Forecasting is no fun. But it's a task we must do, and
it's important that we provide the best forecast we can. This
begs two questions: (1) Since forecasting is more art than
science, what constitutes, "best?" And (2) Best for
whom?
In the first of this two-part Sales
Tip on Forecasting, we're going to get at the answer to the
second of these two questions. In Part Two, which will kick
off the New Year, we'll talk about what constitutes "best"
when it comes to forecasting business.
What goes through a sales person's mind when deciding
how to assemble a forecast? On the surface, you'd think it
would be pretty straightforward, right? You look at your
deals, see what stages they're at in the sales cycle, apply a
little gut check, and put down numbers. Pretty
straightforward, right? Think again. Here are some reasons
I've divined from reps I've managed - OK, from my own
experience as a rep, too! - for fudging the
numbers:
- The Pleaser, wanting to impress the boss,
provides overly optimistic projections for some deals
- The Team Player, wanting to keep up with his or
her peers in the weekly sales meeting, does the same
- The Hero, laying low like a stealth bomber,
submits a conservative forecast. This way, he can rescue the
team at the eleventh hour
- The Sandbagger, whose next month is looking
light, stretches out his close dates
We've all played at least one of these
roles in our sales careers. And while it's certainly
understandable why we might, it's important that we understand
the ramifications of doing so.
The problem with overly optimistic
forecasts
On a personal level, you lose
credibility - you'll come to be known as someone whose
judgment can't be trusted. If you have management aspirations,
you'll have developed a career-limiting reputation. On a
business level, your rosy forecasts - if taken at face
value - will lead management to commit to projects,
investments, or expenditures that will end up being
under-funded - because your sure-fire deals didn't close, or
didn't close when you said they would.
On the other hand,
Forecasts that are
too conservative can hurt both you and the company,
though probably not as seriously as forecasting aggressively
can. Conservative forecasts, when rolled up for the entire
team, make for a weak aggregate pipeline, something your boss
will have to explain to his or her boss. You don't want to
do that to your boss! And eventually, the proverbial cat
will soon be out of the bag about your surprising ability to
close all those supposedly low-probability deals. The
business effect is that the company will needlessly put
off scheduling the very projects, investments, or expenditures
it committed to above - thereby stifling growth. Furthermore,
if you work for a public company, they have to report
earnings; if the projections they share with analysts are -
based on your conservative forecast - unrealistically low,
word gets out to the street, driving your company's stock
price down and its cost of borrowing up.
Of course, I am talking in aggregate here - your one
deal isn't going to save or sink the ship. But taken together,
a sales force's cumulative forecast very much does have a
significant impact on corporate- level decision-making.
The bottom line? The best forecast is an
accurate forecast. Best for you. Best for your boss. Best
for your company. Strive to make your forecasts as accurate as
possible - you'll make them happy, and yourself better
positioned for success.
ACTION ITEM:
Take out your
current forecast. Review each deal for accuracy. If you
consciously put down a number, and/or a date that was
unrealistic, adjust it to something more realistic. Get in the
habit of doing this, and the long-lasting benefits you'll
accrue personally as you become known as someone who is
consistent and reliable will far outweigh whatever short-term
satisfaction you may get for doing otherwise.
In
Part 2, we'll talk about how to develop a "best" forecast.
Stay tuned!
Good Selling!
