The 10 Essential Elements for Accurate Sales Forecasting: #2 Understanding the Funnel
Pipeline Inversely Proportional to Performance
One thing I’ve noticed that I’ve always found fascinating is that often the size of the pipeline displayed is inversely proportional to performance. Over and over we see completely underperforming reps who report 2 to 5x the pipeline listed by the quota busting reps. It’s as if they believe they can make up for poor performance with sheer volume on an excel page.
One explanation is of course for show. “Maybe if my manager thinks I’m doing a lot, I won’t get fired.” Surprisingly this display of sheer volume is somewhat effective for managers hoping its real, even though the track record of success is often miniscule.
The second may be the thought process, “If I keep pushing more deals in the top then more are bound to fall out the bottom.” They mistake activity for direction or achievement.
Beyond Traditional Sales Stages
Especially in todays’ ultra-educated, technology blocking, sophisticated prospects, you have to go beyond the traditional process of pipeline stages and start looking at the elements that make up the sale itself.
Typical Sales Stages
- Identify Opportunity
- Initial Presentation
- Fact Finding
- Develop Solution
- Solution Evaluation
You might think of the pipeline stages as more of check list. For instance you should be doing fact finding at all stages. Not just in one meeting only and then moving on. A weird phenomenon happens with most sales teams. The funnel doesn’t look or act like a typical funnel.
Understanding the Funnel
Most executives and managers think it looks like this:
The reality is most reps rip through the middle stages and then get stalled at #7 Negotiation. They are continually in Negotiation phase with the prospect indefinitely. It looks more like this:
It’s pretty tough to forecast a business when almost all deals are either in #1: Identifying the opportunity (AKA prospecting) or #7 Negotiation. Dig deeper into your reps accounts and you’ll find this is more often the case than not.
So it’s time to start measuring these 10 basic elements of the actual sale and your understanding of your deal flow. The accuracy of your forecasting will improve drastically. And maybe this month you can be a hero with your performance and not just your spreadsheet.