Sales

forecasts

made

simple

Consilium | s a l e s t r a n s f o r m a t i o n |

In July I won a magnum of champagne at a conference for guessing the number of jelly beans in a large jar.* Fluke, or skill at forecasting?

* Thanks to Richardsons the accountants

Consilium | s a l e s t r a n s f o r m a t i o n |

There were 2,173 beans in the jar

I guessed 2,138

an error of 35 or 1.6%

Consilium | s a l e s t r a n s f o r m a t i o n |

Would that sales forecasts

were always as accurate,

and on the safe side

‒ it’s good to over deliver

rather than disappoint.

Why are most sales

forecasts so inaccurate?

Consilium | s a l e s t r a n s f o r m a t i o n |

Forecasting is tough!

► There are many methods, companies ask their sales

forces to forecast using measures such as:

● confidence factor

● sales stage

● objective tests

● the customer’s buying process

● requiring them to commit to a number

► Then there are the methods sales people often use:

● “I won’t tell them about this deal, I’m still negotiating my target”

● “I’ll tell them whatever will get the boss off my back while I look for

my next job”

► The sales director still has to make an accurate prediction

Consilium | s a l e s t r a n s f o r m a t i o n |

Simple arithmetic rarely works

► % confidence factors are error prone: ● in almost any culture ten

‘ten percenters’ don’t make a certain sale

● one man’s 60 percenter is another’s dead cert

● international sales forces will vary according to their culture

► Objective tests are less error prone, but beware; optimists will still fool themselves and the pessimists will avoid committing.

Consilium | s a l e s t r a n s f o r m a t i o n |

tests for each

opportunity*

1. Is there a real opportunity? Are you certain the prospect will buy something

from someone soon?

2. Is it suitable? Is this opportunity a good fit for me and my company?

3. Is it winnable? Or is there an existing supplier who may be impossible

to displace?

4. Is it worth it? Given the effort required and the likelihood of success.

Use

* Part of Consilium’s two page sales plan

Consilium | s a l e s t r a n s f o r m a t i o n |

Then it’s simple Rate each sales opportunity ‘A’, ‘B’ or ‘C’:

A Sales that are certain to come in

B Sales that might just come in

C The rest of your sales pipeline

Commit to a total of all the ‘A’s.

‘B’s are there as ‘cover’ in case any of the ‘A’s slip or drop out.

I lied about the arithmetic!

It can work, but only if you’re BIG.

Consilium | s a l e s t r a n s f o r m a t i o n |

The wisdom of crowds

► You can sometimes use simple arithmetic if you are careful and have

● a large sales force, say 100+

● a large number of unit sales, say 1000+

► BUT remember to factor this period’s predictions by previous periods’ performance

► It won’t be perfect, but it can act as a guide. The larger the numbers the greater the accuracy … and it won’t be accurate at the level of an individual or even a department.

► You are relying on ‘the wisdom of crowds’

Examples of the

wisdom of crowds At a 1906 country fair in Plymouth,

800 people participated in a contest

to estimate the weight of a slaughtered

and dressed ox.

Francis Galton observed that the

median guess, 1207 pounds, was

accurate to within 1% of the true weight

of 1,198 pounds.

Just over a century later 40 guesses

at Oxford’s Venturefest came within

11.4% of 2,173 jelly beans!

Consilium | s a l e s t r a n s f o r m a t i o n |

Use the 4 tests and ABC, but if you must forecast using

simple arithmetic, remember

SCALE is important!

Consilium | s a l e s t r a n s f o r m a t i o n |

More on the

four tests

here:

Pictures courtesy of Microsoft clip art, Wikimedia and others.

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