Saturday, September 22, 2007

Sales Forecasting Is The Achilles Heel Of Business Planning

Forecasting future sales is one of the most difficult areas for many companies. The challenge is to produce consistent and accurate advance information which can be used by production, stock and service managers to plan for future demands.

In practise, much of the forecasting work currently undertaken is very random, if not haphazard guess work. It is based on highly subjective reports of the sales people, often under short term pressure to predict acceptable levels of achievement in order to meet targets.

As a result much of the medium-to-long-term sales order forecasts are often made up of business projections based on nothing more scientific than optimistic guess work rather than on disciplined and realistic assessment of likely conversion of sales from individual customers.

Companies spend thousands of pounds and hundreds of man hours on their annual, quarterly and monthly budgeting and forecasting activities.

Financial management techniques and systems have developed apace in recent years but these have little input into the forecasting process, especially predicting short and long term sales.

The pressure for accuracy is growing. Jobs, investment and expenditure depend on making the right assumptions and predictions. Too often companies fail to spot in advance negative trends or competitive activity which impinge on their ability to win new orders.

Most forecasting, in the widest sense, is based on historic information with some allowance for highly subjective judgements such as the economic climate, trends in the industry etc.

The Achilles heel of even the most significant business planning methodology is an almost uncritical acceptance of what the sales team predict as imminent or long term business opportunities and their value.

Companies put complex and time consuming reporting procedures in place to capture data but can be extremely uncritical of the quality of the information itself which is provided.

Frequently the sales predictions - short, medium and long term - are highly suspect. They depend on the sales team’s personal, often highly subjective views, and often reflect the pressure for ‘certain sales levels to be achieved’

Predicting the real chance of winning a particular order will change the closer the customer gets to placing the order. Two or three months ahead the sales men will report the order as ‘in the bag’, closer to, the odds will often be reduced or even discounted. There is no discipline or consistency in the process. Orders ‘lost’ now will be replaced by ‘new’ opportunities conveniently two or three months down the line. These new ‘orders’ will be lost as the time for their confirmation gets closer. Thus, the organisation never has a realistic assessment of its potential sales.

What is missing is a management awareness of what is really happening to ‘vapour sales opportunities’ and a complete lack of system and discipline in predicting the real possibility of winning specific orders consistently. These ‘vapour sales opportunities’ represent unsubstantiated sales opportunities which can amount to anything up to half of the ‘pipeline’ business being reported to management from month to month.

Sales teams are relying on a base level of business coming in to cover up poor predictions and to replace lost orders previously anticipated. This is one reason that organisations frequently fail to spot downturns or changes in their business environment.

The solution is a proper structuring of reporting procedures. Apart from eliminating unqualified business this process can help the organisation be more responsive to real business and focus on genuine problems and opportunities which the process identifies.

Much of this procedure can be computerised. It is a complex process and requires consistency, minimising the scope for human fallibility and changeableness.
Forecasting future sales is one of the most difficult areas for many companies. The challenge is to produce consistent and accurate advance information which can be used by production, stock and service managers to plan for future demands.

In practise, much of the forecasting work currently undertaken is very random, if not haphazard guess work. It is based on highly subjective reports of the sales people, often under short term pressure to predict acceptable levels of achievement in order to meet targets.

As a result much of the medium-to-long-term sales order forecasts are often made up of business projections based on nothing more scientific than optimistic guess work rather than on disciplined and realistic assessment of likely conversion of sales from individual customers.

Companies spend thousands of pounds and hundreds of man hours on their annual, quarterly and monthly budgeting and forecasting activities.

Financial management techniques and systems have developed apace in recent years but these have little input into the forecasting process, especially predicting short and long term sales.

The pressure for accuracy is growing. Jobs, investment and expenditure depend on making the right assumptions and predictions. Too often companies fail to spot in advance negative trends or competitive activity which impinge on their ability to win new orders.

Most forecasting, in the widest sense, is based on historic information with some allowance for highly subjective judgements such as the economic climate, trends in the industry etc.

The Achilles heel of even the most significant business planning methodology is an almost uncritical acceptance of what the sales team predict as imminent or long term business opportunities and their value.

Companies put complex and time consuming reporting procedures in place to capture data but can be extremely uncritical of the quality of the information itself which is provided.

Frequently the sales predictions - short, medium and long term - are highly suspect. They depend on the sales team’s personal, often highly subjective views, and often reflect the pressure for ‘certain sales levels to be achieved’

Predicting the real chance of winning a particular order will change the closer the customer gets to placing the order. Two or three months ahead the sales men will report the order as ‘in the bag’, closer to, the odds will often be reduced or even discounted. There is no discipline or consistency in the process. Orders ‘lost’ now will be replaced by ‘new’ opportunities conveniently two or three months down the line. These new ‘orders’ will be lost as the time for their confirmation gets closer. Thus, the organisation never has a realistic assessment of its potential sales.

What is missing is a management awareness of what is really happening to ‘vapour sales opportunities’ and a complete lack of system and discipline in predicting the real possibility of winning specific orders consistently. These ‘vapour sales opportunities’ represent unsubstantiated sales opportunities which can amount to anything up to half of the ‘pipeline’ business being reported to management from month to month.

Sales teams are relying on a base level of business coming in to cover up poor predictions and to replace lost orders previously anticipated. This is one reason that organisations frequently fail to spot downturns or changes in their business environment.

The solution is a proper structuring of reporting procedures. Apart from eliminating unqualified business this process can help the organisation be more responsive to real business and focus on genuine problems and opportunities which the process identifies.

Much of this procedure can be computerised. It is a complex process and requires consistency, minimising the scope for human fallibility and changeableness.

Selling & Marketing - The Secret to Developing a Thriving Business by Linking Strategy to Selling

I know you.

You started your business because you are passionate about it. You’re better than most, maybe even the best at what you do and yet clients and customers are not beating a path to your door. In times of desperation you’ve even dramatically lowered your price and STILL you are not getting your fair share of the market, the share you know you DESERVE!

Sound familiar? Well let me share a little secret with you. There are four simple steps you need to follow in order to develop a thriving business.

The Waterfall of Business Development Growing a thriving business is a lot like running a waterfall rapid in a kayak. Sure there are lot’s of ways to get over that waterfall but typically there is just one that will allow you to pass without loss of life and limb! When it comes to running the waterfall of business development you’ll want to follow this path:

Step 1: Get the Right Names Step 2: Have Conversations with the Right People Step 3: Hold Meetings with Qualified Prospects Step 4: Deliver on Expectations…Profitably.

Told you it was simple. Now let’s get into the details

Step 1: Get the Right Names (Strategic Marketing)

Do you know your target market? I understand that you’ll take money from anyone, but who do you want to spend your precious resources marketing to? This may see counter intuitive but the more tightly you define your target market the more effective and efficient you will be at attracting the most qualified prospects. So how do you go about defining your target market? There are many ways, but if I were to work with you we would begin by defining your specific goals and objectives and your unique value proposition (UVP). Once your UVP has been defined we would develop your target market by matching the UVP to demographics, (size, industry, etc.) operating variables, (technology, frequency of use, etc.), purchasing approaches, (centralized, specific policies, etc.), situational factors (urgency, size of order) and personal characteristics such as attitude towards risk. Next, since no business operates in a vacuum, we’ll evaluate the competitive environment and the macro-economic environment. From this we will have clearly defined those “suspects” that are worth investing your precious time, energy and resources with.

Next we would develop a marketing strategy that uses the optimum mix of active and passive marketing strategies to generate sufficient interest in your offering. The optimum mix represents a balance between the target audience’s potential life-time value and your available resources.

Step 2: Have Conversations with the Right People (Prospecting)

Your consistently communicated highly targeted marketing message will resonate with a portion of the “suspects” it reaches. No matter how that initial contact was made your next move is to have a conversation to determine which suspects are really “qualified” prospects. By qualified I mean they are in sufficient “pain” and are interested in meeting you face-to-face to discuss their issues and what you can do to relieve their pain. Depending upon your personality this initial contact, typically by phone, will either be second nature or absolutely terrifying! Regardless, how effectively you conduct this phone call will largely determine your overall success in developing your business. If you don’t know what to ask, how to ask it, and how to get off the phone with a confirmed meeting appointment then please seek professional help!

Step 3: Hold Meetings with Qualified Prospects (Selling)

Congratulations! Your prospecting activities have you meeting with a highly qualified prospect. Now it’s time for your first face-to-face meeting and its time to begin the selling process. Selling is about questioning and one of the most common mistakes I hear people who are passionate about their businesses make is thinking that selling is the same as spewing features and benefits. Are you guilty of this? Then please stop, selling is not about “telling”! Throughout this initial meeting your job is to gather information, not give information. By the time you leave this meeting you should know: - The specific reasons (pain) why the prospect would like to do business with you - Roughly how much the prospect is willing to spend to get rid of the pain - How the prospect goes about making investment decisions. If the answers to these questions meet your requirements for doing business then chances are you are going to make the sale.

Step 4: Deliver on Expectations…Profitably (Business Marketing)

You’ve made the sale and now it’s time to deliver on the expectations you created with your marketing message at the top of the waterfall. You are an expert in your field, so this should be relatively simple, right? Not so fast! Do you have an accurate grasp of your; Cost of acquisition? Cost of product? Cost to serve? What type of pricing model are you using? Cost plus? Value? Competitive? Skim?

Well that’s it! You’ve successfully converted a targeted suspect to a profitable customer and you did by using the simple 4-step secret that I call the “Waterfall of Business Development". Join our Monthly Free Teleseminarseries to continuously learn more ways to develop a thriving business and don't forget to sign-up for our Free enewsletter to keep an eye on innovative tips and techniques that will have your business selling more and growing faster than ever.
I know you.

You started your business because you are passionate about it. You’re better than most, maybe even the best at what you do and yet clients and customers are not beating a path to your door. In times of desperation you’ve even dramatically lowered your price and STILL you are not getting your fair share of the market, the share you know you DESERVE!

Sound familiar? Well let me share a little secret with you. There are four simple steps you need to follow in order to develop a thriving business.

The Waterfall of Business Development Growing a thriving business is a lot like running a waterfall rapid in a kayak. Sure there are lot’s of ways to get over that waterfall but typically there is just one that will allow you to pass without loss of life and limb! When it comes to running the waterfall of business development you’ll want to follow this path:

Step 1: Get the Right Names Step 2: Have Conversations with the Right People Step 3: Hold Meetings with Qualified Prospects Step 4: Deliver on Expectations…Profitably.

Told you it was simple. Now let’s get into the details

Step 1: Get the Right Names (Strategic Marketing)

Do you know your target market? I understand that you’ll take money from anyone, but who do you want to spend your precious resources marketing to? This may see counter intuitive but the more tightly you define your target market the more effective and efficient you will be at attracting the most qualified prospects. So how do you go about defining your target market? There are many ways, but if I were to work with you we would begin by defining your specific goals and objectives and your unique value proposition (UVP). Once your UVP has been defined we would develop your target market by matching the UVP to demographics, (size, industry, etc.) operating variables, (technology, frequency of use, etc.), purchasing approaches, (centralized, specific policies, etc.), situational factors (urgency, size of order) and personal characteristics such as attitude towards risk. Next, since no business operates in a vacuum, we’ll evaluate the competitive environment and the macro-economic environment. From this we will have clearly defined those “suspects” that are worth investing your precious time, energy and resources with.

Next we would develop a marketing strategy that uses the optimum mix of active and passive marketing strategies to generate sufficient interest in your offering. The optimum mix represents a balance between the target audience’s potential life-time value and your available resources.

Step 2: Have Conversations with the Right People (Prospecting)

Your consistently communicated highly targeted marketing message will resonate with a portion of the “suspects” it reaches. No matter how that initial contact was made your next move is to have a conversation to determine which suspects are really “qualified” prospects. By qualified I mean they are in sufficient “pain” and are interested in meeting you face-to-face to discuss their issues and what you can do to relieve their pain. Depending upon your personality this initial contact, typically by phone, will either be second nature or absolutely terrifying! Regardless, how effectively you conduct this phone call will largely determine your overall success in developing your business. If you don’t know what to ask, how to ask it, and how to get off the phone with a confirmed meeting appointment then please seek professional help!

Step 3: Hold Meetings with Qualified Prospects (Selling)

Congratulations! Your prospecting activities have you meeting with a highly qualified prospect. Now it’s time for your first face-to-face meeting and its time to begin the selling process. Selling is about questioning and one of the most common mistakes I hear people who are passionate about their businesses make is thinking that selling is the same as spewing features and benefits. Are you guilty of this? Then please stop, selling is not about “telling”! Throughout this initial meeting your job is to gather information, not give information. By the time you leave this meeting you should know: - The specific reasons (pain) why the prospect would like to do business with you - Roughly how much the prospect is willing to spend to get rid of the pain - How the prospect goes about making investment decisions. If the answers to these questions meet your requirements for doing business then chances are you are going to make the sale.

Step 4: Deliver on Expectations…Profitably (Business Marketing)

You’ve made the sale and now it’s time to deliver on the expectations you created with your marketing message at the top of the waterfall. You are an expert in your field, so this should be relatively simple, right? Not so fast! Do you have an accurate grasp of your; Cost of acquisition? Cost of product? Cost to serve? What type of pricing model are you using? Cost plus? Value? Competitive? Skim?

Well that’s it! You’ve successfully converted a targeted suspect to a profitable customer and you did by using the simple 4-step secret that I call the “Waterfall of Business Development". Join our Monthly Free Teleseminarseries to continuously learn more ways to develop a thriving business and don't forget to sign-up for our Free enewsletter to keep an eye on innovative tips and techniques that will have your business selling more and growing faster than ever.

Sales Managers - Don't Just Manage Down, Manage Up!

As Sales Managers, much of our time is spent managing our sales staff. Training, forecasting, ride a longs. The list goes on and on. Our days are so busy, we are often taken by surprise when our VP or Senior Level Manager emails or calls us with an edict from on high. You know the call. Some new "thing" that the CEO or Board has come up with that your sales team needs to implement immediately. And what do you do? Without even thinking that deeply about the request, its validity and/or viability, you call an all hands meeting and roll out your plan to get this idea into action. Your being a good manager, right? Taking those orders from above you and disseminating them to your staff for implementation.

Oh, and one more thing. Before you can even hold your all hands meeting, they have two more great ideas and have changed the first one they gave you three times. Sound familiar?

This is where many Sales Managers (and managers in general) could utilize the "Manage Up" philosophy. Managing up is very similar to downward managing. The difference being, you are managing your managers/superiors as opposed to managing subordinates. Your time is valuable and you need to manage it properly to maximize your value to your organization. Interruptions to your short and long term game plan are inevitable. We generally think of these interruptions coming in the form of subordinates breaking our stride with mundane questions or fires to put out. We expect this and management training course after management training course teaches us how to deal with these issues. But has anyone ever trained us to deal with the frequent interruptions of our superiors? Let's look at this concept.

Briefly Analyze the Request

Don't just take the order and run with it. This isn't the Marine Corps. Generally, people in VP and C-level positions are there because of their highly advanced skill sets and business ac cumin. Given the nature of their "40,000 foot view", they sometimes forget the day to day pressure of running a sales team. An idea may seem easy to implement to them, but in reality, it may be a logistical nightmare and not practical or profitable at all.

Briefly look at each request and see if it makes short and long term sense. Not "will it be easy to implement?". That's not the criteria. Does it make sense from a business standpoint. Don't be afraid to go back and ask clarifying questions. Your are going to have to sell this idea to your team. Like anything you sell, you have to believe it is good for your buyer, in this case, your sales team to make a believable pitch.

Their time frame may not be your time frame

What are the time parameters your superiors have set on this project? Are they realistic given your current activity level and other commitments (trade shows, presentations, outside training, etc.). Don't be afraid to go back and open a discussion about adjusting the time frame. Remember, you are Managing Up! In reality, it is you who are in control of your day. Not those below OR above you. Have some input into how you will spend your time.

Be clear about outcomes

To often we take an idea from our VP of Sales and run to implement it without really being clear about outcomes. Again, don't be afraid to go back and ask clarifying questions. You are going to be judged on how well you carry out this task. Make sure you don't waste time and energy (both yours and your sales teams) going in directions you don't need to go. Be clear. Clarity and agreement on outcomes is of the utmost importance.

What if the idea stinks?

Now come on...don't tell me you've never thought this? We all have. No matter how much we respect the skill level and experience of our superiors, sometimes they come up with rotten eggs. Ideas that are so far removed from reality that they make you chuckle inside when you hear them. What do you do? Remember, we are Managing Up!

Listen attentively, analyze and ask questions for clarification. Maybe you missed something? Ok, so you didn't. It's still a stinker. Don't be afraid to let them know of your reservations. But you have to do it in a positive and constructive manner. And always let them know that even though you have reservations (make sure you have stated them clearly and concisely), you are willing to do everything in your power to implement their suggestion. Carefully document the process and make notes of any successes and/or failures. At a pre-determined time, have a follow up meeting and discuss the progress. If your VP sees that you have made a valid effort and the idea is not taking off, he/she will be more willing to rethink or even throw out the idea.

Conclusions

Your time is extremely valuable. Make sure you control the pulling on your time in both directions, up and down. Don't be afraid to Manage Up. You will be surprised at the feeling of freedom knowing that you are not totally at the mercy of someone else's whim, whether they work for you, or you work for them!

I hope you have enjoyed this article and find it helpful. Wouldn't this be a great key note for an annual sales meeting or managers meeting/training? Contact me at gary@salesmotivation.net and we can discuss how I can help you to better equip your sales/sales management team to succeed.

http://www.Salesmotivation.net was launched to fill the need for no cost, quality training and motivational material for Sales Professionals of all levels. Our goal is to train you, equip you, challenge and motivate you.

I have been a top producing Sales Professional for over 17 years. I have sold for large corporations and small start up companies. I believe that Sales is one of the most challenging yet rewarding fields an individual can choose. You have the ability to create your own destiny and determine your level of success. I take my profession very seriously, but have a great deal of fun achieving my goals. My wish is for you to do the same.
As Sales Managers, much of our time is spent managing our sales staff. Training, forecasting, ride a longs. The list goes on and on. Our days are so busy, we are often taken by surprise when our VP or Senior Level Manager emails or calls us with an edict from on high. You know the call. Some new "thing" that the CEO or Board has come up with that your sales team needs to implement immediately. And what do you do? Without even thinking that deeply about the request, its validity and/or viability, you call an all hands meeting and roll out your plan to get this idea into action. Your being a good manager, right? Taking those orders from above you and disseminating them to your staff for implementation.

Oh, and one more thing. Before you can even hold your all hands meeting, they have two more great ideas and have changed the first one they gave you three times. Sound familiar?

This is where many Sales Managers (and managers in general) could utilize the "Manage Up" philosophy. Managing up is very similar to downward managing. The difference being, you are managing your managers/superiors as opposed to managing subordinates. Your time is valuable and you need to manage it properly to maximize your value to your organization. Interruptions to your short and long term game plan are inevitable. We generally think of these interruptions coming in the form of subordinates breaking our stride with mundane questions or fires to put out. We expect this and management training course after management training course teaches us how to deal with these issues. But has anyone ever trained us to deal with the frequent interruptions of our superiors? Let's look at this concept.

Briefly Analyze the Request

Don't just take the order and run with it. This isn't the Marine Corps. Generally, people in VP and C-level positions are there because of their highly advanced skill sets and business ac cumin. Given the nature of their "40,000 foot view", they sometimes forget the day to day pressure of running a sales team. An idea may seem easy to implement to them, but in reality, it may be a logistical nightmare and not practical or profitable at all.

Briefly look at each request and see if it makes short and long term sense. Not "will it be easy to implement?". That's not the criteria. Does it make sense from a business standpoint. Don't be afraid to go back and ask clarifying questions. Your are going to have to sell this idea to your team. Like anything you sell, you have to believe it is good for your buyer, in this case, your sales team to make a believable pitch.

Their time frame may not be your time frame

What are the time parameters your superiors have set on this project? Are they realistic given your current activity level and other commitments (trade shows, presentations, outside training, etc.). Don't be afraid to go back and open a discussion about adjusting the time frame. Remember, you are Managing Up! In reality, it is you who are in control of your day. Not those below OR above you. Have some input into how you will spend your time.

Be clear about outcomes

To often we take an idea from our VP of Sales and run to implement it without really being clear about outcomes. Again, don't be afraid to go back and ask clarifying questions. You are going to be judged on how well you carry out this task. Make sure you don't waste time and energy (both yours and your sales teams) going in directions you don't need to go. Be clear. Clarity and agreement on outcomes is of the utmost importance.

What if the idea stinks?

Now come on...don't tell me you've never thought this? We all have. No matter how much we respect the skill level and experience of our superiors, sometimes they come up with rotten eggs. Ideas that are so far removed from reality that they make you chuckle inside when you hear them. What do you do? Remember, we are Managing Up!

Listen attentively, analyze and ask questions for clarification. Maybe you missed something? Ok, so you didn't. It's still a stinker. Don't be afraid to let them know of your reservations. But you have to do it in a positive and constructive manner. And always let them know that even though you have reservations (make sure you have stated them clearly and concisely), you are willing to do everything in your power to implement their suggestion. Carefully document the process and make notes of any successes and/or failures. At a pre-determined time, have a follow up meeting and discuss the progress. If your VP sees that you have made a valid effort and the idea is not taking off, he/she will be more willing to rethink or even throw out the idea.

Conclusions

Your time is extremely valuable. Make sure you control the pulling on your time in both directions, up and down. Don't be afraid to Manage Up. You will be surprised at the feeling of freedom knowing that you are not totally at the mercy of someone else's whim, whether they work for you, or you work for them!

I hope you have enjoyed this article and find it helpful. Wouldn't this be a great key note for an annual sales meeting or managers meeting/training? Contact me at gary@salesmotivation.net and we can discuss how I can help you to better equip your sales/sales management team to succeed.

http://www.Salesmotivation.net was launched to fill the need for no cost, quality training and motivational material for Sales Professionals of all levels. Our goal is to train you, equip you, challenge and motivate you.

I have been a top producing Sales Professional for over 17 years. I have sold for large corporations and small start up companies. I believe that Sales is one of the most challenging yet rewarding fields an individual can choose. You have the ability to create your own destiny and determine your level of success. I take my profession very seriously, but have a great deal of fun achieving my goals. My wish is for you to do the same.