what they have in the pipeline by product, industry, and customer. They assign probabilities of closing the deal ranging from 30 percent to 100 percent, based upon where they are in the sales process.” So far, that is a rather typical
approach to contemporary sales forecasting – but most of those fore- casts still go awry, and his company’s doesn’t. Why? “To make this work,” says Porter, “everybody must use the same terminology and the same way of estimating probabilities, and we work hard to keep everybody on the same page.” Right there is a key to Porter’s fore- casts: The company trains sales reps how to use the terminology and how to measure probabilities. The result, says Porter, is that forecasts have held up even in today’s turbulent technol- ogy marketplace.
MEASURING UP Porter’s technique isn’t the only ap- proach to forecasting, however. At a developer of computer-based mea- surement and automation tools for engineers and scientists, a core dif- ficulty in forecasting is that their sales are very broad-based. “In 2001, we sold to more than 24,000 companies. We get many, many small orders,” says Patrick Zander, vice president, sales.
Pipeline reports, of course, figure into their forecasting, but the real key here is their secret formula. Says Zan- der, “We have found ways to correlate our sales forecasts with economic indices.” The exact nature of this formula is proprietary, but the es- sence is that the company has tracked its historical sales, has matched that data up against standard econometric measuring sticks, and has concocted its own algorithm for predicting sales against predictions about the global economy. “We are not short of data to look at,” says Zander, who adds that their forecasts typically are stated in terms of geographic expectations as well as by product line.
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SANITY RULES At the electronics company where Jim Brenn oversees a program that has elements of the Porter approach to forecasting, he explains, “We start with an automated forecast; then, every person in the field inputs sales projections.” But Brenn faces a challenge be- cause his sales force is made up of salespeople who are supplemented by 90+ manufacturers’ reps, who often have had less training in the company’s way of concocting fore- casts. “We try to do sanity checks,” says Brenn. Once the numbers are in, he and his sales managers “scrub them.” How? Sometimes they go back to reps for more specificity; in other cases, they go with their own best guesses. But, either way, they keep massaging the numbers until a forecast emerges that’s ready for presentation to high-ups. But this is an ongoing process. “Every five to six weeks I will sit down with each sales manager and we will go over each major account. It’s been tough,” Brenn adds, “very hard to meet our forecasts in this economy. We have been getting back to basics – to the blocking and tackling of selling. We are encourag- ing our people to put in lots of face time with solid customers.” And a byproduct of that will naturally be more accuracy, because the better the sales team knows its prospects, the more on the mark projections will be.
THE SECRET SAUCE
No matter how a company generates its forecasts, a must-do is this: “Push accountability for the forecast to the lowest level,” advises sales trainer Lois Dean. By this, she means, hold the feet of the sales force to the fire when it comes to producing reliable forecasts that will help the company set a winning sales strategy. “A lot of salespeople – particularly in middle- market companies – still don’t see the importance of accurate forecasts.”
Adds Dean, “Make sure your salespeople understand why forecast- ing matters. When they do, they will put that much more energy into the process.” In other words, be clear that a good forecast will wind up putting more money into the pockets of each salesperson – and the upshot will be that, suddenly, a sales force that tra- ditionally had brushed off forecasting will plunge into it. And management has no one to blame but itself for not making certain that message is under- stood by the sales team, she says.
THE PAYOFF FOR THE PROCESS
Just why does it matter that sales forecasts are on target? An obvious reason is that, for public compa- nies, Wall Street demands reliable numbers. But another big plus for any company is that a well-crafted forecast leads seamlessly to creation of a sales strategy. “A good forecast tells you about the business oppor- tunities that exist now,” says Doug Berry, vice president of a developer of CRM tools. “Fish where the fish are. Forecasts tell you where to focus your resources.”
The how-to of generating strate- gies is straightforward, say the sales gurus. Every quarter at Porter’s company, for instance, managers get together and hash out a short- term strategy. Thrown into the pot are global economic conditions, economic conditions by key sectors, the state of the company’s product pipeline, and intelligence about how competitors are faring. Most companies report a similar
process and, where it’s followed in detail, useful strategies result. But a lingering problem is that many com- panies pay only lip service to strate- gies, says one sales consultant. “Sales strategies frequently are very poor. Often, there is no strategy at all. Even where there is one, it probably hasn’t been communicated to the sales force in terms it understands. There is a big disconnect between what is said
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