Forecasting is one of the more difficult processes in a sales role, even at large, established organizations. With the chaos and uncertainty that surrounds early stage businesses, this process becomes much more arduous and ambiguous. Why is this?
There are many obvious reasons why forecasting for startups isn’t easy. There are usually a low number of sales at the onset of a business, which means you don’t have reliable data or processes in place. Couple this with a lack of experience and the results will be inaccurate at best. However, if you know where most of the mistakes are made, successfully avoiding these roadblocks can greatly improve your forecasting ability.
1. Initial Sales Team is Usually Inexperienced in Forecasting
The first sales hires at a startup are typically more junior and have little experience as executive leaders. There is a high probability they have never been trained how to forecast accurately. Perhaps they can add a close date or know how to use opportunity stages but the criteria behind how they come to these conclusions is usually where the inexperience comes in.
So how can you get the most from your data with your green sales team? To start, make sure that all your opportunities are action based: a specific action that happened with the budget process, decision maker details, and timeline for each deal clearly noted. These are the three most critical pieces of information you need to make an accurate forecast. With this information in place, your reps can form an action based plan to move opportunities through the funnel and allow you to forecast close date much more accurately.
2. Your Sales Process is Still New
There are numerous different factors that can affect the life cycle of a sales process. With startups, the sales process is still new and usually a work in progress. This makes it tough to identify where the kinks are and how to improve. Are deals are running long because of product issues or is the sales process sloppy? This alone will cause a large variance in setting up reliable forecasting because we don’t know yet the difference between the two.
These complications are usually tough to mitigate. You can start by standardizing your sales process with the understanding that it will adapt and change over time. It is critical to have a baseline process so you are able to create some initial benchmark that creates some form of a typical sales cycle. Even if there are issues with the product, you can remove some of the variables of forecasting by keeping your process static.
3. Leader May Be Inexperienced Themselves
Finally, many startup leaders also do not have sales forecasting experience and rely on financial based models to project their results.
Financial models and round table meetings discussing what they “think” or “feel” will close this week never check for the key variables mentioned above: budget, timeline, and decision makers. Leaders not familiar with the sales process won’t know where to look for accurate forecasting and will become consistently frustrated and confused with why their sales people consistently miss targets and close dates.
To avoid this, make sure you have mandatory fields for these variables so you can actually see how far along a deal has progressed. Don’t accept the “they really like it” as a main reason for buying; look at the facts of the case. This will also allow your sales reps to understand what you’re looking for during weekly meetings and will help them build a replicable sales process and forecasting system. Adding this criteria to each account conversation is crucial, especially if you and/or your sales team have a limited background in forecasting.
The key to a great sales forecast is to make sure you are clear on the criteria you need to know, you have a process in place to benchmark from, and you are coaching your team in how to gather the right information that is necessary to actually get a deal done. Forecasting can always be tricky, but starting with these steps above will provide a great foundation for building out your process.