You have a deal that is near the end of your sales process. Your CRM settings suggest that you have a 90% chance of winning that opportunity. You know for a fact that they are still engaged with your competitor. This means you have a 50% chance of winning that deal, not 90%. Unless of course your prospective client chooses to do nothing, reducing your odds winning to a dismal 33%.
Most of the numbers in CRMs used to indicate the likelihood of winning a deal at each stage don’t resemble the true percentages.
In the example above, how would you behave if you believed you had a 90% chance of winning? Would you take a different set of actions if you knew it was a coin toss between you and the competitor your prospective client is still considering? What if your primary contact said, “We’re not sure we can even pull this off this year?” How would your strategy change if you were only at 33%, with a “no decision” as the most likely candidate to win?
If you want more accurate numbers, you have to capture real data and study the results.
First, you have to pick a period and monitor the opportunities for a finite period. If you win 20% of the opportunities you competed for, that’s the real number you should use when looking at your total pipeline.
Next, you have to study deals at each stage to know what percentage you win of deals once they reach that stage. Let’s say you win 3 out of every ten deals that make it the presentation stage in your sales process, your likelihood of winning deals in that stage isn’t anything over 30%, regardless of the percentage you use in your CRM (A lot of companies use 50% or higher).
You need to know what percentage of deals you win. You also need to know what percentage of deals you win at each stage if you are going to have a reasonably accurate forecast. Even when you have these numbers, context matters. If you have two competitors still vying for a deal and genuinely engaged with your prospect late in the process, your chances of winning aren’t greater than 33%—and they may be lower.
The error too many salespeople, sales managers, and sales leaders make is believing that they win a higher percentage of late stage deals than they do. That false sense of security is what causes you to miss your goals.
If you want to improve your sales forecasts now, start by doing better math. Then test every opportunity to ensure it is progressing the way you believe it is.
This Wednesday, I am speaking at InsideSales.com’s Sales Acceleration Summit. My session starts at 1:45 PM ET (10:45 AM PT). It’s 15-minutes long, and the topic is How You Lose Deals—And What To Do About It. I am tackling 24 mistakes that can cause you to lose deals with direct advice on what to do about it.
Register You and Your Whole Team Here: http://bit.ly/1KGgUhJ
49 other people are presenting with lots of different tracks running at the same time. Don’t worry about missing anything, it’s all recorded and you can watch your “must see” sessions when it works for you.
As always, send me your thoughts, ideas, and stories. If someone you know needs to think through the way they forecast, forward this newsletter to them, and point them to http://www.thesalesblog.com/newsletter so they can join us here every week.
Do good work this week. I’ll see you Wednesday at the Sales Acceleration Summit.