Pipeline management and forecasting are different, yet we see many firms focus most of their attention on the forecast, at the expense of pipeline management. The main reason we see this arise is the confusion between sales stage and forecast category.
Sales stage should reflect where the customer is in the buying process (done right it’s always objective). The forecast category should reflect the sales person’s assessment (subjective) of the likelihood of winning. The two are not interchangeable, and you can’t correlate a forecast category (subjective) to a sales stage (objective).
If forecasting within your organization is a tenuous topic and consumes excessive time from sales leaders and salespersons, the cause is likely to lack of time spent on pipeline management, inadequate pipeline reports, and a lack of understanding and adoption of sales stages.
We even encountered large firms with no sales stages on their pipeline reports, just forecast categories. And we’ve seen all too often organizations that elect to conduct weekly or daily forecast calls, in efforts to improve forecast consistency and accuracy. We liken this approach to navigating the streets of New York City with a map of Chicago. No matter how many hours you spend trying to navigate, you won’t make progress with the wrong map. The output of good pipeline management is the right map for the forecast process.
The primary goals of pipeline management are to build a healthy pipeline (size, shape, and contents) and win more opportunities. The sales stage and close date fields are crucial for pipeline management, but equally for forecasting. Understood and applied correctly, these fields should indicate where the customer is in the buying process, and their timeline for making a decision. Typically, there are up to 3–5 additional fields on the pipeline report that objectively illustrate the underlying health and status of an opportunity.
Shifting an organization’s focus to a disciplined, clearer and more effective pipeline management process can be incredibly hard. However, without a shift, it will be practically impossible to improve the consistency and accuracy of the forecast.