Nothing hinders strategic planning like unpredictability. And, as you well know, our current business environment is anything but predictable. 

Clients’ needs are changing almost daily. The supply chain has shifted dramatically, just as customer demand is increasing. This has put owners in the precarious position of trying to estimate future projects and plan for new initiatives in the midst of navigating uncharted territory. 

It inevitably leads to the question, “How on earth do I forecast sales in this environment?”

The short answer is: Not the way you did it before.

Stop Obsessing Over Your Close Rate

There’s an old joke that goes something like this…

“If you want to know when it’ll rain in Kansas, look at the news. If you want to know when it’ll rain in Florida, look at your watch.”

In a sense, we have moved from Florida to Kansas. The way we used to forecast simply won’t work anymore now that we’re in a completely new climate. 

The same is true for forecasting sales. We’re in a new business climate with drastically different conditions. If we keep trying to base our forecasts on patterns from our old business climate, they won’t be accurate and will leave us incredibly frustrated. 

Instead, we need to let go of our old patterns of forecasting and stop checking the proverbial wristwatch — which, for most of us, is the close rate. 

Two years ago, close rate was a great indication of future sales. We offered well-defined services to prospects with predictable demand. At any given moment, we could look at the number of outstanding RFPs and, based on our close rate, quickly forecast how many of those projects we could count on to end in confirmed business. 

Now we’re in a climate where we’re offering a broader scope of services to prospects whose demand is less predictable because they themselves lack clarity around their specific needs. 

It’s this lack of predictability that makes close rate an obsolete metric for forecasting sales. 

Buyer Engagement Is the Key Indicator

In our new climate, we’re not offering the same well-defined, pre-packaged solutions to buyers who simply need to sign off on them. 

Now, our projects are much more fluid. The scope and deliverables often evolve up until the start of the event, which requires an ongoing stream of long conversations with the client during the sales and fulfillment process. 

As Dorothy famously said in the Wizard of Oz, “We’re not in Florida anymore, Toto.” 

In this type of climate, engagement with the client is key. It’s measuring this engagement that will give us the best indicator of future sales.

Measuring engagement is crucial because it tells us: 

1. The likelihood a prospect will buy from us.
2. Whether they’ll buy at a level that’s worth our time and effort.   

The second part is essential in our new climate. Because projects are much more fluid, they require additional attention and resources. Engagement will tell us whether the project will be profitable. 

3 Forms of Engagement You Need To Measure

Maximizing the level of engagement you have with buyers is a great strategy for increasing future sales. But that’s a focus for a different post.  

Right now, we’re concerned with forecasting sales for the business already in our pipeline. To do that, we need to measure our engagement. 

Here are the three places to start: 

1. The Pivotal Engagement Moment

Every business has a point in their sales process that nearly all of their best clients participate in. 

When it happens, it’s the biggest indicator that the prospect will become a client. It’s the closest thing to a “point of no return” you have in your sales funnel. 

For a lot of businesses, this may be when a prospect comes to the building for the very first time and is blown away with the operation. For other businesses, it could be when a prospect hops on a video call with the heads of Sales and Operations to talk about the different ways to execute a project.

To forecast sales, you need to measure the number of these pivotal engagement moments (PEMs) — whatever they may be — that have occurred recently or will occur soon.

First, look back over the last year and determine how long it took prospects to become paying clients after they had that experience. Then, use the average time gap to predict a timeline for future sales based on how many current prospects have had that experience.

For example, let’s say my PEM was a building visit, and on average, prospects finalized their deals within four weeks of visiting. I could then look at the number of office visits over the last four weeks to help me forecast sales for the upcoming month. Then, I could look at the number of upcoming building visits on the schedule to help me predict sales for the following month.

To measure this, ask: 

1. What is your PEM? 
2. What is the average time between the PEM and the sale? 
3. How many prospects have had the PEM in the last [average time gap]? 
4. How many upcoming PEMs are scheduled to occur soon?

2. The Communication Method

You can also look at the way you communicate with potential buyers. Specifically, do you communicate one-to-one or many-to-many? 

One-to-one communication is often masked by the term “relationship selling.” It’s when a single salesperson exclusively communicates with a single representative from the buyer’s organization. 

The two of them work together and distance the rest of their teams from each other. In other words, “I don’t want all of my employees talking to all of your employees. We’ll work this out ourselves.” 

I call it the Bow Tie Effect. 

It’s a small, breakable connection that greatly reduces the likelihood that the conversation will turn into future business. 

The alternative is many-to-many communication, which flips the bow tie around — into a diamond. 

Instead of one salesperson talking to the buyer rep, we have multiple people on our team talking to multiple people on their team, creating multiple points of connection.  

More connecting points and stronger connecting pieces make the connection stronger, which makes this model of communication a great indicator of high engagement and future business. 

To measure this, ask: 

1. Who are we in talks with right now? 
2. Is there one person communicating with them? Or multiple people? 
3. How can we further pivot to a diamond model? 

3. The Quality of Prospect Conversations

The final form of engagement to measure is the quality of conversations you’re having. 

While this is a little more subjective than the previous two forms, it’s an equally effective indicator of engagement. 

Make sure you’re having honest conversations with prospects — or more accurately, that you’re guiding conversations where they can be honest with you. 

By “honest,” we’re specifically talking honesty in three areas: 

1. Goals
2. Budget
3. Commitments 

First, are they clearly and openly expressing their goals, both for the project and for the type of working relationship they want with you?

• Are they clear about the outcomes they want for the project? 
• Are they holding anything back about the challenges they know they’ll encounter? 
• Do they want to create a long-term partnership with you and continue to work together on upcoming projects? Or is this a solo project? 

Then, are they comfortable discussing their budget? Transparency about budget upfront will allow you to gauge how effectively you can help them reach their goals. This is especially important in our current climate, when projects change so much from inception to completion. 

Finally, are they willing to make a commitment if all conditions and circumstances are correct? In an honest conversation, you can quickly tell whether the buyer is serious about doing business or is just shopping around to report back to their decision-maker. 

Obviously, the answers to these specific questions will help you decide whether they’re a client or project you want to take on. But regardless of the specific answers, conversations that honestly discuss these issues are a sign of high engagement, and the more of them you have, the higher the likelihood of a sale. 

The Value Barometer Has Changed

Traditionally, forecasting sales was all about estimating revenue in a specific period based on our close rate. We could look at the discussions we were having with prospects in our pipeline and, based on our close rate, estimate the amount of revenue we could expect to generate. 

The operating conditions and the products were predictable, making it easy to assign value to each project. 

But in our new climate, close rate is no longer a useful metric. 

Demand and supply are in a constant state of flux, so instead of looking at the value of a project, we need to look at the value of a client. 

If we want to forecast sales at all today, we need to start by looking at the level of engagement of the prospects we’re in discussion with now. 

If our buyers are participating in pivotal engagement moments, and if we’re communicating with them in a diamond model consisting of honest conversations, we can assign a much more accurate value to those clients over time. This is forecasting in our new climate.