Forecasts are about the deals, not the number!

This is one of those topics I wish I could just put to bed and ignore–yet it keeps rearing it’s ugly head. We continue to get forecasting wrong, at least for complex B2B sales.

We keep making the forecast about the number, for example, this quarter we are going to make $1B!

Not long ago, I was analyzing the forecasting process for a very large organization. I looked at the forecast at the beginning of each quarter for the past 3 years. Then I looked at the results achieved at the end of the quarter.

The management team was reasonably proud. They roughly made to forecast each quarter. Some they missed a little, some they overachieved. But they were making the “number.”

But I knew there was a lot underneath that. In some ways their process looked a little like synchronized swimming. On the surface it looks easy and very smooth, but underneath the water there’s a lot of kicking.

As I looked at their forecast. roughly 25% of the deals they forecast winning during the quarter, they actually won. 35% of the deals they forecast winning during the quarter, they actually lost during the quarter. And the rest slipped.

The sales forecast is about deals, not "the number."

They made their “number” by bringing deals into the quarter, or by doing unnatural acts on other deals they were working (read “discounting”).

They were proud, “We are making the number!”

They didn’t recognize the huge performance issue because they thought the forecast was about making the number. At a high level, here were my questions of them:

1. How come 35% of the deals you were committing to win, you actually lost? How could you be so wrong about your ability to win on so many deals?
2. 40% of your deals slipped into another quarter–and we still don’t know whether you will win those or not.
3. This means the forecast was only 25% accurate, why are you so wrong?
4. But if you could make the number by pulling deals into the quarter, why weren’t you forecasting them in the first place?

They were “making the number,” but in reality they were under performing, substantially.

The forecast is really about deals–each deal. Are we going to win and when? The number is just the aggregation of these deals.

It’s stunning to me how many organizations focus on the number only, not the integrity of the deals they are forecasting. They play all sorts of games to “make the number,” and still miss hugely. There are so many layers of non-performance when you really think about it.

What are your thoughts?