Forecasting in an Opportunities Based Business
As a business owner or manager, have you ever had issues with sales people forecasting revenues?
Sales people often either forecast revenues way too early or the opportunities fail to actually close.
We find that many organisations often have either no consistent method of forecasting or they base forecasts on the 'Stage' of each Opportunity.
For instance, if the sales person has undertaken a demo of their solution - but is yet to provide the customer with a formal proposal, the amount forecasted may be calculated as 50% of the value of the Opportunity. Likewise, once the proposal has been provided the forecast may increase to 75% of the Opportunity value.
We often see this method of forecast calculation built into the heart of the CRM.
Unfortunately, this can often contribute to a failure in forecasting for two key reasons:
The correlation between stage of the deal in the CRM and the outcome may not be realistic
Salespeople often move through the steps of the sale well ahead of where they are "really at in the deal"
We have found that a far more appropriate approach to forecasting is to take an 'issues based' approach to an Opportunity as the closure of an Opportunity will most likely occur when all issues (internal and external) have been clearly addressed by the vendors solutions.