Three Criteria for Useful Sales Opportunity Forecasting

A large sales forecast is every business owners’ dream. The rule of thumb is that to achieve your revenue objectives the sales pipeline should include three to four times your goal. The challenge comes when everything in the pipeline enters the opportunity forecast.

Consider this: When sales reps prospect for new opportunities, they often qualify contacts based on potential needs and a set of broad characteristics. The goal of the prospecting process is simple: Identify a possible match, get a foot in the door and start a conversation.

Typically, sales prospecting yields a high number of contacts who will never become actual opportunities, but that’s normal. In the early stages of the sales process, the goal is to add a lot of contacts to the top of the funnel and worry about honing qualification criteria as your sales reps begin needs analysis.

While a consistent flow of leads is good for the pipeline, adding all of them to your sales forecast is not. As I wrote in Why Your Sales Forecasts are Failing to Deliver Real Value, a sales forecast can be a valuable tool for creating focus and guiding sales activity, but only if it includes qualified opportunities that have a legitimate chance of closing in the near future.

If, on the other hand, your sales reps’ forecasts include every contact they’ve had a conversation with in the past four months as a possible forecasted opportunity, guess what will happen? First, you’ll have to conduct opportunity reviews on those that are not progressing through the sales process. And second, your salespeople won’t be able to focus on the opportunities with the greatest potential to yield a high return. The forecast loses its value to your salespeople in prioritizing their time, and valuable qualified opportunities may be lost due to neglect.

As you might expect, both of those outcomes will negatively impact your company’s ability to meet its revenue objectives. 

The good news is that you can avoid those issues by simply waiting to forecast opportunities until each prospect has met three criteria.

1. Need: Whether a prospect’s network is down more than it’s up, their communications are disjoined across several offices, or their CRM is no longer supported, while your sales rep has identified the need, the contact must acknowledge it. Otherwise, nothing will move forward.
2. Desire: In the Customer Buying Cycle, prospects must move beyond basic awareness of the need to become legitimate opportunities. If a contact isn’t genuinely interested in addressing its need, your salesperson will end up investing a lot of time trying to create that desire. Even if your sales rep is able to create desire, the prospect’s interest will wane the minute the salesperson leaves the prospect’s office.
3. Timeline: Before prospects will close, they must be able to envision when and how implementation will occur. If a prospect can’t visualize the implementation timeline and the staff who will need to be involved, they won’t move forward and the sale will stall.

Now, your forecast resides in your CRM, so all the prospects who don’t yet meet these criteria still will be there. They have to be included so you can be confident that your sales reps have enough leads to achieve their quotas. But when it comes to sales opportunity forecasting and making business staffing and investment decisions based on that forecast, only consider those opportunities that have confirmed need, desire and timeline.

Kendra Lee is a top IT seller, prospect attraction expert, author of the award winning books “The Sales Magnet” and “Selling Against the Goal” and president of KLA Group. Specializing in the IT industry, KLA Group works with companies to break in and exceed revenue objectives in the Small and Midmarket Business (SMB) segment.