A while back, a gentleman who wanted help selling his company approached me. I asked him, “So, what do you hope the purchase price to be?” He looked at me and said, “$5 million.” I then asked, “How did you come up with that figure?” He looked at me and said with a straight face, “It is a nice, round number.” I paused and said, “So is $100 million.”
The point of the story is he had no idea what the value of his company was, and the $5 million number was a guess. I liken this story to several sales forecasts that I consistently come across that are swags, round numbers or guesses. Anyone can come up with a number — the question is whether it is legitimate or vaporware. Here are some tips to consider that will make your sales forecasting much tighter than “a nice round number.”
It’s Basic Math: In order to arrive at a number — say, $50,000 in sales for the month — a sales rep should have several clients forecasted that cumulatively add up to $50,000. This isn’t rocket science, but I am amazed at how often this simple premise isn’t followed. This simple exercise separates the accountability of the salesperson from the pretenders.
Develop a Sales Model: Most likely, at the beginning of the sales year, an annualized targeted sales number was developed that tracked sales by client by salesperson (and, perhaps, even by month). A second component to the sales model should be a month-by-month forecasting section that is designed to be updated throughout the year as more information is learned.
Daily Sales Flash: The Daily Sales Flash is a communication tool that provides a reminder of the overall monthly targets by salesperson daily. This Daily Flash keeps your sales targets front-and-center with the entire team, and projected shortfalls can be addressed throughout the month as opposed to learning of them at the end of the month.
Forward Forecasting: Likewise, the Sales Model can help the team identify gaps to the overall annual plan well in advance. Tell me that I have a projected overall annualized shortfall in May so that I have seven months to create a plan to address the shortfall as opposed to not recognizing this until Q4.
Develop Routines: Holding each salesperson accountable for their forecast requires milepost discussions throughout the year. I like to schedule individual meetings with each salesperson at the end of the month so that we can discuss the existing month to see how we fared against the forecast. At mid-month, I meet collectively with the sales team to address our sales activities as a group.
Peer Pressure: Lastly, some good old-fashioned peer pressure can motivate every salesperson to hit their individual goals in addition to contributing positively to the overall team goal. Communicating sales achievements throughout the month helps create an inspirational message to the overall team that positive efforts are appreciated.
Sales forecasting is not difficult. In fact, what I have outlined above is very, very basic, and yet I am surprised at how often these practices are simply not followed. While there seems to always be a rush to technology to solve all our problems, sometimes you must have the basics in place first in order to capture the benefits of such tools.
John Matthews is responsible for the management of all consulting activities for Gray Cat Enterprises Inc., which include retail consulting for multiunit operations; interim executive management; and project management. Prior to founding his own company in 2004, Matthews held senior management positions as president of Jimmy John’s Gourmet Sandwiches and as VP of marketing, merchandising, facilities, corporate communications and real estate at Clark Retail Enterprises, Inc. Additionally, Matthews worked for nine years in marketing management as the national marketing director of the Little Caesars Pizza Corporation.