I received a message last week from an old friend who recently retired from a long and successful sales and sales management career.
It was tongue-in-cheek, but he stated:
There were quite a few forms that I didn't fill out when I turned in my Account Plans. Sometimes, I made up my forecast. I'm just looking for absolution...
Sometimes you made up your forecasts? Sometimes?
For some organizations, sales forecasting is a dreaded ritual of sales people and sales managers generating reports that, at least short-term, keep the next level of management at bay.
The Problem with Sales Forecasting
Survival is the strongest of human instincts. Who wants to risk job security by openly admitting they are going to perform below expectation? Field level forecasts become a mixture of hope and fear. Even some successful reps would prefer to avoid the embarrassment of an upcoming off month and make up a forecast. Right, my old friend
Eventually, someone at a senior level in the company runs the rolled-up numbers through a formula derived from historical performance and produces a forecast that often doesn't come close to the field generated numbers.
Why? Once again, survival is a strong instinct. Do you think senior managers want to hang their hats on reports generated by a field organization that regularly and notoriously misses their forecast? No way.
I've heard it said that for senior managers, sales forecasting is like "driving a car with no brakes or steering the wheel while looking in the rear-view mirror to see where you're going". For some organizations, maybe even yours, it's that out of control, that inexact.
It Doesn't Have to Be this Way
There are many levels of process and control to improve forecasting accuracy. Unfortunately in a short blog post I can't address them all, but I can lead you to some fundamentals. It begins with making certain your field organization is working with the right predictive metrics.
If, for every individual salesperson, you accurately and continually track the number of new opportunities identified, proposal ratio (the percentage of new opportunities converted to proposals), individual closing ratios (the number of sales made divided by the number of proposals submitted), and the average sale value (dollars or units), you can predict, with surprising accuracy, the performance of your entire sales team.
Yes, you're still relying on historical performance and, yes, it takes a significant amount of discipline and diligence to ACCURATELY track these metrics. The good news is hope and fear aren't predictive metrics. They're taken out of the equation. These numbers don't lie.
So take the first steps to forecasting accuracy. Start tracking these predictive metrics right away. It won't happen immediately, but within a quarter or two, your forecasting accuracy will improve dramatically. Otherwise, keep your foot off the brake pedal, take your hands off the steering wheel and adjust your rear-view mirror...
Bob Nicols has 34 years of experience in sales, sales management, executive management and sales force development. He founded Burton Training Group, now AXIOM Sales Force Development, in 1990 after being a top and highly recognized performer in sales, sales management and executive positions within the technology sector. He has managed and mentored thousands of sales people, sales managers and senior managers and been responsible for hundreds of millions of dollars in sales. For more than 21 years he has developed and delivered sales programs that have become the standard for many Fortune 100 companies including AT&T, BellSouth, Disney Enterprises, Alltel, Verizon and ESPN. AXIOM programs have been implemented in over 30 countries including Japan, the UK, Germany, Dubai, Brazil, Taiwan, Singapore, Australia, China, Mexico, Canada, South Korea, Slovakia, Sweden, and The Netherlands. Bob's highly energetic and insightful lectures and workshops have resulted in invitations to be a featured presenter at dozens of national and international sales meetings and conferences. He is a trusted advisor to the presidents and senior managers of multiple organizations, both large and small and has been a board member of a national technology company. Bob is the developer of AXIOM's “Selling Sciences ProgramTM” and co-author of the “Selling Sciences” CD series.