Estimated reading time: 4 minutes

It's Only Common Sense: It's Forecasting Time Again

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Yes, it’s forecasting time again. Stop your groaning...I know you salespeople out there hate the idea of putting together a forecast. Some of you try to convince yourselves (and your bosses) that forecasting doesn’t work. Others, managers that is, ignore their salespersons’ forecasts and dictate a number from the top down--a huge mistake, to say the least. And then there are the companies that don’t even bother to do a forecast which is more than a mistake--it's sheer insanity. How can you run a railroad if you have no idea where the train is going?

If you want to be successful you must do a forecast. You must understand your customers, their buying habits, and their ordering patterns. To predict what your customers are going to do next year you must know what they did this year and the year before that and, hopefully, the year before that. You must forecast to set your personal goals for the coming year. You must forecast so your operations people can line up necessary resources for the coming year. From people to equipment to process improvements to technologies, they are all are based on what the sales team not only forecasts, but also what type of business they forecast.

I’m going to show you how to forecast in five easy steps. Stick with me because it’s not that difficult. If you follow my directions and apply them to your particular customer base, you'll have a forecast and an accurate one at that:

• List your current customers in an Excel spread sheet. Write down what they bought during the past year (month by month) if you have this information for the year before that’s even better. You now have your sales history for your customer base.
• Now look for trends: How is each company doing? Look at the total forecast to see if it makes sense.
  • Do they spend the same amount of dollars equally each month, or do they buy seasonally?
  • What is their recent trend? Check out the past couple of quarters, are the ramping up or down?
• Review each customer, and create an account plan for each customer that will include:
  • What is their annual dollar buy in boards?
  • What percent do you get?
  • How could you get more?
  • How is the company doing?
    • Are they doing well, booming?
    • Or are they on the decline?
    • Determine whether their forecast will go down (and by how much) or go up (and by how much) or stay the same?
• Now enter this information in your Excel spreadsheet and add everything up.
• Look at the total forecast to see if it makes sense.
  • Make sure your total monthly forecast makes sense.
  • Make sure your annual number is logical.
  • Make sure that your increase is not too little or too much.
  • Make sure that the months flow logically year to year. If your booking trend for the last quarter of the year is $30k a month. then don’t jump the January bookings number to $100K (unless you know something specific is about to happen).
• Yes, there's always one more than promised: Make sure that in your account plan you mention what it is going to take to make each customer forecast happen. Go beyond price to what else you can do to win the business.

And there you have it--that’s all there is to it. If you do this correctly you'll have your forecast for the year.

Now it’s up to you sales managers to accumulate your salespeoples’ forecast into one company forecast and repeat step number six making sure that it all makes sense and that your bookings months all relate to the number of working booking days in each month.

If you don’t have access to the information that I mentioned, something is wrong. You should have it. Someone in your company knows what each customer has booked by month for the past few years. You as a sales person should know enough about your account to be able to answer all of the pertinent questions about that account without batting an eye. This is information that every salesperson needs to have at their fingertips.

Once the account plans and forecasts are completed they should be communicated to the entire management team so they will know:

• What the forecast for each customer is;
• What the month-to-month forecast is;
• What the annual forecast is;
• What customers you are working with; and
• What it will take to win their business and make this forecast a reality.

I’d also recommend that the sales team’s compensation be at least partially tied to making that forecast as well.

The best way to successfully run a company is to set and communicate goals and the best way to start this process is with an accurate forecast. It’s only common sense.