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Forecasting – Objective or Subjective

As we enter the final quarter of 2023, sales leaders are once again facing the stressful task of closing out the year with accurate revenue forecasts. But for many, this yearly ritual brings more dread than confidence. Studies show that the vast majority of sales leaders lack faith in their team’s ability to forecast revenue precisely. With Q4 just weeks away for most organizations, there is still time to implement changes that can significantly improve forecast accuracy before the year wraps up.

Why Accurate Forecasting Matters

Let’s first establish why forecasting accuracy is so critical for sales organizations. Here are some enlightening statistics:

  • 93% of sales leaders are unable to forecast revenue within 5 percent, even with just two weeks left in the quarter.
  • Between 53% to 60% of forecasted deals do not end up closing.
  • 67% of organizations lack a formalized approach to forecasting altogether.
  • 80% of sales organizations do not have a forecast accuracy greater than 75%.
  • 55% of sales leaders do not have high confidence in their forecasting accuracy.

With the majority of sales teams missing forecasts by a significant margin, it’s no wonder that sales leadership enters Q4 with a sense of anxiety. Inaccurate forecasts lead to missed quotas, stressed sales reps, and executive team angst. But there are steps sales leaders can take right now to improve forecast accuracy before year-end.

The Problem with Subjectivity

A root cause of poor forecasting is over-reliance on subjective assessments of deal likelihood from sales reps. Studies show that 80% of firms acknowledge their sales forecasts depend heavily on individual rep judgment. And 68% admit that salesperson bias creeps into the numbers they submit. Rep optimism or pessimism can cloud objectivity.

Subjective information is affected by an individual’s unique perspective, values, past experiences, and emotions. When forecasting relies too much on rep intuition and not enough on objective facts, accuracy suffers.

Objective information, on the other hand, is concrete, measurable data that can be verified. An objective forecasting methodology removes individual rep bias and emotions from the equation. Objective deal criteria such as lead source, deal size, buying stage, and more have been proven to boost forecast accuracy when applied systematically.

Implementing an Objective Framework

To inject more objectivity into their forecasting process before year-end, sales leaders should consider implementing an opportunity scoring framework. This tool allows deals to be assessed consistently based on objective criteria that are strong predictors of close rate.

An effective opportunity scoring framework typically includes the following elements:

  • Opportunity criteria: A set of objective factors that influence deal closure, such as lead source, deal size, buying stage, competition, decision process, etc. Each criterion has a weighted impact on the overall deal score.
  • Scoring scale: A standard 1 to 5 or 1 to 10 scale is used across all opportunities to score each criterion. Low scores reflect higher risk and high scores reflect higher confidence of close.
  • Opportunity reviews: Structured forecast meetings where reps review each opportunity and justify scores for each criterion to sales leadership.
  • Score calculator: An automated calculator that compiles the criterion scores into an overall opportunity score. Higher scores indicate higher likelihood of close.
  • Forecast categorization: Opportunities are grouped into forecast categories (e.g. committed, optimistic, pessimistic) based on their overall objective score.

Implementing a framework like this injects consistency, structure, and objectivity into deal scoring. Recurring opportunity reviews also increase visibility for sales leadership into any outlier scores that require justification.

Research shows that organizations using an objective opportunity scoring system see substantial gains in forecast accuracy and other performance metrics. Cycle times improve, later stages flow more smoothly, and reps hit their targets.

Realizing the Benefits of Objective Opportunity Assessment

The benefits of consistent use of an Opportunity Assessment forecast aid are unmistakably clear. This objective analysis tool weighs criteria using mostly objective factors, with a smaller percentage allocated to subjective measures.

Organizations that implement an Opportunity Assessment realize measurable gains:

  • Sales cycle times improve as non-viable deals are identified early.
  • Later pipeline stages flow more smoothly with higher quality opportunities.
  • Up-sell revenue increases as reps learn to expand on original deal size.
  • Teams make their targets as forecast accuracy improves.

The outputs are objective, predictable results – a welcome contrast to hopes and gut feelings.

Now is the time to advance the effectiveness of your 2023 Q4 revenue attainment. Take a closer look at our Opportunity Assessment tool and use it to inject objectivity into your forecasting process before year-end.

Assess Your Deals Before Year-End

With Q4 just weeks away, sales leaders should act now to improve forecasting practices. Implementing an objective Opportunity Assessment framework can significantly boost accuracy over reliance on rep intuition alone. Consistently applying such a framework ensures your forecasts reflect measurable opportunity data rather than emotions, assumptions or opinions.

If achieving your Q4 revenue targets feels uncertain, take control today. Don’t allow hope to be your only strategy. Assess your opportunities based on factual deal criteria that are highly predictive of customer actions. Your forecast accuracy and ultimately business success will thank you.

For a closer look at our Opportunity Assessment tool, click here Opportunity Analysis. Apply it to your Q4 opportunities today.

We hope your Q4 finishes just as you’ve planned. Wishing you great success!

Jim Hale

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