Throughout my career I’ve seen many organizations struggle to create a sustainable sales forecasting process in Salesforce. Salesforce is designed as a CRM for collecting data. But after 20 years of being in business when it comes to extract meaningful data that can help drive your sales process forward, salesforce is still lacking.
Let’s take a deep dive into the tools available in Salesforce out of the box.
Currently in Salesforce you are able to create your sales funnel by setting up Opportunity Stages. For details on how to do that well, see my previous post on Sales Funnel.
So, once the stages are set up, assign weights to your stages which translate into some version of a probability score. I.e Stage 1 = 10% and Stage 5 = 90%. The problem there is that you don’t know what is the real correlation between the stages and closing an opportunity. For many companies the first 3 or 4 stages might all sit at a 20% close rate and then the last stage is 95%+. So the first problem is that the probabilities are manually assigned.
The second process for creating a basic forecast is determining your close rates and sales cycles. For a basic understanding of what a close rate and a sales cycle is, see our blog post on Sales Forecasting – The Pipeline Methodology. Unfortunately there is no easy way to determine your stage-by-stage sales cycle or close rates in Salesforce. You have to create reports and download your sales data to excel. YIKES.
This is the basic building block of your sales forecast and remember that your forecast is the basic building block of your business. Sales forecasting adds the most value when its in real time. If it takes a month or a quarter before you spot trends most likely you are too late to fix. You don’t want to create a reactive sales force vs a proactive sales organization.
So if we are keeping count, you cannot easily create lead scoring in Salesforce and you cannot easily determine your average sales cycles and conversion rates.
Next, you would combine all of your open pipeline and multiply each opportunity by your conversion rate for the stage it’s in. Then use your average sales cycle to determine when each deal is going to close. But since this has to be done in excel it is very time consuming to build out a detailed enough forecast to be accurate for any business. Not to mention all of the errors that can occur within an excel based forecast. Remember the London Whale – $6B loss from a spreadsheet error. If you don’t have a detailed enough forecast you miss out on the nuance which drives real value.
The key to deriving value is to have an accurate forecast but it is very tough to test assumptions and forecast accuracy in excel. This can cause huge problems, as the sales team relies on the sales forecast for understanding where to spend their time and if it’s wrong then you might have done more damage than helping.
The final glaring issue with the sales forecasting process in Salesforce is that the basic pieces of the forecast are set up around rep commitments, rather than around sales goals. This is flawed as rep commitments are usually too optimistic – in my experience they often add up to over 200% of actual sales. And even if your teams are more accurate, commitments still don’t necessarily get you to your goals.
Throughout my career I’ve struggled with those problems and I noticed almost every executive I spoke with shared these same problems. That’s why I decided to solves all of these problems once and for all, by building TwelveZeros – a sales forecasting platform. TwelveZeros integrates with Salesforce in minutes without any changes to your core product. Our AI builds out an accurate sales forecast that we call our baseline forecast. Then sales teams can review the forecast and determine how to get to their goals. Users can determine how much pipeline they need to generate and understand all of their KPI metrics. TwelveZeros uses sophisticated Machine Learning algorithms that customizes for your specific business and team. It not only improves the accuracy of your forecast over time but also bubbles up insights that in and of itself could change the direction of your sales organization.
Let us show you how TwelveZeros can improve your sales forecasting process and in turn your sales.
10 years of corporate finance and forecasting experience at different technology startups across the US.