Why The Sales Forecast Stinks

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  RickSchultz08/01/07 Report as spam
  1

  Discipline can help the forecast

  While I generally agree with your statements, and have seen the abuses you mention often, I must mention a situation where the forecast was spot-on, regularly, without a mathematician:
  
  The Sales Manager (let's call him Pete) used a Sales Automation system (doesn't matter which one) regularly. He developed a sales methodology within it, and required his staff to use it. He checked their progress in the system daily, and met with each salesperson weekly to review their progress AS SHOWN IN THE CRM system. Where possible, he inserted himself in the sales process to add value.
  
  Every quarter, he was within 10% (plus or minus) of his forecast. Another manager in the same company used the same system, but not as rigourously, and was regularly within 25% (again, plus or minus, more likely minus) of his forecast. The rest of the managers would have better luck throwing horseshoes.
  
  I agree that expert modeling can help, but only to the degree that the variables that affect sales are fairly well established and predictable in and among themselves. In my case, it was a software company; most of the variables were undefined, let alone stable & predictable.
  
  Please note, I made my living for 7 years doing financial modeling (ie being the mathematician), including sales forecasting & subsequent performance reviews. From that perspective, the best forecast comes from establishing a sales process and then methodically implementing it, making changes as they appear prudent.

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  Geoffrey James, Sales Machine08/02/07 Report as spam
  2

  Great!

  That's a great story and I'm really pleased that you posted it, because you've identified about the only way that forecasting can be "fixed" without wholesale changes in corporate culture.

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  tmorling08/02/07 Report as spam
  3

  Sales Forecasting

  Hiring a mathematician to build a scientifically accurate forecasting model is a great idea but probably overkill for most small to medium sized businesses.
  
  Simply defining simple terms such as "qualified prospect" or "decision maker" or "verbal acceptance" will yield results because, over time, the inconsistencies inherent in most sales teams' forecasting process will flatten out.
  
  By enforcing standard definitions for each stage of the sales process, percentage "probabilities" can be applied that will drive improved accuracy in the model over time.

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  hiattdaniels08/07/07 Report as spam
  4

  Why The Sales Forecast Stinks

  I am with you on the sales forecasting. For the smaller companies, which I have, it still is not accurate. Life happens and sales calls don't get made or employees go on vacation. Our forecasts are usually very aggressive and not often reached.
  
  We focus on making the best use of time, talk to as many people as possible and always measure what is working in the company's marketing. Constant measurement of what we did, what worked and what is missing that may work.
  
  Being in sales positions for 15 plus years of my life and now in my own company for 3 years. I found out that it was never motivating or exciting forecasting my sales. When I did not forecast I tended to increase sales than when I did submit a forecast. Isn't there a better way?

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  mcontois@...08/08/07 Report as spam
  5

  Job for someone else

  I think someone else, a non salesperson needs to take care of the forecast. I believe that your accountant could do it.
  But you will need to be able to give them the information they need and what you are looking for. Have them use 2 or 3 different methods. Forecasts will always be wrong. We are trying to predict the future. There are always anomalies and other unexplained occurrences. But it's important to have an idea so you can plan for growth. The goal is to become more effective/efficient, use limited resources better.

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  tonyw10108/07/07 Report as spam
  6

  Sales Forecast vs. Reality

  Unfortunately, the scenario described is all too common, whether it be small, medium or large company. The only difference is that the larger enterprises can absorb the ?plus or minus? margin of error, whereas a small company often has to live with the rewards or sins of a forecast, often for 6 months or more. My 15 plus years of experience has taught me: A) Have a Sales process as meaningful as any other critical process in the company; B) Make sure the process clearly defines and identifies a qualified opportunity or prospect; C) Ensures an understanding of the client purchasing process (where the majority of forecasts break down); D) The process is dogmatically followed and finally E) The Sales process is understood by all who may be affected by it (Finance, procurement, Manufacturing, etc). Yes, it?s a ton of work, but when weighed against widely missed forecast and the repercussion thereof, I have found its sweat equity worth the effort.

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  mcontois@...08/08/07 Report as spam
  7

  Graduate Course

  I am studying forecasting now in a course called Global Operations Management that is part of an MBA program. All of these points are mentioned. Not all forecasting methods are equal. Some are less expensive and time consuming than others. It depends on what you are trying to achieve and what you are out to measure. There are certain techniques that work well for the short-time and others that work better for the long-term. Regression analysis is a favorite, using one variable to predict another variable. It seems the best thing to do is to employ more than one method and compare with the results to see which is most accurate most often.

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  tmorling08/13/07 Report as spam
  8

  Sales Forecasting

  There are several issues at play here. First, the sales process is generally viewed as a "black box" by most other organizations and not understood at any detail especially by people who have nver been in a sales role. Many executives look at sales as a mysterious, magical process that revolves around hiring a proven rainmaker and waiting for the results to pour in. When they don't, the rainmaker is fired, a new one is found, and the cycle starts over.
  
  The second major problem are the terms "qualified lead" or qualified opportunity" or "decision maker" have widely varying meanings.
  
  The solution is to treat sales just like any other business process and adopt standard definitions, process tasks, and validations that everyone understands and agrees to.
  
  I have a consulting practice and blog on this topic: www.thomasmorling.com.
  
  Thomas Morling

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  vive4ever@...09/10/07 Report as spam
  9

  RE: Why The Sales Forecast Stinks

  I am an investor and am familiar with an investing model called Elliot wave analysis which, despite being esoteric in nature is touted as the best model to predict stock price behaviour by the few who use it. The greatness of the model is not that it is accurate- it isn't, but that it has rules in place to help investor make an informed decision 'based on the nature of deviation from the predicted value'. I believe that forecasting could also be used not as a predictor of future sales but as guide to the actions that an organization is supposed to take based on the deviation from the predictions given by the model.