What Good Forecasting Requires

What Good Forecasting Requires

Good forecasting requires a set of leading indicators that give salespeople and sales managers an easy-to-use tool for predicting the likelihood of revenue from each individual account and opportunity. However, these kinds of metrics are rarely developed and used. Much more

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… while even small variances in

most areas of a business would be cause for major concern, many

business leaders … simply accept

their inability to accurately forecast revenue numbers.

 

 

Rational Forecasting

©2005, 2006 Huthwaite, Inc. 3

common are seat-of-the-pants predictions by overly optimistic or consistently conservative salespeople, modified according to equally subjective judgments by sales managers.

If such leading indicators are to be identified, the starting point is a proven sales strategy that is executed according to what the customer is doing at any given moment to reach a buying decision. For the sake of this discussion, let’s assume that “sales strategy” refers to the steps salespeople take in either closing a new opportunity or in deciding that the business cannot be won.

It is important to point out that this assumption is a fairly significant one. Many companies allow their sales force to develop new opportunities with little more than an ad hoc this-is-the- way-we-have-always-done-it approach. When done properly, sales strategy, like all other parts of the sales function, is a matter of science, not folklore. While a full discussion of sales strategy is beyond the scope of this paper, one point cannot be overstated: it is impossible to move forecasting beyond pure guess-work unless the sales force has a common set of practices for developing customer-centric sales plans (see Major Account Sales Strategy by Neil Rackham, McGraw Hill, 1989).

What is Sales Strategy—Milestones

It is important to not confuse sales strategy with a simple checklist of activities that the seller associates with moving a client toward a sale. Real sales strategies use an assessment of where the customer is in the process of making a buying decision to adjust and execute each step through the sales pipeline. Too often, sellers operate as though activities such as completing a SWOT analysis or submitting a proposal constitute a sales strategy. While each of these steps is important, and in some cases essential, to making a sale, they represent steps in only one-half of the process. What’s missing is the perspective of the customer.

Real strategy relies on incorporating the customer’s point of view and continually realigning the steps in the sales process accordingly. Why is the customer’s point of view so important? Imagine the parent whose only attention to child rearing was a checklist of activities to be completed as the child reached particular ages, and who was oblivious to how the child reacted or developed. No one would call this good parenting. Yet many sellers look at activities such as completing a SWOT analysis as their only method of planning competitive

When done properly, sales

strategy, like all other parts of the

sales function, is a matter of science,

not folklore

Well formulated and executed sales

strategies incorporate both a seller and a buyer

focus.

 

 

Rational Forecasting

4 ©2005, 2006 Huthwaite, Inc.

positioning. Isn’t the customer the final arbiter of who wins the business? How does the seller know that their own SWOT analysis coincides with the customer’s view?

Well formulated and executed sales strategies incorporate both a seller and a buyer focus. Good strategies juxtapose insights such as those gained through SWOT with considerations such as customer buying criteria and how the customer ranks the seller against these criteria. By comparing these two points of view, the seller can identify strengths and weaknesses in the sales strategy. These strengths and weaknesses are the basis for adjusting the strategy and tactics of seeking a customer’s business.

This means that sound strategies are dynamic. When done properly, the seller adjusts the plan with every new piece of information obtained. It is the ability to plan and execute such strategies that form the bases for great forecasting. Let’s dissect this idea by looking at the tool most people use in place of a strategic plan; the sales pipeline.

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