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Sales Solutions
Forecasting (Part I of II) vol 2, issue #22
December 1, 2004
Forecasting is no fun. But it's a task we must do, and it's importantthat we provide the best forecast we can - for reasons we'll explain below. This begs two questions: (1) Since forecasting is more art than science, what constitutes, "best?" And (2) Best for whom?


In the first of this two-part Sales Tip on Forecasting, we're going to get at the answer to the second of these two questions. In Part Two, which will kick off the New Year, we'll talk about what constitutes "best" when it comes to forecasting business.


What goes through a sales person's mind when deciding how to assemble a forecast? On the surface, you'd think it would be pretty straightforward, right? You look at your deals, see what stages they're at in the sales cycle, apply a little gut check, and put down numbers. Pretty straightforward, right? Think again. Here are some reasons I've divined from reps I've managed - OK, from my own experience as a rep, too! - for fudging the numbers:



  • The Pleaser, wanting to impress the boss, provides overly optimistic projections for some deals

  • The Team Player, wanting to keep up with his or her peers in the weekly sales meeting, does the same

  • The Hero, laying low like a stealth bomber, submits a conservative forecast. This way, he can rescue the team at the eleventh hour

  • The Sandbagger, whose next month is looking light, stretches out his close dates



We've all played at least one of these roles in our sales careers. And while it's certainly understandable why we might, it's important that we understand the ramifications of doing so.


The problem with overly optimistic forecasts

On a personal level, you lose credibility - you'll come to be known as someone whose judgment can't be trusted. If you have management aspirations, you'll have developed a career-limiting reputation. On a business level, your rosy forecasts - if taken at face value - will lead management to commit to projects, investments, or expenditures that will end up being under-funded - because your sure-fire deals didn't close, or didn't close when you said they would.

On the other hand

Forecasts that are too conservative can hurt both you and the company, though probably not as seriously as forecasting aggressively can. Conservative forecasts, when rolled up for the entire team, make for a weak aggregate pipeline, something your boss will have to explain to his or her boss. You don't want to do that to your boss! And eventually, the proverbial cat will soon be out of the bag about your surprising ability to close all those supposedly low-probability deals. The business effect is that the company will needlessly put off scheduling the very projects, investments, or expenditures it committed to above - thereby stifling growth. Furthermore, if you work for a public company, they have to report earnings; if the projections they share with analysts are - based on your conservative forecast - unrealistically low, word gets out to the street, driving your company's stock price down and its cost of borrowing up.


Of course, I am talking in aggregate here - your one deal isn't going to save or sink the ship. But taken together, a sales force's cumulative forecast very much does have a significant impact on corporate- level decision-making.


The bottom line? The best forecast is an accurate forecast. Best for you. Best for your boss. Best for your company. Strive to make your forecasts as accurate as possible - you'll make them happy, and yourself better positioned for success.


ACTION ITEM:

Take out your current forecast. Review each deal for accuracy. If you consciously put down a number, and/or a date that was unrealistic, adjust it to something more realistic. Get in the habit of doing this, and the long-lasting benefits you'll accrue personally as you become known as someone who is consistent and reliable will far outweigh whatever short-term satisfaction you may get for doing otherwise.


In Part 2, we'll talk about how to develop a "best" forecast. Stay tuned!

Good Selling!


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