Why Are Sales Forecasts So Unreliable?

Bill Stinnett

Ask any sales manager and they'll probably tell you that they would love to be able to forecast sales revenue more accurately. Many managers struggle with getting a true understanding of which deals are likely to close and which ones are simply wishful thinking. At some companies, forecasting has become more like "fore-guessing" or "hope-casting" and with all the uncertainties of today's marketplace, the problem is getting worse not better .The root cause of poor sales forecasting is usually not poor salesmanship, more often it is the lack of a good method for forecasting, or the existence of a bad one. Forecasting by "gut feel" or "seat-of-the-pants" is a major contributor to the consistent sale of antacid and headache medicine, but it usually does very little to accurately anticipate the sale of our own product or service.Many companies use an inferior or outdated forecasting methodology and some have no formal forecasting process at all. They ask their salespeople to, "Tell us what is going to close," and when their people don't "commit" enough business, they ask them to "commit" additional business that is nowhere near closure. In this manner, some managers set themselves up to be disappointed, or even worse: surprised.The most effective sales forecasting methodologies are based on the observable milestones of the customer's buying process. Note that these are not milestones of our own sales process. Actions we take or activities we engage in may actually do nothing to move a deal toward closure. Checking the box next to "Delivered the final proposal" might make us feel good, but it probably won't increase the likelihood that the sale is going close.What an accurate forecast considers is, "What are the steps that the client must take to execute this contract or place this order, and what do we need to do to enable them to take those steps?" This requires a lot of research and questioning, but good sales forecasting should be less soothsaying and more investigative reporting. If what we discover suggests less forecast-able business than our quota requires, then at least we know where we stand. Most managers would agree that they'd rather know where they are, than make believe they're somewhere that they're not.About the authorsSales Excellence, Inc. is a consortium of world-class sales management consultants, sales trainers, and personal coaches who help business executives and sales professionals grow their client base, increase revenue, and keep more profit. They can be reached at 1-800-524-1994 or by email at staff@www.salesexcellence.com.

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