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It’s Only Common Sense: Why Are Forecasts So Important?

As an advocate of forecasting—and as someone who knows the importance of a good forecast to a company’s planning—I honestly don’t understand how someone can run any business without a forecast consisting of their current customers and how much business they will bring to their company in the next month, quarter, or year. My favorite part of forecasting is the new potential accounts your sales team is targeting and how much possible business can be gained by successfully adding these accounts to your forecast. It’s only common sense that every company—and every salesperson in that company—should be required to develop an annual forecast and then make the necessary month-by-month updates.

Operating without a forecast is like playing a basketball game without a scoreboard or setting out on a trip without a map or GPS. How are you going to get there if you don’t know where you’re going? For most people, developing a solid forecast is daunting at best and boring at worst. For me, it is one of the most fun and exciting parts of doing business. A forecast is planned insight into where your company is heading. It’s a glimpse into the future.

The best thing about forecasting is that it forces the forecaster to review every customer and evaluate how their company is performing with that customer. It’s a true report card of your company’s performance with that customer—not to mention an icy cold stare into whether or not they are performing well enough to grow with that customer, which is something we all need to do.

Forecasting potential accounts is the most fun of all because you’re setting out on an adventure to win those accounts. Talk about fun and excitement! I love the idea of strategizing how you are going to land that big fish or whale! That is as close to an adventure as you can get in the business world.

Good forecasting is not just about holding salespeople accountable; that is only one of the many benefits of a company’s forecast. The true value of a forecast is that it defines your company’s direction. A good forecast will show the company what direction they should go when it comes to technology, capital investments, and the workforce.

For operations to plan for the coming year, they need to have a good understanding of the business that will be coming in the door—including how much business and when, what type of technology, the lead times, and how many extra people it will take to handle this business. In most cases, an honest and accurate forecast will dictate the overall direction of the company.

Why are so many salespeople aghast when you ask them to do a forecast? Why do so many salespeople have a negative knee-jerk response when asked to put together a forecast? I am always amused at all the reasons people give me why they cannot possibly put together a forecast. Some salespeople come up with a very long list of reasons that they do not forecast, including real-life examples supporting their non-forecast stance.

Here are some of my personal favorites:

• How do I know what a customer is going to do when they don’t even know?
• Over the years, I have found that forecasts are a complete waste of time because we never meet them. (Hmmm, I wonder why?)
• I don’t have time for doing a forecast because I’m out there selling. Do you want me to do paperwork all day or sell?
• The reason I became a rep was to avoid all of the bureaucratic BS, so I’m sure not going to start doing it now.
• I don’t believe in forecasting, and I don’t want to do it.

If you are going to run a successful company, you have to know who your customers are, as well as how much business they have done annually for the past couple of years, and how much business you can expect from them this year. It’s not that complicated. If you can’t do that, you don’t know your customers well enough.

When it comes to new customers and target accounts, a salesperson should have a complete understanding of what business they are in, how much of their type of business they have, and what it’s going to take to win that business. This is called developing and implementing an account strategy, and it’s an integral part of being a good salesperson.

I have taught companies and salespeople how to forecast for over 25 years. During that time, I have shown them how to develop account plans and forecasts, and in every case, the companies and salespeople have been better off for it. I guarantee that forecasting works.

In the end, it all boils down to this—if you ain’t forecasting, you ain’t selling!

It’s only common sense.

Dan Beaulieu is president of D.B. Management Group.