If a command of the language, the ability to deliver a message to a clear specific question without saying anything you can be held accountable for or if not answering that specific question while setting up plausible deniability at the same time is important you may be the head of a sales organization explaining your forecast to the CEO and leadership team or investors.
After standing in front of over 10,000 CEOs, owners and leaders with the question “show of hands – how many of you are comfortable with your forecasts and forecasting process” no hands have yet gone up.
Before there was Revenue Science™ delivered by a CRO (Chief Revenue Office) there was only hope and luck. In the last few years the world had changed and Revenue Science™ gives the power to forecast with real metrics.
Let’s explore 3 critical forecasting questions to start building a science-based foundation for forecasting.
1. Pipeline vs Funnel (investment in deals or friends)
Funnels are ideal for forecasting if you have too much money and want to reduce the burden of too much money by spending it on friends at a ball game. Depending on your approach the difference between the awareness and action levels in this funnel can be 10 or 20 to 1. In other words, your forecast will be accurate 5 to 10% of the time and the action may be desirable or not.
In a pipeline forecast, the suspects that enter one end of the pipeline are almost the same as the number you see exiting as new customers at the other end.
Both methods are suspect if your goal is predictable metrics. If you are just starting to build a science-based forecasting system you won’t have the process, metrics or skills to start a pipeline with the exact number of highly qualified suspects that you need to come out the other end of the pipeline as contracted customers.
In the funnel model, the “Cost of Chaos” to produce even survival sales/profit levels is off the charts. Funnel marketing reaches out to anyone and everyone, salespeople make a career of networking and “I hope you buy someday prospecting” with we assume they will volunteer to move through the funnel at a great rate because we got them started.
Early in the science-based forecasting you need a VERY small funnel only collecting ideal buyers in niches you will or do dominate who have the business problem you uniquely solve. Once this group opts-in to your small funnel you need a highly metered selling model that measures behavioral outcomes.
2. Once you have them in the VERY small funnel headed to the pipeline opening your process and metrics are about activities that drive your ideal buyer and buying team to the behavioral outcomes that result in the next steps in the buying process.
This starts in the marketing effort (normally digital with database and operational tools) and at the point, the suspect acknowledges they have the problem you solve, are compelled to solve it and want to invest time with you to develop a SOW (Scope of Work) they are in the selling phase of the pipeline. This also has activities that drive outcomes that move to the next selling step – the final step being a contract.
3. The modified pipeline forecast has activities with measurable outcomes and those outcomes are measured by more than the next step. Forecasting demands metrics for how long this took, what percent were wins, what are the topline dollars and the net profit after delivery.
These metrics matter. They don’t just mater to satisfy the CEOs need for accuracy and the financial communities need to judge how well a company is run, but for a much more important long-term reason.
Everything is moving at hyperspeed politics, economics and technology change the competitive landscape almost by the month. The only way to survive and thrive is to know your pipeline numbers and the trends.
Exactly what intentional activity created what level of pipeline changes (for better or worse) creates control. When we understand each of the activities and their impact on the growth of sales and profits we can keep making the process better or we learn it is time for a new pipeline revenue process from start to finish.
The original funnel needs to go the way of other myths (replaced by science) since it eats money and other resources provide no predictable outcomes and can’t be continuously improved based on metrics.
Once that original funnel is gone, and a VERY small funnel is attached to the front of the pipeline your “Cost of Chaos” goes down, the future can be predicted by the outcomes, the process can be continuously improved, future transitions are visible and become opportunities for you and over time the VERY small funnel will get smaller and smaller.