Let's walk through a dialogue between a Customer-Focused salesperson and a targeted decision maker at the VP of Finance/CFO level. (Refer back to Figure 8-3.) The decision maker wants to forecast more accurately, and the salesperson is using a Solution Formulator developed for selling sales force automation/customer relationship management (SFA/CRM) applications:
Salesperson: How do you forecast today?
Buyer: With great difficulty. Our overly optimistic VP of Sales gives me a monthly forecast that I have to reduce by about 50 percent just to be close. Even then, many of the specific opportunities he forecasts will close do not. Luckily, we get some unexpected business most months, or we would really be in a pickle!
Salesperson: How do your forecasting metrics vary by district?
Buyer: We have hired sales managers from a number of major companies, and they all seem to have their own way of qualifying and grading opportunities. At this point, I don't believe we have a standard grading system that is enforceable.
Salesperson: How many salespeople do you have, and do many rush or feel pressured to do their forecasts?
Buyer: We have 200 salespeople, and from what I hear they all despise forecasting.
Salesperson: Do you think those who are below quota are overoptimistic in an attempt to show enough in their forecast so it looks as though they are going to get caught up?
Buyer: That seems logical to me. It would be best to verify that with some of our sales staff.
Salesperson: How do salespeople report progress to their managers on opportunities in the forecast?
Buyer: I'm led to believe it is done on an ad hoc basis. Sales managers are asking questions as the forecast is being created.
Salesperson: How do your managers determine which opportunities on the forecast are stalled?
Buyer: There doesn't seem to be any standard way. Even if managers know an opportunity is stalled, they seem reluctant to remove anything from the pipeline. We recently closed a deal that had been on the forecast for 13 months! When I ask if an opportunity should be removed, my VP of Sales reminds me of the one that took 13 months to close.
Salesperson: How do managers assess the current status of opportunities? How do they coach reps to qualify and disqualify prospects?
Buyer: If we have a way to assess the status of an opportunity other than calling the salesperson and asking his or her opinion about an account, I am unaware of it. I believe our managers pressure more than they coach—especially at quarter's end.
Salesperson: Do forecast probabilities vary by salesperson?
Buyer: Based on the experience and year-to-date (YTD) quota position of the salesperson, they vary widely. There are a limited number of reps in whom we have a high degree of confidence as relates to bringing in what they projected.
Salesperson: How do sales managers adjust for this, and do you adjust the numbers you get?
Buyer: I would hope managers would take close rates of salespeople into account, but it must be on a seat-of-the-pants basis. Managers are under pressure as well, so their YTD position against the district's quota also affects forecasting at this level. As I mentioned earlier, I typically adjust the number I get from my VP of Sales by about half.
Salesperson: If one or two large opportunities can make or break a forecast, how do you track those prospects?
Buyer: We missed our year-end earning target because two large opportunities that were supposed to close by December 31 didn't. Here it is, almost the end of March, and still neither one has closed. So yes, absolutely, large opportunities can make or break a quarter! But other than every C-level executive in the place calling the VP of Sales twice a day, there is no way for us to track those large opportunities.
Salesperson: What would better visibility on these opportunities mean to you?
Buyer: As CFO, I can deal with bad news much more effectively if there is some lead time. If a large opportunity drops off the forecast early in a quarter, we can do some belt tightening and hopefully find some other sources of revenue. My job is immeasurably harder with "high-wire act" finishes to our quarters. Any bad news from sales late in the quarter becomes an unpleasant discussion in staff and board meetings.
Salesperson: Let me summarize what we have covered so far. You have difficulty forecasting revenue, and it has affected your ability to hit your earnings targets. There is no consistent, companywide standard to use when grading opportunities. Unqualified opportunities find their way into your pipeline. It is difficult for managers to track progress. Close rates vary widely between salespeople, and you have a difficult time keeping updated on make-or-break deals. Ultimately, you have to reduce the forecast you receive by as much as 50 percent. Is that a fair summary?
Buyer: Yes, that pretty much describes how things happen today.
Salesperson: What approaches have you considered to improve forecasting accuracy?
Buyer: Other than changing Vice Presidents of Sales every couple of years, I am not sure what else we have tried or could try. I've had several sales executives in my career tell me that I just didn't understand sales.
Salesperson: Based on our discussion so far, may I offer a few suggestions?
Buyer: Please do.
Salesperson: After making sales calls, would it help if your salespeople were prompted to report progress on that call against a standard set of company milestones for each opportunity in their pipeline?
Buyer: I have been clamoring for a standard set of milestones we could all use and understand. Prompting the salespeople seems like a good way to collect data after each sales call. I believe it would help.
Salesperson: When reviewing a salesperson's pipeline, would it be useful if your sales managers could access a secure central database from any location, evaluate the status of opportunities, and email suggestions to reps to improve the chances of winning the business?
Buyer: I believe so. We didn't discuss it, but many salespeople work out of remote or home offices.
Salesperson: On an ongoing basis, would you like a system that would track historical close rates for each salesperson by milestone, and apply them to your pipeline to help you predict revenue?
Buyer: I would like that! I might not have to tweak the numbers by 50 percent or more. It would be refreshing to apply a little science and logic to our forecasting process.
Seller: When evaluating the status of large opportunities, would it be beneficial if you or any C-level executive could access a central database via laptop anytime/anywhere, and review progress against milestones without having to talk to your VP of Sales?
Salesperson: If you had standard milestones updated after each sales call, an accessible pipeline database for coaching and reviewing progress, the ability to track historical close rates by milestone, and the ability to assess make-or-break opportunities from your laptop, do you think you would be able to achieve your goal of more accurately forecasting revenue?
Buyer: Yes, and I'd feel more confident going into board meetings if we had a better handle on forecasting.
This conversation, of course, is something of an ideal. It mirrors the first role-play we have attendees execute in our Customer Focused Selling workshops. The role-play coaches, who serve as buyers, are passive and cooperative the first time through so as to allow participants to walk before they run. The subsequent six role-plays become more challenging and realistic.
In the example above, the seller enjoyed the luxury of having a buyer readily share a goal and be willing to engage in a candid and pointed conversation, with the salesperson doing a lot of directing (through questioning). In sales calls, conversations almost never follow a script. But the SF provides a guideline for (1) diagnosing the buyer's current situation with a bias toward your offering, and (2) developing a custom vision that the buyer owns. Please note that in this example, the buyer agreed to all four major diagnostic questions, and therefore the seller offered all four usage scenarios. In making calls, if a buyer does not agree to a reason the company cannot achieve a goal, the seller would not offer the corresponding usage scenario.