Right on the Money: The Key to Accurate Sales Forecasts
July 30, 2012
Accurate sales forecasts are essential for any business, but also incredibly difficult to create. Fortunately, there’s a new valuable resource that can help.
In Boston, people say if you don’t like the weather, just wait 10 minutes and it will change. As a result, people don’t put much stock in the local weather reporting. But let’s disregard that for a minute and imagine that you checked the extended forecast this morning and saw a sunny, 75-degree day two weeks out. Wanting to capitalize on the great weather being forecasted, you decide to plan a big golf outing.
Now, what if you were to make a wager on the accuracy of that forecast? If the weatherman is right, the payoff would be you get to enjoy your golf outing. If his forecast is wrong, however, you lose all of your retirement savings.
No rational person would take a bet with such poor odds and returns. Yet when it comes to sales forecasts, many growing businesses do precisely that. They frequently bet their company’s future on inaccurate, unreliable, or nonexistent sales predictions. When those sales forecasts are accurate, they successfully deliver on their promise and nothing more. When they are inaccurate, however, the price is much greater, negatively impacting just about every component of the business.
The problem is that none of us are psychics. We can’t look into a crystal ball and see which deals in the pipeline will close in the next X days, which will drag on for the next X months, or which will flame out and never come to fruition. Truthfully, the chances of consistently producing 100 percent accurate sales forecasts are slim at any company, and virtually nonexistent at expansion-stage companies.
Thankfully, sales forecasts don’t need to be completely accurate to be valuable. In fact, forecasting is simply about identifying a specific sales target in a specific time frame, as accurately as possible. It’s about coming up with a number and growing and planning around that number. And, ultimately, forecasting can be an incredibly valuable tool that brings clarity to an entire organization, particularly expansion-stage companies that are in the process of scaling.
Of course, that’s assuming you do it right. The question that you need to ask is whether your growing company’s forecasts are actually helping you plan for expected growth (in some cases potentially inhibiting growth), or if forecasting is just another corporate routine that your sales team doesn’t take seriously.
OpenView’s new eBook Sales Forecasts: A Question of Method, Not Magic, can help. In addition to explaining what forecasting is and why it is important, the eBook outlines the components of a forecast and how to create a successful forecasting process through forecast review meetings. It offers tips to help you improve your forecasting accuracy and utilize the best technology possible. It also focuses heavily on small, but crucial, adjustments you can make to your process to improve the accuracy of your sales forecasts over time, especially as your business continues to scale.
Like most things worth doing, sales forecasting isn’t easy. It requires diligence, discipline, and persistence as well as commitment, honesty, and consistency. It’s is a complex mixture of people, responsibilities, tools, and tactics that, collectively, produce a reliable, deployable output. If your organization’s forecasting practice isn’t taking each of these things into account, then it’s likely void of critical information that might shine a light on potential flaws or imperfections.