Sales Forecasting: Strategy and Pipeline Management
Posted by Bill Carson
In an ideal world, salespeople and their managers would be able to predict future sales results with a high degree of accuracy, at least for the period of one future sales cycle. This should hold true regardless of the length of the sales cycle.
While it may be difficult to predict each individual piece of business (particularly with new opportunities in early sales pipeline stages), forecasting sales numbers in the aggregate should be nearly as reliable as the sales forecasts most businesses make of "controllable" operations like their manufacturing processes. Sales management should be able to apply the same concepts of variance reduction (such as Six Sigma) to sales forecasts that other managers use to control non-sales processes.
This is more than a matter of just giving comfort to company leaders. Wall Street punishes the smallest negative variance in profit predictions. A half of a percent shortfall in earnings can cause stock prices to plummet. For those companies less concerned with public equity markets, consider the impact that unpredictable revenue figures can have on budgeting, financing and discretionary spending.
The surprising fact is that while even small variances in most areas of a business would be cause for major concern, many business leaders and their sales managers simply accept their inability to accurately forecast revenue numbers. In how many companies does the same conversation occur at the end of each reporting period? How often do sales managers hear something like, "It's three days until the end of the month/quarter/year and we are nowhere near our budget/forecast/goal/my-promise-to-the-CEO. Do something to find revenue. We just can't tell the CEO/the Board/Wall Street that we fell that short." Or, how about the good news? "Wow. We are way over what we thought we'd do for this period. I love these kinds of surprises, I just wish they'd happen more often."
Huthwaite's research indicates that these kinds of reactions are indicative of a fixable problem; the inability to execute customer-centric sales strategies.
Whitepaper: Rational Sales Forecasting
Accurate sales forecasting is a result of good sales strategy. This paper examines this important correlation, looks at how buyer behaviour effects forecasting, and how to construct accurate sales forecasts.
Download it here.