5 Forecasting Metrics That Every Sales Team Should Track
How do you determine the accuracy of your sales forecast? If you’re like many VPs of sales, you look at the final commit and compare it to the deals that closed at the end of the quarter. If you focus solely on this metric, you miss out on important insights that are critical for improving accuracy. Keep an eye on these five forecasting metrics when you’re starting to get serious about building a predictable business.
Accuracy 90 Days Out
These deals are a long way from closing, but accuracy at this stage gives you the opportunity to see pipeline problems long before they impact your forecast at the end of the quarter. A lot can change in a few months, but experienced sales reps recognize the early signs that show them where that particular deal is going.
Your team may be overly optimistic or pessimistic about these deals, resulting in low accuracy at the 90-day mark. While some of these assumptions can be attributed to reps’ individual personalities, you can either adjust the forecast based on this insight or train the sales team so they move toward more accurate numbers.
Accuracy 30 Days Out
Once you hit 30 days, you expect to see accuracy above 90%. The reps should be in the final stages of closing deals and have enough details to provide numbers that should be more realistic. The biggest problem that you’ll find at this stage are reps convinced that all of their deals are going to close before the end of the quarter. By discovering which reps have a hard time pinpointing the progress of their deals, you can address the weak points in the sales forecast.
Additional training on how to put together an accurate forecast may help these reps, or it could be time to look for people who have an easier time nailing their numbers. You have a lot riding on the accuracy of this report, and everyone needs to do their best to contribute the right information.
You have a worst-case scenario on your hands when the biggest deals of the quarter have their close dates pushed back at the last minute. These gaps may be impossible to address if you don’t have any indication they aren’t going to go through until much later than anticipated.
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Knowing the typical push rate for your sales team gives you the opportunity to prepare for the worst. You might not know exactly which deals are going to slip away, either into another quarter or lost entirely, but you can estimate how much you need to make up for.
If the same sales reps have higher-than-normal push rates, you can bet on their deals being the most likely to have a problem. Adjust as needed to keep your pipeline strong and your numbers as accurate as possible. All of the information you need is right in front of you, you just need the right metrics to improve the sales forecast.
Accuracy by Product Type
Do your sales reps have an easier time predicting the close date and health of the deal with particular product types? Complex products with long sales cycles are more difficult to forecast than straightforward, off-the-shelf options with limited customization.
Look into the elements that make a particular product difficult to predict. For unique solutions that involve many factors, consider breaking the prediction down into its parts. The rep may not know everything that the business wants for their purchase, but they can select the typical configuration during the evaluation and discovery process as a starting point.
If your accuracy is off for simple product types, look for inefficiencies or confusion in the process. The sales reps may not have enough training to understand exactly what the buyer is looking for, or they may lack an understanding of the product itself.
Deal Size Accuracy
Do you ever have deal sizes that seem like they have no basis in reality? When your sales reps are consistently over- or under-reporting their numbers, it’s nearly impossible to put together a forecast that comes close to the actual cash flow. The answer isn’t always an easy fix, but there are a few ways to handle this situation.
Look at your overall accuracy in this area for the entire team and on a per rep basis. Don’t expect the deal size to be particularly accurate in the early stages of the sales cycle. The rep is still learning about the account and what they’re looking for in a solution. As you get closer to the end of the quarter, you should get better numbers based on the needs and pain points of the buyers.
You lose out on a lot of details if you only look at your final commit while evaluating the accuracy of the sales forecast. Many factors influence numbers being over or under what they should be, from poor sales rep training to an overly optimistic sales force. Use these metrics to home in on exactly where your team is going wrong, and what you need to do to fix it.