Ed. – Forecasting is one of the least favorite activities of sales people and one of the most difficult tasks for sales managers. Today we’re re-publishing John Darrin’s take on why sales people hate doing forecasts.
In America, it’s April 14th, (April 29th in Canada and Brazil, May 30 in Germany, and June 29 in Papua New Guinea) and your income taxes are due tomorrow. You don’t want to do them, but you have to. They will be wrong, but you don’t know how wrong. You will cheat and hope you don’t get caught. There are expensive professionals and cheap software that will do it for you and give you someone to blame. And the audit is only slightly preferable to prison.
Quick – tell me the difference between this and doing your sales forecast.
Hint – you only have to do your taxes once a year.
Yes, forecasting. The very word itself makes you cringe. Like marriage counseling or colonoscopy. But it won’t go away, no matter how much you wish.
We’re going to examine sales forecasting from three perspectives – the sales person at the bottom of the ladder who generates the raw material that everyone up a rung or more will massage; the sales manager who understands the proclivities of his sales staff and changes the numbers accordingly – up if he’s looking for short-term affirmation while job hunting, or down if he wants to look like a hero come end of month -quarter -year; and finally the CEO or equivalent who has other departments relying on accurate numbers and a Board of Directors who demands them.
Why is forecasting so hard? I mean, it’s only numbers, right? You sold that many last quarter, how hard can it be to figure how many you’ll sell this one? Well, let’s see, this quarter the surprises will include your biggest customer getting a better deal from a competitor you didn’t think could tie his shoes without a diagram, your long-term contact at another customer just got fired and replaced by your competition’s brother-in-law, the budget got cut, someone’s new product came out, someone’s end-of-fiscal-year money popped up, blah blah blah. The amazing thing about forecasting is that you ever get it right.
Here are some questions I’d like to ask and address.
How do you forecast? Manually, looking at each opportunity and saying I’m going to win this one but not that? By probability, using some multiplier on each opportunity and adding up the results? A simple multiple of last period’s results? A six-pack of Guinness?
How often do you do it? And how long does it take?
Are your forecasts graded? Do you get points for being right? Are you penalized for being wrong? Is it more important to be low rather than high (on your forecast, not the Guinness)?
What other company processes and functions depend on your forecasts?
The next post will be looking at forecasting from the sales person’s point of view. That should be fun. And it could be made funner if you give me your thoughts.