Tl;dr - Industrial sales forecasts are unreliable. Fixing them takes management, clarity about where inaccurate information originates (hint: from prospects AND your reps), coaching, process, and a technology framework. The payoff is accurate pipeline reporting and predictable revenue growth (plus time and embarrassment saved!)
Next Quarter Never Comes
You've seen those pipeline reports.
The ones with the perfect project, with an ideal customer, for an application that no competitor can touch you in.
It's going to close for sure.
Then next quarter comes, and nothing changes. It's still perfect in every regard but there's some small internal hangup.
Don't worry, it's going to close - for sure next quarter.
You know how the story ends....
I'm also certain you can also picture yourself sitting alone, after dinner, the night before a meeting (with the board, your boss, your colleagues in manufacturing, your commercial bankers, etc.) pouring over spreadsheets and emails trying to tease out the real story of each pipeline project so that you can consolidate a forecast that won't embarrass you at the meeting, or at the end of the quarter and year.
Why the extra hours and extra work trying to interpret narratives and pipeline reports from your team?
Because you know most of it is fantasy. Lots of optimistic chitter-chatter with precious little pitter-patter.
Not the fact that your sales team is talking about projects with prospects; they are. But the fantasy that most of them are anywhere near qualified, much less truly likely to close as claimed.
This situation has two terrible impacts on your team.
First, the value of your CRM and pipeline data is substantially reduced. When everyone knows it's bunk, then it's not treated as the source of truth. As a result, everyone knows they can be casual about maintaining it in all regards.
Second, your forecasts are a crap shoot...or maybe just crap. Instead of a real-time on-demand dashboard that you're content to refer to yourself and share with key stakeholders, you have to spend hours trying to read between the lines and creating parallel reporting tools. It's wasted effort....and the forecast is still problematic. As a result revenue growth is unpredictable.
You wouldn't tolerate this from production planning, finance, or purchasing.
So why do you tolerate it from sales?
Knowledge vs. Hope
The problem is that the forecast is based on hope.
The hope that prospects answer questions honestly.
The hope that the project champion actually knows the answers to what's happening in the opaque executive planning and budgeting meetings.
The hope that the need is as legitimate as claimed.
Your reps have happy ears, and too often your sales process asks them to simply confirm fairly generic and innocuous statements by the prospect.
Your process goal is to qualify opportunities "in", and so when reps ask "Is there budget approved?" and get a reassuring "Yes", the qualification moves ahead.
It's a live one!!
Except Prospects Lie
I know this sounds harsh. And we both know it's true.
Budget. Timeline. Decision makers. Competitors. Purchase criteria. All of these are common qualification questions that prospects routinely lie about.
Not everyone sets out to deceive your sales rep. They may be lying inadvertently because they've asked gentle, generic questions themselves internally. Or maybe they've asked the wrong person. Or maybe things have changed internally since they last asked.
And of course, sometimes they lie deliberately. They could be trying to portray themselves as more important than they are; working on a pet project outside the system; protecting and shielding their boss; trying to solve for a different problem than they've explained; or keeping you on the hook to provide a "third quote."
The prospect's intent doesn't matter. Your industrial sales forecast is unreliable as a result. So something has to change.
The solution is to change the focus. We want to remove uncertainty by working to qualify deals "out."
Deal in Facts
We need to move past cordial confirmations to dig into the real details of a project. The only way to do that is with more and better questions.
Let's take budget.
A rep could be trained to ask "Is there budget approved for this project?" And then perhaps to follow up (if they dare) with "What is the budget?"
Alternatively, they could be trained to ask a series of questions that might include:
- What projects got pushed off to accommodate this one this year?
- What is included in the project budget? (clarify with details that are relevant in your industry e.g. Rigging? Sample runs? Validation? Shut down planning? Overtime? Spare parts and training? Electrical and air contractors? New printing plates? Start-up waste? Training? Travel for a FAT? Engineering fees?)
- When did the capital committee meet?
- Did you/your boss make a presentation to them? What questions did they ask?
- How many of your projects were approved?
- Are the funds available for spending immediately? Or only at a future date during the FY?
- What happens if the project runs over budget?
- What's the savings/opportunity that the budget was justified on?
- Can you share the CapEx request with me? What's your plant manager's (division president's) track record? What percent of projects that they request get funded?
- Who is on the capital committee?
- Was the capital approved for the project? Or specific vendors?
- Is there a "must spend by" date when it all has to be installed?
- Are there customer commitments that are driving the timeline of the budget approval?
You'll doubtless think of others of your own.
The point of these questions is to ask about the budget and capital approval process in ways that will reveal whether there's a casual "sure, go ahead" or if in fact there's substantive understanding of the costs and capital allocated by the C-Suite or the sign-off authority.
It's likely that your deal champion won't be able to answer all these. If they're intentionally lying, this will help you figure that out and hopefully get some honest answers. If they're inadvertently lying, they'll appreciate your help in guiding them through the labyrinth of their internal process so that they can participate and advocate for the project.
These questions will take practice, coaching, role-playing, courage, and business savvy to ask effectively. That's the role of sales training and sales management.
Your sales process needs to identify qualification criteria that are factual and narrative based, and which hold the sales team accountable to answer in adequate detail to bolster everyones' confidence in the answer.
The impact will be to qualify many more opportunities "out." In other words to finally evaluate projects realistically, based on facts, rather than glib assurances and happy ears.
Your pipeline will shrink, but your industrial sales forecast will be significantly more accurate. And as time passes, and the team gets better at asking and learning, they'll improve their ability to sell complex deals to large buying teams. Then the pipeline will start to fill - and fill in an appropriately staged way.
Use a CRM That Makes It Easy
This will definitely take a lot of coaching and rigorous pipeline review meetings. But that's not enough.
Technology is the framework for documenting and reporting all of these details.
Your sales pipeline stages should be carefully designed to correspond with your sales process and your sales force automation should include:
- workflows based on length of time in a stage to automatically remind, guide and coach reps of key information and actions that they should be completing to advance
- dashboards that highlight length of time in stages, deal advance rates (from stage to stage), and also celebrate deal "dequalification" of those that are moved back a stage (demonstrating attention to qualifying "out" continuously)
- automation to force reps to complete important sales process steps to prevent premature advancing of deals between stages (for instance having engagement with each key buying role and a minimum number of contacts in the company, clarity into approved budget per above) and scoring (e.g. the number of times you've quoted projects for this contact and/or company without winning deals)
The point is that CRM should help the rep adhere to the process, help the manager coach and manage, and improve the quality of the pipeline and forecasts.
Let's Hold Sales to the Same Standard as Other Functions
Sales feels mysterious because we allow it to be. With great skills, proper process, accountability, and effective technology industrial sales forecasting accuracy can be substantially improved.
It's long past time to do so. For many companies, the current process has devolved into such a joke that the casual disregard for accuracy bleeds over into other aspects of performance and reporting.
And it creates resentment in other departments that are held to higher standards.
Let's fix it!