Forecast for Success

In performing corporate turnarounds or in situations where I have been engaged to retool sales teams, I’m always surprised at the absence of monthly and midmonth sales forecasting meetings.

Most companies take the time to generate a budget at year-start, and typically the sales departments play a major role in delivering and supporting that yearly budget revenue number. Rarely, however, do I see a systemic process of monthly forecasting and adjusting.

Instead, sales teams often are left alone month to month and quarter to quarter.

Admittedly the organization might review its monthly P&L report in the middle of the following month, and it might even retroactively investigate sales declines or increases, but rarely do I see processes at the start of the month in which the sales team delivers a monthly estimate that they are held accountable to in any meaningful way.

Most discussions of sales performance take place firmly while looking in the rear-view mirror.

Proactive Option

But let me paint a different picture. What would the value be to your company’s operational effectiveness if there was an internal process driven in the sales department that yielded solid monthly estimates early within a reporting month?

Think of the value to a company that can model its monthly fiscal report with accuracy 20 days prior to month-end. There are several key benefits:

1. The finance department gains accuracy of the anticipated invoices (and, as a result, the status of receivables) 20 days prior to month-end. This facilitates cash flow modelling.
2. Operations departments know the expected workload or production requirements for the last three weeks of the month and forecast new business that requires onboarding.
3. The sales staff knows if they are headed for a major revenue miss (or victory) and can modify their actions with lots of room to spare in the fiscal period.

It has been my experience that a company that can forecast its sales with great accuracy three weeks before the end of the month does so as a byproduct of other best practices already in place. These practices include:

• Presence of a solid overall sales strategy and supportive, quantifiable action plans.
• Understanding of a sales pipeline process with measured and quantifiable milestones.
• Presence of individual or territory sales plans with monthly targets and territory-specific revenue reports.
• Good understanding of last year’s fiscal results and seasonality of the business.
• Good understanding of baseline accounts or returning revenue.

Two major factors that determine sales forecasting for a specific territory, channel, or individual are baseline protection and new business development.

Baseline Protection. These are the activities that the sales team engages in to retain existing clients, keep connected, and reaffirm the relationship on a monthly basis. Generally, revenue from these sources can be anticipated in a macro manner from seasonality and ongoing contact with client principals. While fairly stable, these activities are focused on growth accounts and quantifying declining clients so that business can be managed.

New Business Development. These are activities that spin out of the sales strategy and typically are charted within a sales pipeline. Regardless of the strategy, this sought-after new businesses typically moves horizontally through several stages:

1. Prospecting
2. Qualified lead
3. Preparation
4. Presentation
5. Approval/Close
6. Onboarding

The core of the sales manager-sales staff relationship is discussing and formulating tactics in a review of each of the six stages to address prospects. It is from this interaction that expectations about mobility through the pipeline for all new business prospects are established, and coaching, mentoring, or training opportunities are injected into the sales cycle.

From biweekly one-on-one meetings with your sales team members, you establish revenue results as you forward-model the month on an individual/territory or sales channel basis.  The sales manager updates monthly estimates on baseline revenue as well as on all new business development initiatives underway from the entire team.

Formatting all this data and filtering it through established internal norms such as close rates, a company can establish a monthly projection with a high degree of certainty.

Given that most mobility through a pipeline typically takes longer than three weeks, theoretically by the 10th day of the month, filtering the data through some established internal norms permits a good sales manager to accurately project the month.

This setting of expectations about pipeline thickness and mobility is at the core of good sales management practices and leads to very effective expectation dynamics in the sales management process. But, when matured and in place, the byproduct of accurate sales forecasting can benefit the entire company, not just sales.