Most CRM systems have a field labeled Percentage of Probability. Many of them equate the probability of winning with progress through the selling cycle. For example, a sales opportunity in the early stages may be assigned a 10% Percentage of Probability. As the deal progresses to contract negotiations, it may be assigned a value of 90%.
Untold numbers of CRM forecasting reports are built around Percentage of Probability. Special attention is supposed to be paid to opportunities in the 80% and 90% categories. After all, there is an 80% or 90% chance these deals are going to be won, right? NOT!
We’ve asked several VPs of Sales and Chief Sales Officers the following question:
Is it possible to lose a deal that has a Percentage of Probability of 99%?
The resounding answer is “Yes!” It’s not unusual for a buying organization to enter contract negotiations with two finalist vendors. Assuming a transaction actually occurs the end of negotiations, there can only be one winner. The losing sales person worked the opportunity 99% of the way through the sales cycle, but the true Percentage of Probability going into the negotiations was more like 50%.
So let’s call “Percentage of Probability” what it is: Percentage of Sales Cycle Progress.
There is no science in this number that can predict whether a sale will be won. To be brutally honest, Percentage of Probability, where arbitrary percentage values are assigned to certain stages of the sales cycle, is Probability Abuse. There is no relationship between a sales opportunity with a Percentage of Probability of 70% and winning 70% of the time. One number cannot be used to make such predictions.
To accurately predict which sales will close, and when, requires two styles of information:
The fundamental question here is whether a given opportunity can become a successful client-partner or not. How well does the prospective buying organization align with (or resemble) your most successful client-partners today? We use a Client Alignment Parameters (CAP) Score. Is there alignment or are there disparities? The higher the score, the better.
Is there an imminent transaction? In other words, does the buying organization have to make a purchase, or is Status Quo a viable alternative? A negative answer here can result in significant selling time and money being invested in a non-decision. By the way, most sales organizations tell us they lose to Status Quo more than any other competitor.
Will you be allowed to sell to the buying organization? Do you know who all the Buyers (aka Decision Makers) are? Do you have access to all of them? Do you have one or more Guide(s) – a Buyer willing to collaborate to help you win? Inability to identify and access Buyers lessens the chances of winning. Having a Guide is critical.
Will the economic value of your solution generate a return that is higher than the price of your proposal? Is the data required to drive an ROI projection available or not? Have you shared your projections with the buying organization? Has anyone from the Finance Department approved or edited your projections? Failure in these categories can jeopardize funding for the investment.
Using a set of standardized Sales Milestones should ensure that all necessary sales cycle steps are executed – in an optimal sequence. Skipped steps can cause deals to get killed at the finish line. What is the Present Sales Milestone (the most recently completed step in the process)? This indicates what has been done to date.
What is the Next Logical Sales Milestone (NLSM)? In other words where, in the Sales Milestones, will this opportunity be in the foreseeable (e.g. one to eight weeks) future? What is the Plan of Attack to achieve that NLSM? If the NLSM is to close the deal, is it reasonable to believe that the Plan of Attack can be completed by the forecasted Close Date?
This article began by discussing the merits (or lack thereof) of Probability in Sales. It is impossible to make reasonable predictions using a single number. The beauty of sales, from a statistical perspective, is that there are only three outcomes: Win, Lose or Walk (discontinue the investment).
Tracking the Sales Vital Signs described in this article can serve as a more scientific platform for predicting which sales opportunities will close and when they will close. One analysis of 250 opportunities we conducted for a client showed true correlations between higher CAP Scores (for qualification) and winning. Losses consistently had lower average CAP Scores.
Every sale that was won included one or more Guides. Winning sales included access to an average of 4.3 Buyers, while losses averaged 1.1 Buyers. There was also a relationship shown between non-decisions and Status Quo being a viable alternative.
It’s one thing to claim the sale will close by the end of the Quarter. It’s another to have a Plan of Attack illustrating: the events that will take place, the information and actions required to complete the plan and the sales team resources that will participate in completing those events. When these are all assigned and completed using a “no later than” date, forecasting becomes much more accurate.
High performing sales teams set realistic expectations in forecasting close dates. They don’t project closed sales without plans to achieve closure. When things do not go as planned, they acknowledge that and either develop a better Plan of Attack or push the close date out. We believe the 11th Commandment is: “Thou shalt not kid thyself.”