Get Yoda's Wisdom

If I've heard it once, I've heard a thousand times from small business owners "the biggest problem with our sales is that we don't have enough leads in our forecast."

Usually, in my own flip way, I tell them I can help that. Get me the yellow pages. You get the picture. It isn't how many leads are in the pipeline, it's how many qualified leads are in the pipeline!

But it just appears that some folks get some level of comfort in seeing $xx millions of potential sales in a forecast. Kind of sleep with it under their pillow to make them feel better, when if they truly understood what a good sales forecast was, they'd be having nightmares!

Sales forecasts are one of the most important elements in a company's success...and one of the most misunderstood.

First of all, it is above all else, a forecast. In short, what is projected vs. what will actually happen. Second, its credibility is not dependent on how large the potential dollars from a sale, but on the confidence that some portion of the potential dollars will actually arrive in the form of new sales and can be counted on, over time. And that credibility is seated in two things. How qualified the leads or prospects are, and what the conversion rate of those qualified leads has been over time.

Let's address each in turn...

Now the old sales adage is "leads = sales." That is the more leads you have, the more sales you close. Sounds reasonable, right? Nope. Only partially right. It's, actually, the more qualified leads you have, the more sales you close.

Qualified Leads

Qualified leads, basically, come from the various marketing programs the company has instituted. At the end of day, marketing's major, if not only, objective is to generate qualified leads. The difference between a lead and a qualified lead? A lead is "aware," but a qualified lead is "aware" and "interested." Most marketing programs are established to create awareness. Not enough focus on getting potential prospects "interested."

Some examples of "interested" leads are those who don't just visit a website, but opt-in for a download, newsletter or blog. Or they could be prospects with whom a demonstration is scheduled as the result of some kind of marketing program. Those are the only prospects that ought to appear on a forecast. If they haven't exhibited interest, then they are just a suspect, and although they still might be pursued, they should not be counted in any way. A forecast or pipeline should only contains qualified leads. They can't be closed if they aren't, at least, interested. Check your latest forecast. How many of the prospects shown are truly qualified?

Conversion Rate

The conversion rate, determined over time is the % of qualified leads that, ultimately, are closed. And this is really the true measure of how good a sales force is performing. This is a direct result of a good sales process, a step-by-step way to take a qualified lead from "interested" to "customer." The better the sales process, the higher the conversion rate. Just because a qualified lead appears on a forecast does not make it a "take it to the bank" situation. Do you know what your conversion rate is? And how good is your sales process? Time to review what it takes to take a qualified lead from "interested" to "closed."

So, a forecast is only as good as the qualified leads that comprise it and the conversion rates that turn those leads into actual sales. A forecast built and managed in this way, won't guarantee your success or a good night's sleep, but won't give you nightmares, either!

"The Entrepreneur's Yoda" knows these things. He's been there. May success be with you!