The Most Popular But Useless Metric In Sales

Most of us and our organizations are sales-centric in the sense that generating a robust sales pipeline, maintaining the suspect to prospect and prospect to customer conversion ratio are considered key to an organizations viability and financial health. While carrying out such activities, we also do regular projections based on a most used forecasting methodology called “weighted revenue” which is essentially a product of the sum of opportunity pipeline and a probability factor.

Despite being the most used and most relied metric, “weighted revenue” is also highly skewed. Such projections are also  essentially to be based on other factors rather than applying the above methodology :

  • Type of Customer (Existing / New)
  • Type of Sale (Product / Service)
  • Historical Win / Loss Ratio on each Geography / Product / Service line
  • Last but not least is the Sales Team’s ability to close the deal – a derivative of the win / loss ratio

It is amazing that this forecasting methodology is still being considered a key metric and many CRM tool vendors also embed this approach in their software too.

Dave’s and Anthony’s blog post on the similar subject is worth reading.  The emphasis is on coming up with a more practical and relevant forecasting methodology which would provide the real sense of comfort of those who run the business.