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 did not 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, forecasting sales 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. 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 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 that way.
There are many levels of process and control to improve forecasting accuracy. Unfortunately in a 475-word blog 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 are 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…