An inaccurate sales forecast is a disaster.
An inaccurate sales forecast means underlying issues in your sales process, and the understanding and management of that process.
An inaccurate sales forecast indicates you will be losing business, losing opportunities and forfeiting profit.
Business and profit will be going to your competitors at your expense.
In my book, an inaccurate sales forecast is a very serious offence.
It fails to allow for robust planning in the business and it can leave the whole business financially exposed.
That’s just not good business.
An accurate sales forecast is one of the most valuable documents in the business.
BUT it must be accurate.
If it’s accurate, precise and timely it is the best business planning tool you can hope for.
If it’s not, well, only a fool would base business decisions on a sales forecast that typically falls over on a regular basis.
There are three very specific tools for ensuring you get a solid sales forecast.
Sales Funnel – a series of stepped stages that are gates during the sales process.
The Sales Funnel is exactly that. A funnel.
Into the wide top of the funnel you feed unqualified leads, and through a very careful, robust and universally understood qualification process the leads are either carried through and converted into prospects for inclusion in the sales forecast, or are rejected.
The Sales Funnel is wide at the top, and narrow at the bottom.
The Sales Funnel will have different historical conversion rates at each of the gates/stages in the funnel.
The conversion rates will vary depending on the sales person, the industry, the nature and origin of the leads, any offers that are being run and any number of factors.
There should be a high level of movement in the Sales Funnel…prospects can move down towards the thin end or they can move back towards the wide top. Likewise, they can be banished completely from the Sales Funnel, at any time and for any reason.
The Sales Funnel is dynamic.
The Sales Funnel should have a £ value attached to it as a guide.
It should be fed on a very regular basis with new prospects.
Not all new prospects will enter the Sales Funnel at the top…some may enter half way down or even very near the bottom, again, it depends on their origin.
A Sales Forecast must be worked. Worked hard. Worked often. Worked intelligently. Worked honestly.
As must any reporting on the Sales Funnel.
The Sales Funnel encapsulates a process that is understood as the Sales Pipeline.
Sales Pipeline – the sales process sitting inside the Sales Funnel.
The Sales Pipeline is the sales qualification process.
It is standard.
It is understood universally throughout the sales team and throughout the business.
Certain pieces of information should be appended and understood at each state in the sales pipeline before it can move from one level to the next in the Sales Funnel.
The Sales Pipeline is the future forecast, the future Sales Forecast.
Using the Sales Pipeline the business can predict the likely revenue streams 3/6/9 months hence so as to avoid any peaks and troughs and to manage proactive activity before it’s too late.
The Sales Pipeline is information rich. This is a great resource for planning, analysis, marketing and sales performance management and sales improvement management.
The Sales Pipeline is an intelligent resource that should be the main focus of discussions between the sale manager and the sales team.
The Sales Pipeline is a queue of prospects…who with careful screening and management will feed into your Sales Forecast.
A poor Sales Pipeline and a badly managed Sales Pipeline will lead to an inaccurate sales forecast.
Sales Forecast – a document detailing the prospects that have stated their intention to buy a specific product or service for an agreed price at an agreed time, in an agreed volume, delivered to an agreed address with agreed terms.
A sales forecast should be able to forecast sales for at least 3 months in advance with some certainty, with the degree of certainty increasing as the time frame shortens.
Whilst a forecast should never be regarded as cash in the bank, it should be taken as a very strong indicator of what will happen in reality.
Key Considerations Regarding Sales Forecasts
A Sales Forecast that is consistently inaccurate needs investigating immediately – is a key indicator of other issues that will be definitely costing your business money in lost business opportunities.
A Sales Forecast that appears without specifics – client name, price agreed, order date, quantity, delivery date, terms is not a sales forecast. A sales forecast should have a very high degree of certainty. If it doesn’t then this is a likely indicator that the sales process lacks that same degree of certainty.
A Sales Funnel should have a high degree of movement – prospects added and taken out on a very frequent basis (frequency will depend to a degree on the industry, product/service sold, order value etc).
The Sales Funnel is a proactive way of managing prospects – managers should be keen to look at the age of prospects in the funnel, last contact dates.
Sales Teams may benefit from having a universal understanding of what a Sales Funnel should do and what the criteria are for moving from one stage in the Sales Funnel to the next.
The danger is to have an overly full Sales Funnel. This is extremely dangerous. Too large a Sales Funnel means that some great prospects will be ignored whilst poorer quality prospects may get attention they don’t deserve. The aim of the Sales Funnel is to bring focus to the sales process.
For more information about how you can get the most out of your Sales Funnel and deliver certainty and accuracy to your Sales Forecast call Carol Griffiths – Lead Consultant and Director at Morton Kyle Limited on 0779 002 1885, or email email@example.com