More Accurate Forecasting and Reducing Close Date Slippage (CDS).
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In earlier posts I discussed uncertainty in selling situations and how uncertainty manifests itself as a range of probabilities of success in closing a piece of business, and I coined the term ‘Uncertainty Range’ to refer to range of probabilities.
I also showed that the size of the Uncertainty Range was a direct indicator of how well the opportunity was qualified; a poorly qualified opportunity has a much larger Uncertainty Range than a Qualified or Well Qualified opportunity.
And if you recall, I introduced the term Degree of Qualification (DoQ), which is a measure of how well the opportunity has been qualified and represents your level of knowledge about the opportunity.
And in my last posting I discussed how we need to qualify an opportunity along 2 dimensions, the Probability of Winning and the Probability of Closing by the Close Date.
So let’s bring all these concepts together make some sense of this stuff and see how they apply to what we do for a living, which is selling.
So what does mean in the real world of selling?
That’s easy to explain; suppose through your cold calling activities you identify a new opportunity. Because it’s a new opportunity, it’s not well qualified as your knowledge level about it (at this point in time) is low; which means the DoQ for the opportunity is low and, as you would expect, it will have a large Uncertainty Range in the probability of winning. Suppose now that your sales manager asked you what you thought your chances of winning the business were. The first thing you might say is that’s it’s not qualified yet and then you might give your sales manager a range of probabilities, say 20% to 80%. If your sales manager pushed for a single number (which they have a tendency to do), you would might emphasize that you haven’t really qualified the opportunity yet, etc., etc., but if you had to give a number you would say 20%. If your sales manager asked you when it was going to close, you’d give him a range of dates as you’re not sure when exactly it will close.
So in effect, you are qualifying the opportunity in in 2 dimensions, Winning and Closing and we have an Uncertainty Range for both Winning and Closing.
What does this look?
The best, clearest and easiest way to explain this is with an example and a picture.
Suppose the new opportunity you’ve identified worth $100K, you’re in the early stages of the sales cycle and you’re actively qualifying it.
Your sales manager asks you what your chances of winning the business are. You think about it and say, “At this stage it could be anywhere from 20% to 80%, but I’ll say 60%. OK! Now you sales manager asks you what are the chances that it will close by the Close Date. You think about it and say, “At this stage it could be anywhere from 30% to 70%, but I’ll say 50%.
Let’s put those numbers in a table.
| Winning | Closing (by Close Date) | ||||
| Low | Score | High | Low | Score | High |
| 20% | 60% | 80% | 30% | 50% | 70% |
| Uncertainty Range | Uncertainty Range | ||||
| UR = 80% – 20% = 60% | UR = 70% – 30% = 40% | ||||
Now let’s graph them.
The vertical axis shows the Probability of Winning the business and shows the High (maximum), in this case 80%, the Low, 20% and the Score, 60%.
The horizontal axis shows the Probability of the business closing by the Close Date and shows the High of 70%, a Low of 30% and the Score of 50%.
So you can see the Uncertainty Ranges for Winning & Closing form a box around Score, this is the Uncertainty Zone and in actual fact the probability of Winning and of Closing by the Close Date is somewhere in that Uncertainty Zone.
No doubt you’re asking yourself, “Where do these numbers come from?” The answer; two places, but let me get to that a little bit later.
Recall that the size of the Uncertainty Range (or Zone) is an indicator of how well the opportunity has been qualified, it’s DoQ, and the DoQ of an opportunity is a measure of how much you know about it. As you increase your knowledge of the opportunity, the DoQ increases and the Uncertainty Zone decreases as well. What does this look like?
You continue to work the opportunity and learn more about it and amd how you stack up against the competition, it becomes better qualified and your chances of winning improve, so that your probabilities now look like those shown in the next table.
| Winning | Closing (by Close Date) | ||||
| Low | Score | High | Low | Score | High |
| 65% | 75% | 85% | 70% | 80% | 90% |
| Uncertainty Range | Uncertainty Range | ||||
| UR = 85% – 65% = 20% | UR = 90% – 70% = 20% | ||||
And the graph would look like this.
You can see what’s happening; you have improved your knowledge of the opportunity (you’ve qualified it to a greater extent), the DoQ has increased and the Uncertainty Zone has decreased. In addition your sales strategy is proving effective and the probability of winning has increased. So now when your sales manager asks you what your chances of winning the business are, you might say 75%, because your confidence in winning it has increased because you know more about the opportunity and how you stand against the competition.
The objective is twofold:
- Reduce the size of the Uncertainty Zone by increasing the DoQ of the opportunity
- Implement a sales strategy that drives the decreasing Uncertainty Zone and increasing Score to the top right corner of the graph, where the probability of Winning and Closing is 100%, which means you’re winning the deal.
If the decreasing Uncertainty Zone moves to the bottom right corner, you’re losing the deal, which implies that you should reconsider your involvement in the sale.
Now it’s time to answer where these numbers come from.
The most obvious source is YOU!
Every time you’re involved in a competitive sale you have in mind a range of probabilities (your Uncertainty Range) of winning the business. As you qualify the opportunity and understand how you stack up against the competition that range of probabilities will shrink and you will be more confident in you assessment of whether or not you will win.
The other source of these numbers is Occulus.
How does Occulus do it?
You answer a number of questions (divided into 6 categories) about the opportunity, it’s simple, straight forward and only takes a few minutes. Occulus the analyzes your answers and generates the Win / Close graph for you. As you increase the DoQ of the opportunity, you update the answers and Occulus re-runs the analysis and generaates a new Win / Close graph.
There are a couple of things missing, right?
- What information do you need about the opportunity to increase the DoQ? Not to worry, Occulus will tell you, it will give you a complete list of all the information you need to get.
- What sales strategy do you need to implement to drive the Score to the top right corner? Occulus will tell you that as well. Occulus will provide you a list of Action Items to drive the business forward.
Anyway, don’t take my word for it, see for yourself. Click here and go to the Occulus site and analyze one of your opportunities, there’s a free trial so it won’t cost you anything and you can use it for 2 weeks. And do use it for the full 2 weeks, update the opportunity whenever you get new information and rerun the analysis. There’s a real cool graph in Occulus called the Velocity Chart; its tracks your progress as you move the opportunity forward. Or as an option, download this sample Occulus analysis (Occulus Sample Analysis and see what it looks like in the real world.
So now that you have an accurate measure of your chances of winning the business and of it closing on time, what do you do with these numbers? Why you put them in a forecast.
Forecasting is not my strength, so have asked a colleague, Peter Mickie of PERFORMAX, Inc., who is an expert to comment on forecasting. So the next blog will discuss on forecasting. Stay tuned, you’re going to enjoy what Peter has to say of course
Good luck, give Occulus a try and let me know what you think.
After all, you have nothing to lose………….except, perhaps, a sale!
Mel
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