Evidence-Based Forecasting: A Strategic Approach to Improving Sales Forecast Accuracy.
Guest interview with Bill Norberg, Partner at Sales Meddic Group.
What is "Evidence-Based Forecasting" (EBF), and why is it becoming so popular?
[Bill Norberg] There is increasing pressure on sellers and sales leaders to generate new pipeline and close business. Sales leaders need to create a sales forecast that shows the progression of all deals that make up the forecast. With this pressure, sellers can trend toward being overly optimistic and move their deals through the sales process (example process: Discovery, Qualify, POC, Proposal, Negotiate, Close) perhaps sooner than they should, not for malicious reasons, but because they “feel good” about the deal.
In the world of evidence-based forecasts, a series of discovery meetings and qualification discussions provide the “evidence” that the prospective customer is adequately moving along in the “sales process” with the seller. Documenting “decision criteria” and the “decision process,” the prospect will validate to make a choice.
Identifying true “champions” helps to orchestrate the decision process and confirm the business outcomes they seek to achieve. Documenting a “compelling event” helps avoid the dreaded “No Decision” lost opportunity trigger. By understanding the “compelling event,” you have a much greater chance of success. A compelling event typically identifies the economic buyer, has a defined purchase date, and the business reasons to purchase.
We can demonstrate the “evidence” we have built through a disciplined approach to qualification, called MEDD(P)ICC. Each of the letters in the acronym helps lead the seller and the customer down a path towards building the evidence the seller needs to forecast an opportunity accurately. The buyer needs to build evidence that the solution “being considered” will help achieve the desired business outcomes.
Why does "Evidence-Based Forecasting" produce higher accuracies than traditional forecast methods?
[Bill Norberg] Traditional forecasts suffer from the “pressure to forecast” syndrome. These forecasts leverage seller opinions and reps “feeling good” about a deal yet do not follow a rigorous qualification methodology. Sellers remain very busy with costly activities (demos, proof of concepts, custom proposals) to move the deal forward. In many cases, sellers perform these expensive and resource-intensive activities without getting the advancements in the deal they are seeking due to a lack of understanding of the “business outcomes” the customer is aiming to achieve.
Building an evidence-based forecast starts with strong discovery skills, understanding the business outcomes the customer is trying to drive towards, and becoming a resource by bringing value to the customer in the sales process. The customer will perceive value from the seller when the seller helps build the business case around the agreed business outcomes and becomes prescriptive with the decision criteria and decision process to support those outcomes.
What types of organizations or sales cycles are the best fit for "Evidence-Based Forecasting?"
[Bill Norberg] We find success in evidence-based forecasts across the SaaS business spectrum. Regardless of the type of sale (transactional or enterprise), we see the MEDD(P)ICC Qualification Methodology successfully driving evidence-based forecasts. In the transactional sales cycle, we coach towards a “MEDD(P)ICC Light” methodology vs. the full MEDD(P)ICC methodology, which has driven tremendous success in the enterprise sale.
What's hard about getting "Evidence-Based Forecasting," right? Why isn't everyone doing?
[Bill Norberg] As previously mentioned, driving towards an evidence-based forecast is challenging due to the pressure to build pipeline and move deals through the sales process. Many times this leads to overly optimistic forecasts that end up with exceedingly long sales cycles that cause forecasted opportunities to slip out of one quarter, with many ultimately never closing (let alone in a relevant forecasted timeframe).
Where do "Evidence-Based Forecasting" implementations go wrong typically?
[Bill Norberg] Evidence-based forecasting is a result of a disciplined approach to qualification. Qualification methodologies like MEDD(P)ICC help companies build this discipline into their sales motion. It starts with sales leadership wanting to change their seller’s behavior and “coaching” them to achieve the change. We like to “coach” the companies we work with to create a “common language” within their organizations that everyone should follow when discussing any sales opportunity. To ensure consistency in the sales process, Sales, SE’s, SDR’s, ISR’s, Customer Success, and Marketing all need to understand and communicate using MEDD(P) ICC’s common language.
Regardless of the training or the qualification methodology of choice, if sales leadership does not lead the change through coaching and create the expectation that building evidence-based forecasts is the only way deals move through the forecast, the change will not occur. Deals will continue to be put in the pipeline and pushed through the forecast only to “slip” rather than “close.” Adequate and sufficient coaching is the key to the adoption of evidence-based forecasts.
Does this mean that traditional forecasting models will die soon?
[Bill Norberg] Unfortunately, I am not sure we will ever eradicate “hopecasts!” The pressure to show progress on deals as companies have pressure to grow revenue will always exist. There will always be sales management that will be more interested in counting the number of activities a seller completes in a week/month/quarter as leading indicators of success. Transitioning to building evidence-based forecasts is not easy. Sales leaders need to continuously “coach” their sellers and customers through the process, which will ultimately end up with a more reliable and accurate sales “forecast.”
What are some easy to implement best practices to drive accuracy lift via “Evidence-Based Forecasting?”
[Bill Norberg] MEDDICC (MEDD(P)ICC) is a qualification methodology designed to be lightweight for the sellers, sales leaders and a prescriptive buying process for the buyer. MEDDICC helps sellers identify their prospects’ business outcomes using a straightforward, simple formula. MEDDICC allows the seller to “self-assess” their progress to quickly understand the next best step in the sales process to gain advancements in the sale and not just continuations.
Great insights, and thank you for sharing your perspective on the topic. My favorite two lines are “hopecasts” and “pressure to forecast.” That’s exactly right, and that’s where traditional forecast approaches fall short. I agree that having a defined evidence-based forecasting process and a predictive forecasting solution will yield significantly improved forecast accuracy. Again, thank you for your time, Bill.