This is a common question that frustrates so many executives especially in small to medium businesses where lack of or too much inventory creates a host of other issues. Service businesses face similar challenges when large adjustments or changes are made to services orders. These missed forecasts cause labor issues both in terms of layoffs or overtime, cashflow problems, materials cost and loss, along with customer service issues that further lead to reduced revenue opportunities.
This is a common question that frustrates so many executives especially in small to medium businesses where lack of or too much inventory creates a host of other issues. Service businesses face similar challenges when large adjustments or changes are made to services orders. These missed forecasts cause labor issues both in terms of layoffs or overtime, cashflow problems, materials cost and loss, along with customer service issues that further lead to reduced revenue opportunities.
The process of forecasting is based on reliable data of past and present. Forecasting is not new, as it has been practiced from the beginning of time. Forecasting is an important aspect of good business administration. “Sales forecast is an estimate of Sales, in monetary or physical units, for a specified future period under a proposed business plan or program and under an assumed set of economic and other forces outside the unit for which the sales forecast is made”, according to the American Marketing Association.
An experienced sales leader is generally the person with whom an organization reply’s on to get this right. What data and process are they using to ensure good accuracy? How connected to each sales event are they to ensure its timing, pricing and other key requirements are positive?
Below are some areas to consider when determining if sales forecast is accurate.
Relying on Bad and Incomplete Data
Do you have a CRM and is it riddled with more holes than a wool sweater in a moth infestation. Some of your data is missing, or it’s outdated, or it’s simply inaccurate. Holes such as these can lead to skewed forecasts. Remember, what you get out of your CRM depends on what you put into it. The more data points your team inputs into your CRM, the more solid the data will be as far as forecasting. The more data you’ve amassed, the more accurately you’ll be able to forecast.
If you don’t have a CRM, how are you keeping the data? Do you have pipeline stages that measure activity and other key qualifiers that helps you understand each accounts opportunity?
Key practices include directing your team to engage in data input as a best practice. Make sure everyone’s diligent about documenting communication points and populating fields at the account and opportunity stages. This collective effort will draw a data-driven picture of why some deals are successful and others cough their last breath and die. Adhere to this rule: “If it’s not in your CRM, it does not exist.” The should expect the same results even if you don’t use a CRM but have built some other process for tracking sales data.
Blinded by Positivity Fairy Dust
This is the most common attribute of missed forecast. Too much optimism without real data to support. The mantra of most businesses is, “Be optimistic or be obsolete.” Sales is chancy, yet despite what might be repeated setbacks, you must maintain a sunny disposition, staying positive when it comes to growth opportunities and deal closing. That said, you don’t want to go through your sales life being a happy idiot. Engage in that other “ism”—realism. Meaning, don’t clog your pipeline with too many potential deals that are built on wishes and dreams. That magical-thinking “user error” often results in an overinflated, unrealistic forecast. Making the effort to debug your pipeline is time well spent.
Selling Price versus Value
Often sales forecast appears to have more value in the pipeline than what materializes once you ship the product or provide the service. This is because solid controls are not in place within sales leadership along with the possibility that there is a poor understanding of the actual cost associated with each sale. This is a key area that must be completely understood. It is not that you will not use price as a tool to drive sales in certain situations, however, all to often businesses allow discounting and other forms of price change without a clear strategy. This often leads to unprofitable customers and this really creates a forecasting mess.
Betting on the Wrong Horse
Be careful not to funnel your resources into unpromising deals. Emotion can be the driving force sometimes— “I like that company … I’d love to work with them … they seem cool!” Next thing you know, resources spent on your dream company have not resulted in a deal, and now you’re short on TME (time money energy) that was better spent pursuing more realistic leads. Again, this can be the result of too many deals in the pipeline and/or the wrong ones getting special treatment while the right ones get ignored. Forget that glam deal you’d love to land. Focus on data management. Or, if you’ve mastered the art of data management already, use what you know about data science to rank and prioritize opportunities for reps, teams, region, or product lines, considering things like close probability, momentum, size, and market trends.
We all know that, “No one has a crystal ball.” True enough, but forecasting can be thoughtful, or it can be stab-in-the-dark reckless. When you make thoughtful, intelligent predictions, it’s more likely the clouds will part, and you’ll have your day in the sun.
If you wish to learn more about how Outsourced Sales Pros can assist you in ensuring an accurate sales pipeline and a growing base of business contact us for more information. www.outsourcesalespros.com