homebuilder, and there was no loyalty or partnership,” Hemmer says. “It’s a commodity business. It comes down to price on many orders.” Elsewhere in the country, a variety of his company’s wood products was more extensively used in new homes. But, in the sunny Southwest where Hemmer works, the moldings his company sells are less important – and they are fairly standard in configuration. That helps make price competition intense. “Yet we still have to make sales forecasts.” For the firm must purchase its own products abroad, often three months ahead of delivery to customers.
And these customers want their
products promptly, so Hemmer’s company must keep millions of dollars of inventory on hand. Moreover, Hemmer must forecast sales to individual customers, because each customer often wants a different product.
Hemmer first tries to persuade his customers that there is still value in partnering, and he is sometimes successful in this effort. “When those guys are receptive to partnerships, we know what is coming up and we can crunch numbers and figure we will get 60 percent of that.”
But, for other customers – the ones who must be won on price – Hemmer gets out his crystal ball. He looks at history and makes forecasts statisti- cally. “We figure we will win one this week and then not the next week.” Hemmer works with his reps to do all the forecasts. “We use spread- sheets, and we spend a lot of time on it.” Hemmer also uses proprietary software that helps with purchases, after he puts in the basic trends. Even where price competition is not intense, forecasting can be very tricky. Jerry Aingsley forecasts revenue fre- quently and then must monitor sales activity very closely. Aingsley manages sales for a legal solutions firm that provides litigation support such as im- age scanning and electronic culling of millions of emails for legal discovery proceedings. It is not a simple, com-
modity business. “It is a relationship sale,” he says. Indeed, the average sales cycle is six visits before close. Aingsley starts each year by forecasting annual revenue broken down by month. He adjusts these monthly numbers every quarter. He relies chiefly on two bases for his forecast: the tenure of his sales reps and the company’s project- tracking system. The project-tracking system lets Aingsley know when there is a large case coming down the road in, say, three months. Then the com- pany will seek this business and look at all aspects of the case. “We need to decide who we need to sell to – the law firm or the client.”
Rep experience is also crucial. Right
now, Aingsley has mostly new reps on his team. “I cannot expect a brand- new rep to hit the street and sell $50,000 to $60,000 in his first month. It is possible, but not very likely.” Aingsley does not expect a new rep to have any revenue in his first month. From the second to the fourth month he expects each rep to do perhaps $5,000 to $10,000 per month. By the sixth month, a rep should be in the $30,000 to $35,000 range. “If I had a rep on my staff for five years, he might have built relation- ships that would add up to $60,000 per month. Then, if he has been tracking a large project, he might know that it is good for $40,000.” So Aingsley could forecast $100,000 for the month with some confidence. For new reps, Aingsley chiefly tracks visits: first-time, follow-up, and buyer visits. The first month, a new rep makes about 70 first-time visits; the next month, there will be follow- up visits; and only later will there be buyer visits, as relationships have developed. “I track all these activity measures on a daily basis.” Sometimes the business dictates
the forecasts. Sarah Arnaud runs her own public relations company selling sponsorships for special events in communities that are bringing their old downtowns back to life. She seeks sponsorships from local businesses
‘‘
Do not be embarrassed by your failures; learn from them and start again. RICHARD BRANSON
and has been at it for 15 years. Arnaud starts her forecasts by figuring out how much she has to raise for each community. “I say we have $100,000 for this and $95,000 for that, and then another half million. I put it all down and see how much more we have to raise,” she explains. Then she looks for logical buying times and where there are the concentrations of potential sponsors. “I end up juggling quite a bit,” Arnaud says. “I want to go for low- hanging fruit. And, when we go after multiple events, I want to seek one sponsor for several events.” It is all a little rough. “I’d like to tell you it is brilliant and intelligent and I have an exact forecast, but I don’t.” Arnaud works mostly by experience. In 16 years, she has booked a quarter of her sponsors between Christmas and New Year’s. “That is when executives are in their offices and there are no gatekeepers. You may not get through, but, if you do, it is to an executive.” Arnaud is really working on goals, not forecasts. “I have a little thermometer on the wall because I am very visual. I like to see where we are on things. I start out with an objective and try to see how to get to it.”
Arnaud has developed a formula and knows it works. By September of any year, she already knew what events she would do for all of the next year. She does not take new clients for the following year after August 1. “And I am a fanatic about service. That makes hitting our goals much easier.”
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