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Forecasting & Budgeting

Sharpen Your Competitive Advantage Using Techniques that Makes you a Forecasting Savant

By Peter Callaghan, V.P. Sales & Marketing, Maximizer Software

When it comes to sales, who is really responsible for the accuracy of the forecast?

Accurate forecasts provide companies with a significant advantage over the competition: predictability. The old saying, “If I only knew then what I know now, I would do things a lot differently,” is one of most commonly expressed statements heard in sales departments when someone has not lived up to the expectation of their forecast. When it comes to sales, who is really responsible for the accuracy of the forecast?

Most often it all boils down to the person at the top of the sales team, generally the Vice President of Sales. Since the average tenure of sales professionals is usually less than other positions within a company, the answer to longevity can be found simply by learning how to create a more accurate forecast relative to the status of your sales pipeline. The majority of current forecasting techniques allow for errors to be injected into the very numbers that your business relies upon to operate. The truth is when it comes to forecasting there is too much subjectivity and an excessive number of manual procedures influencing the results. This may lead to consistent errors in your forecast. For example, how do you ensure that a 50 per cent probability of closing an opportunity for ‘sales person A’ is the same for ‘sales person B’ when you are factoring revenue numbers for the forecast?

If your company is planning to expand you may soon discover that your current forecasting methods are too cumbersome and error prone, not to mention the risk it poses to your business results. The fallback position is to trend your overall forecast based on previous results. Then you must search for evidence that your predicted trends are accurate based upon your observations of the current quarter. In the end, you discover that you have been either too conservative or too aggressive with your forecasts, and by this time it’s usually too late to react. How many times in the past eight quarters have you accurately estimated your forecast within five per cent? Were you always in excess of your targets? Many sales managers survive based on their ability to orchestrate and align the company’s revenues with the expectations of the management team and Board of Directors. The question that sales managers are often asked is, “Are you maximizing your revenue potential at the optimal cost structure?” Without an accurate forecast this becomes a difficult question to answer. How much is really possible? When is the right time to increase your investments in new sales and marketing initiatives?

If you were able to create forecast measurements that allow you to minimize subjectivity and create visible actionable insight for sales management, you would be empowered to make decisions based on consistent accurate information. You also gain an opportunity to coach your sales people and sales managers to take action based on this newly created actionable insight. Actionable insight is derived from trending information related to lost, pushed, abandoned and won opportunities.For example, visibility into your sales operation, including monitoring the number of opportunities, pipeline revenue per sales person and average revenue per opportunity, gives you the ability to take action by coaching your sales people to correct their behavior. For instance, if a sales person has a lot of pushed deals, then the sales person most likely needs to better qualify the buyers’ buying process and then predict a more accurate forecast date on the opportunity. Another example is a sales person who experiences too many lost deals. This person most likely needs to spend more time studying the competition and then utilize this newfound knowledge to qualify out the opportunities that they cannot win earlier in the sales cycle.

Customer Relationship Management (CRM) automation technology has proven to be an effective method to assist sales managers in making more accurate forecasts. While this technology also provides the promise of delivering a superior customer experience, if the forecasting process and strategy isn’t defined, then the technology won’t be of any use, which is similar to buying a car without the ability to find a gas station. In order to secure and maintain superior market share, your sales strategy must be more advanced than that of your competition. Your competitors’ advantages must be clearly defined and your sales forecast model must enable your sales representatives to compete to win! Your company’s ability to map your prospects’ buying process with your sales forecast model allows you to measure both current and future revenue potential. Several new forecasting methods are available to help your organization achieve this advantage. Methodologies such as Solution Selling, Strategic Selling and Target Account Selling can be very helpful. You can also increase your ability to make more effective sales forecasts by considering the following tips:

Teach your sales people to think about the buying process versus the selling process and define it by consulting with potential buyers;
Define in writing what steps need to be accomplished by your buyer to achieve the confidence they need to make an investment decision;
Teach your sales people to then map the buyer’s process into your sales forecast process model to bring them into alignment;
Score the opportunity accordingly using a defined forecast scoring matrix, which can achieve a consiste way for sales people to predict the probability of an opportunity closing and allows you to measure current and future revenue potential;
Implement software applications that are easy for your sales people to use and will automate their customer management strategy, enabling them to manage their workload more efficiently;
Coach and guide your sales people on their ability to consult with prospects and make them accountable for their efforts by measuring the results they achieve within a specific time frame. It will be easier to achieve a more accurate and timely sales forecast when your sales team is trained to be proactive as opposed to reactive;
Define and implement automated business processes that enable the selling team to
collaborate and win the confidence of the buyer. Include specific events and define how each role collaborates for a win-win result;
Provide anywhere, anytime access to forecast information, which will provide your selling team with instant visibility into your sales pipelines.

If your company can use these tips to master your forecasting techniques then you will have a more efficient and competitive business.You will gain efficiencies, as your sales team has more time and resources to invest in pursuing real opportunities. This also gives you the ability to make sound investment decisions based on your prospects’ willingness to evaluate your solution using the best practices that you promote. By demonstrating confidence in your ability to make more accurate forecasts, and pursuing only true winnable opportunities, you’ll strengthen your competitive advantage and people will see you as a forecasting savant.

Peter Callaghan is responsible for managing Maximizer's ( www.maximizer.com ) direct sales, channel sales, and marketing activities in the U.S. He has more than 17 years of sales experience in the software industry and has held senior sales and marketing positions at Pivotal, Computer Associates, Cognos, and Sybase. Peter helped Pivotal company grow its revenues from US $1 million to US $100 million over sixteen quarters. Peter is on CRM magazine's list of "Who's Who in CRM," and he is frequently quoted in a variety of business publications, including CRM Guru, VARBusiness, and Sales & Marketing Management magazine.

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