As I’ve been invited to speak and work with companies over the past two decades, one of the reoccurring thorns in the side of every executive is the difficulty in forecasting accurately.
59% the percentage Bloomberg reported of the S&P 500 companies who missed their sales forecast in Q3:2012.
I was asked to speak to a large group of diverse companies recently on this subject. I introduced a few simple concepts in 30 minutes. At the end the Q&A lasted well over two hours. I finally had to cut it off and set up individual meetings. The issue is so universally pervasive with so few options that work, that not one person left the room in the hours of discussion. When does that ever happen?
Forecasting truly is the bane of the executive trying to fund growth, the manager trying to remain employed, and the front line sales person desperate to make a house payment. But, thinking about it, the three common forecasting questions are basically simple to ask, but infinitely harder to answer accurately.
#1: “When is this deal going to close?”
#2: “How much are we discounting?”
#3: “What is the final amount of revenue?”
Critical Management Miss
What do you notice about those three questions?
They are all final summary questions at the end of the sales cycle. They didn’t take into account the actual sale. You can’t forecast something you don’t understand.
How often have you seen a forecast meeting that goes like this:
Manager: “So, tell me about __________company.”
Rep: “They’re doing great.”
Manager: “Are they going to close this month.”
Manager: “Need any help?”
Rep: “Nope. I got it. We’re good to go.”
Manager: “Great. So tell me about ____next______company.”
Two months later they are still replaying both these stalled deals on the forecast sheet wondering why the outcome didn’t happen. Huh, wonder why?
Forecasting accurately starts and ends with understanding “Where”, “When”, “Who” and “How.” Not just “What” might happen at the end (when it’s too late to change the outcome).