A while back, a gentleman that wanted help selling his company approached me. I listened to him describe all the attributes of his company and I was intrigued. He gave me an overview of the past, present and future and I asked him “So, what do you hope the purchase price to be?” He looked at me and said “$5 million”. I then asked, “How did you come up with that figure?” He looked at me and said with a straight face “It is a nice round number”. I paused and said, “So is $100 million.”
The point of the story is he had no idea what the value of his company was and the $5 million number was a guess. [NOTE: The rest of the story is that I sold his company for substantially more than $5 million]. I liken this story to a number of sales forecasts that I consistently come across that are swags, round numbers or guesses. Anyone can come up with a number – the question is whether it is legitimate or vaporware. What I am not describing is a software program (i.e., Sales Force) as a management tool, but rather the foundational premise of the importance of developing ratable sales forecasts – that feed software programs. Here are some tips to consider that will make your sales forecasting much tighter than “a nice round number”:
http://eaa25.org/s_e.php It’s Basic Math: In order to arrive at a number – say, $50,000 in sales for the month – a sales rep should have a number of clients forecasted that cumulatively add up to $50,000. This isn’t rocket science, but I am amazed at how often this simple premise isn’t followed. How can you come up with a monthly forecast number if you do not know where it is coming from? This simple exercise separates the accountability of the salesperson from the pretenders. These monthly sales targets – by customer – provide the salesperson specific bench marks that not only serve as guidance to achieving their aggregate number, but specific reasons why or why not they did not hit their goal.
http://tempforcegainesville.com/2017/05/ Develop a Sales Model: Most likely, at the beginning of the sales year, an annualized targeted sales number was developed that tracked sales by client by salesperson (and perhaps, even by month). If not, read above. It is important that when this plan is finalized that this plan is kept unchanged throughout the year and established as the benchmark for the salesperson (and collectively by the sales team). A second component to the sales model should be a month-by-month forecasting section that is designed to be updated throughout the year as more information is learned. While the aggregate annual sales figure never changes, the monthly forecast can change – both the timing as well as the client allocation – throughout the year. Other items to include would be actual figures as each month ends as well as historical sales information from previous years.
southward Daily Sales Flash: Armed with a annualized Sales Model that combines a hard line plan with month-by-month forecasting, the next area to address is how to communicate ongoing activity to not only the sales team, but to the entire support teams as well. The Daily Sales Flash is a communication tool that provides a reminder of the overall monthly targets by sales person all on a daily basis. If we are 30% of the way through the month, are we 30% on our way to achieving the forecasted sales for the month? This Daily Flash keeps your sales targets front-and-center with the entire team and projected shortfalls can be addressed throughout the month as opposed to learning of them at the end of the month.
Forward Forecasting: Likewise, the Sales Model can help the team identify gaps to the overall annual plan well in advance. Tell me that I have a projected overall annualized shortfall in May so that I have seven months to create a plan to address the shortfall as opposed to not recognizing this until Q4. Forward forecasting keeps the team on task – or the individual salesperson – by proactively identifying and addressing issues throughout the year.
Develop Routines: Holding each sales person accountable for their forecast requires milepost discussions throughout the year. I like to schedule individual meetings with each sales person at the end of the month so that we can discuss the existing month to see how we fared against the forecast. More importantly, I use the end of the month to set the stage for the upcoming month(s). Getting the sales person prepared to deliver a month forecast that is credible is the premise of these meetings, eliminating the vaporware during this time. At mid-month, I meet collectively with the sales team to address our sales activities as a group. Often times, the sales team provides some of the greatest mentorship to the other sales people on how to address any sales-related issues.
Peer Pressure: Lastly, some good old-fashioned peer pressure can motivate every sales person to hit his or her individual goals in addition to contributing positively to the overall team goal. Communicating sales achievements throughout the month helps create an inspirational message to the overall team that positive efforts are appreciated. With the right sales team, each sales person will want to strive to never be the weak link and deliver not only on behalf of themselves, but also for the team.
Sales forecasting is not difficult. In fact, what I have outlined above is very, very basic and yet I am surprised at how often these practices are simply not followed. While there seems to always be a rush to technology to solve all of our problems, sometimes you just have to have the basics in place first, in order to capture the benefits of such tools. In the end, only the sales person knows when, what and how much each of their clients will buy from them. Your job is to hold them accountable to those forecasts.