Just the mention of the word “forecast” brings many salespeople and sales managers out in a cold sweat, it’s the greatest source of tension in the sales team and has far more time spent on it than is productive.
For a moment let’s consider the objective of the sales forecast. It’s simply the leading indicator that shows how the business is performing vs. the sales target set in the financial plan. Are you on track vs. plan or do you need to make corrective inputs? What salespeople don’t often consider is that expenses are also forecast in exactly the same way, often much more accurately, and this enables the Profit & Loss forecast to be calculated. The P&L is the key financial document that management use to steer the business and investors/shareholders use to track progress.
Here’s where the tension starts … salespeople hate forecasting, they love to be the hero, keeping opportunities nicely hidden up their sleeve until the very last-minute and then producing a sale seemingly out of nowhere. It’s a way for the salesperson to manage the pressure and keep the spotlight away from them. See the image of the shell game, that’s exactly what’s happening.
You also encounter the exact opposite behaviour although less frequently, salespeople who are too bullish or simply don’t understand their business well enough to forecast accurately. The classic over promise and under delivering behaviour is a Sales Managers worst nightmare and needs urgent correction. Be careful though, it’s very easy to swing the pendulum too far and end up back in the “shell game” !
Accuracy is the critical key. As a salesperson, you generally don’t consider the issues that both of the behaviours above create, if left unchecked it causes really thorny problems for whomever owns the P&L. There are severe consequences to an inaccurate forecast :-
- If sales finish lower than forecast then your business may need to cut expenses to balance margins and profitability, not a pleasant position to be in.
- If sales finish higher than forecast, then your business could be investing even more resources to help drive growth faster, again not ideal.
The moral of the story, do your utmost to forecast accurately. Work hard to strike the delicate balance between forecasting low and playing the hero, or forecasting high and over promising. The sales people who stand out as the very top performers don’t just beat their target, they are reliable and deliver on their forecast accurately. When they do encounter an issue (and everyone will from time to time), they communicate fast and early, looking for ways to recover whilst always having the customers best interests at heart.
If you want to grow, develop and be considered for promotion then show your Manager, Director or VP that you have what it takes to manage your business well. To be regarded as being “at the very top of your game” develop a reputation for “doing what you say you will do”. This is when the career opportunity doors start to open up wide for you.
Watch out for a future post where I’ll talk more about how to forecast accurately and point out some of the pitfalls to avoid.