Salespeople have to be able to predict when sales will happen, it’s an essential part of the job, and it’s referred to as forecasting. Businesses need to know what is lying ahead and salespeople are best suited for determining that. But, as any salesperson will tell you, “it ain’t easy.”
In our ASPEC sales methodology we use a couple of issues to determine probability of winning the order. On one side we look at the confidence of winning. That involves gut feel about ability to beat the competition, whether the product to hold its own, and of course the price. I always think of product spec and performance coupled with price to represent value to the customer.
There is another side of the “risk assessment” of getting an order that is often forgotten, but it is vitally important – will the sales even happen!? Many times not. Salespeople understand this, but don’t include it in their forecasting – many prefer a “bury the head in the sand” approach, and have an optimistic approach that everything will click along to the end. But lots of stuff, like funding, needs, politics can make the buyer give up the quest to get something new.
The math is brutal: The salesperson who thinks he can win the deal with a probability of 80%, has to face this being only 40% attainable if there is 50% chance the sale won’t go through to the end.
Look at this real world example. Here is an analyst’s comments after reading Nikon’s financials:
In particular, one risk I hadn’t noticed before was that Nikon takes big pre-payments on semiconductor equipment but those sometimes need to be returned because the order eventually gets cancelled.
Ouch! I would not want to be a Nikon sales manager trying to handle that.