29 Oct Lessons from the Front: Year-End Forecasted Deals

We have reached the time of the year when sales managers carefully examine the opportunities forecasted to close by the end of the calendar year. Most sales pros are optimistic and often will forecast an opportunity to close by year-end, even if they only had one conversation with the buyer.

Most organizations use a sales methodology incorporating milestones or activities to explain an opportunity’s stage in the pipeline or funnel.

For example, I have used the Miller Heiman sales methodology¹ to define where an opportunity is at in the sales funnel, with the activities that occur in each stage, is as follows:

• Stage One -Universe
  • Marketing or sales program definition
  • Any company can be considered as a prospect
• Stage Two – Above the Funnel
  • Selection of targeted companies
  • Contact the prospect/ personal introduction
• Stage Three-In the Funnel
  • Qualifying the lead- go/no go decision
  • Survey/Discovery
  • Build the sales plan
  • In-person meeting with a prospect
  • Solutioning
  • Building trust
  • Determining value
  • Presentation meeting/demonstration
  • Answer questions
• Stage Four- Best Few
  • Financial proposal
  • Follow up/objections
  • Best few options
  • Ask for commitment
• Stage Five- Closed/Won
  • Consensus and affirmation
  • Confirmation of decision
  • Contract negotiation and finalization
  • Delivery, fulfillment, customer service
  • Post-sales assurance

I have found the Miller Heiman methodology easy to understand and deploy.  Many sales organizations have used it for years.  I would discourage using any methodology with more than eight or ten stages.

The movement of an opportunity through the stages is not affected by the passage of time or even by certain actions, such as holding a meeting. When the buyer commits to specific actions due to a sales activity, an opportunity moves from one stage to the next.

These actions must be measurable and quantifiable, tied to a timeline, appropriate, and necessary for that stage. For example, buyers commit to determining an ROI, or total cost of ownership, to proceed with the purchase or the consequences and cost of not purchasing now. Sellers’ actions should not move an opportunity without a corresponding buyer commitment.

Using this methodology, a sales pro must do a great job convincing me if she forecasts a deal to close in the next two months if it has not achieved Stage Four status by November 1. I would typically move those forecasted opportunities to the following year. Sometimes, it may take over two months to close an opportunity already at Stage Five, but the contract has not yet been negotiated.

As a sales manager and Vice President of Sales, I have rarely seen sales pros move an opportunity from Stage Three to close within two months.  I would call those instances “unicorns”. They should not be expected to happen.

“According to CSO Insights, 60% of forecasted deals never close. Their data also shows that 25% of sales managers are unhappy with their sales forecast accuracy.”² Do sales pros want to forecast their opportunities incorrectly? Are they trying to embarrass their sales managers? Do they understand the ramifications of inaccurate forecasts? My opinion is that most sales pros are overly optimistic and think every opportunity will close – and always sooner than it does.  I have rarely seen a sales pro that closed an opportunity before the forecasted date.

I want the sales pros to remain optimistic, especially the high performers. Still, one needs to be realistic, and the sales manager must provide management with a reasonably accurate sales forecast to manage the shareholders’ expectations.  I found that often, the forecasted opportunities to close each month were over-optimistic by as much as 100 percent.  If I divided their forecasts by two, I would usually be reasonably close to the actual amount closed.  For example, if they forecasted to close $1 million this month, I would tell management it would be $500,000 and provide my list of opportunities I thought would close that sum to that amount. This is a critical monthly exercise, especially at the end of fiscal quarters.

I would help identify the tasks the sales pros and buyers must complete so that opportunities in Stage Four and Five can close by the end of the year. It is essential that the prospect also agrees that this can be accomplished within the desired time frame.  Typically, the sales pros meet and review the tasks with the prospect.  They will often inform you if closing in that timeframe is feasible.  However, they understand the imperative of closing the opportunity by the end of a fiscal year.

Whatever time the prospect says it will take the contract to be approved by their legal department, my experience is that the estimate needs to be doubled or tripled. This is where the prospect is often too optimistic.  Your contract will be put in a queue in the legal department and will either be given to a junior or senior attorney depending upon its internal priority – not yours.

Caution:  Contract signers visit Vail or Hawaii between Christmas and New Year’s Day.

Yes, I have personally had the CEO or COO taken off the ski slope to sign, scan a contract, and send it back to us.

Good luck on your quests to achieve your 2024 sales goals.  Be sure to follow your sales methodology!

¹ Miller, Robert B., Stephen E. Heiman, and Tad Tuleja. The New Strategic Selling: The Unique Sales System Proven Successful by the World’s Best Companies, (New York, NY: 2005) , pp. 362-356.

² https://www.clari.com/blog/sales-forecasting-methods/#:~:text=According%20to%20CSO%20Insights%2C%2060,with%20their%20sales%20forecast%20accuracy.