Mike was, at the time, working for a growth-stage company. As such, managing cash, he says, was critical. So, when the company’s CFO approached him looking for a sales forecast for the new quarter, Brouwer dove deep into their CRM to get his boss the right numbers. He studied the team’s pipeline and examined the opportunities and the respective stages with a jeweler’s eye. Unfortunately, the forecast he delivered was off the mark. Way off the mark. Then, at the outset of the next quarter, the CFO came looking for another forecast. Mike dove in again. And, again, the forecast he delivered was way off.
The CFO didn’t ask again.
“Our CFO did the forecast himself. And I realized he had no credibility with him,” says Brouwer, on a recent edition of The Predictable Revenue podcast.
“I was absolutely embarrassed. Something needed to change, and that’s what started me on my journey.”
And what a journey it’s been for Brouwer. In the years since those missteps, he’s entirely re-written traditional sales forecasting methodology to ensure those mistakes never happen again.
“It really was my inability to forecast that forced me to say ‘I better figure this out or I’m going to need a new profession.’ And, being a rather simple individual, I started to break down this process into simple steps,” adds Brouwer.
Before jumping into Brouwer’s detailed system, it’s instructive to look at the traditional, simple sales forecasting model that failed him.
Mike Brouwer, VP of Sales at Denver’s FullContact
Brouwer’s previous method (based on the likelihood of closing opportunities at each stage of the pipeline):
- Discovery call scheduled: 10% chance of closing
- Discovery call completed: 20% chance of closing
- Demo completed: 40% chance of closing
- Proposal Sent: 60% chance of closing
- Contract Sent: 80% chance of closing
- Closed Won: 100% chance of closing
The problem with such a method, says Brouwer, is that it doesn’t take into account different deal sizes and how committed prospects are throughout the sales cycle. Sales reps hate to lose a deal, so if they don’t actively manage those statuses in Salesforce (and accept a deal has gone dark), you’re forecasting is going to be wrong.
“So, let’s look at the first stage. We’re saying 1 in 10 or 1 in 5 of those prospects become closed sales. But, of course, not all of those prospects are created equal. One might be worth $60K, and four might be $500 opportunities. What if that $60K prospect doesn’t close? It does not contemplate the size of the deal at each stage,” says Brouwer.
“It also isn’t aligned to how people buy things. You have to be so incredibly confident your sales reps are doing exactly the right activity at the right time.”
So…what does that re-designed methodology look like?
Brouwer has broken his method into two separate, distinct parts: Sales Stages and Sales Process, both of which are managed by regular meetings with his sales reps.
“Our sales reps are comfortable having to defend their pipeline. They have to answer questions that are part of each stage – why are where they are in the process,” says Brouwer.
“We really go deep and offer coaching and support wherever necessary.”
The Brouwer Methodology Sales Stages: “the process followed to ensure the execution of a consistent predictable and successful outcome when we qualify into a sales motion. Sales stages indicate where the prospect is at in their buying process.”
Brouwer’s Sales Stages Rubric:
Pre-Qualification (BDR only)
- What is the size of the opportunity?
- Do they buy into your value statement?
- Who does the prospect compete against?
- Are they willing to invest time in a qualification meeting?
- Goal is to conceptual buy-in for what you’re selling;
- Run qualification call – do we have a champion in the making?
- Roadmap defined…what is going on in their company?
- How can the prospect derive value from your offerings…have a price chat when appropriate;
- Gain technical buy in about your product;
- Engage in an ROI conversation, then formal pricing delivered;
- Complete technical calls to answer any integration questions;
- Get business buy-in that your offering is a profitable investment;
- Gain agreement on ROI assumptions and budget approval;
- Create an agreed upon sequence for go-live date;
- Begin to negotiate pricing / legal terms;
Managing The Close
- Execute what’s been agreed upon in previous stages;
- Timelines for execution confirmed – final negotiations and signing process locked down.
Sales Process: “a consistent methodology we follow to ensure proper expectations are set around how much, how sure and how soon we will close profitable deals. This is how we tell the organization what to expect.”
Brouwer’s Sales Process Rubric (percentages reflect the chance the respective opportunity closes in the current quarter):
A – “Commit” 85%
- Negotiating contracts, understand contract approval and signing process and timelines;
B – “Probable” 67%
- We are the Vendor of Choice and champion has committed to getting the deal done in the quarter;
C – “Possible” 34%
- Now active opportunity, part of forecasting for the quarter. Pricing has been delivered and they are actively participating in the sales cycle;
WIP – Qualified
- Engaged with the prospect, next steps on the calendar, done qualification call, know decision maker, champion, competitors;
“Pre-Qualified” – BDR
- Satisfies 3 of the 4 criteria listed above.
For more on Mike Brouwer’s sales forecasting skills, be sure to check out this edition of The Predictable Revenue Podcast.