Is Your Sales Forecast Inaccurate?

A few years back, I worked for a company that spent more money, time, and effort on sales forecast accuracy than what most companies pay in corporate taxes.  There was a complete department that had 3 permanent employees and at any given time 2 temporaries.  Why the expense?  While most would say spending this amount of money was ludicrous, this company’s accuracy in sales forecasting was 8%.  At the time, this was phenomenal compared to other companies in the same industry.

In later years, I worked for a Fortune 500 company that demanded 4% forecasting accuracy.  Moreover, they got it too!  Being a public company, how the street loved them!

So why are most companies lacking in their accuracy?  I think it comes down to a couple of things.

  1. Pressure to make a number that executives have not been realistic in obtaining.
  2. Not getting input from the rank and file members of the salesforce.

Too often, I have seen front line managers take numbers, pad them, then pass them upstairs.  No two ways about it, this is just plain wrong.  I think this is unethical because it is now forcing a quota number on someone that was not involved in the planning process.  Crazy idea, but how about getting people responsible for what they were hired to do, generate revenue. When you get the by-in from the sales force, it now becomes a point of pride and ownership.  No salesperson I have ever worked with wants to tell their manager they won’t be making their forecast.

Despite loads of money spent on CRM and SFA tools and software, along with hours of time dedicated to reviewing the forecast, it is still way out of line.  Why?  In all my years in sales, I have never seen a company do a detailed analysis on a territory other than do say “it did $$$ last year and we expect $$$ this year”.  What does this say about the coming year, or the next?  Nothing, absolutely nothing. When a new sales person starts a territory, unless a detailed analysis has been done, how can a quota be set and handed to them with an honest expectation of meeting that quota?

The fundamental flaw in all forecasting is that we are asking the wrong questions.  It does no good to set-up a sales rep for failure from the very beginning by overestimating the territory.  This is like having no target; you are going to hit it every time.

When salespeople, especially those who are behind are asked to update the forecast, are you really expecting accuracy? Organizations are kidding themselves if they do.  The opposite end of the spectrum has the top reps ‘sandbagging’ or understating their pipeline.  The point is, if done correctly, the accuracy is built from the ground up with everyone’s acceptance, and no one has to be double checking numbers.

If this sounds familiar in your company try these:

  • Collaborate with the sales force to get ownership of the quota.  Supply detailed supporting data so that informed decisions can be made; not what you want to be made. Managers need to remove the pressure from the process.  If you do not, the resulting forecast is no more than a subjective and inaccurate piece of paper.
  • Quarterly reviews are worthless.  The process of review needs to be ongoing and management updated weekly.  Clearly establish grading milestones for pipeline deals over a certain amount.  Once they reach a percentage level towards close, do an overall review.
  • Have an agreement between the salesperson and the customer that qualifies all key measures, conversations and meetings.  The process that outlines the due diligence necessary to lead to the ultimate ‘yes’ or ‘no.’  In most cases, any verbal agreement ambiguity from either side removed and now put into writing.  Both parties now share and understand with crystal clarity. Every step the customer adds and agrees to adds to the next level of accuracy to the forecast.

Hope you find this useful. Please let me know by leaving a comment. If you have a Twitter account and found this article useful, it would be much appreciated if you would retweet this at the beginning of the article!

Happy Selling!

Ed Warner

So You Wanna Be the CEO?

CEO’s have a tremendous burden in that they must not only perform, they must often outperform. They fail not for the lack of planning, strategy gazeor the lack of a long-term vision, rather because of a simply task, Execution.

Too often we (salespeople and alike) act as though our tasks and daily routines are insignificant. On the contrary, everything you do has a certain degree of separation that touches the bottom line. We fail to realize just how important our job is, regardless of the occupation. In spite of where you are in the corporate structure, treat your sales territory as though you were the CEO… Execute!

In order to execute, you still have to have a plan, but the execution must plancover the humdrum details of account management. Many a salesperson has made the mistake of believing they can do these at their leisure. and the customer will be happy! Nothing could be further from the truth. I am a relationship sell kind of person, therefore I believe in cultivating relationships for the long-term. I do not believe in the churn-n-burn mentality. If that’s your nature and it suits your job description, then more power to you. But if your goal is to keep the customer in hopes of selling to them again, there are continuous must-do’s you have to perform.

  1. Follow-up and make sure your solution did indeed perform–their pain MUST be gone
  2. Regular contact–this allows you to uncover additional pain or issues as they arise
  3. Competition Watch–contact allows you to understand their penetration, if any

So what’s your excuse?
Sounds fairly simple, so why is there such a disconnect in execution? TIME Make the time and make the call or visit. I have heard just about every excuse, but the one that stands out is: I don’t have time, I need to concentrate on this quarter’s numbers. hourglassThis excuse is the biggest reason for not doing anything; the illusions of time dwindle. You actually have more time than you realize and here is how you dispel the myth and reclaim the edge.

Account Division
In order to make sense of your time this really only works for those that do account management. Divide your customers into three groups, 1,2,3 or A,B,C. Decide on one key element that will divide them. It can be something like: yearly potential selling value, lifetime selling value or whatever makes sense for you.
Start by putting the top 20%-30% customers in the first tier, the next 50%-60% into the middle tier the rest in the last tier. Once that happens, make a contact plan for each of the tiers according to importance. Put this into your electronic calendar as a to-do!

Rule of thumb: 1st tier call monthly, 2nd tier call quarterly, and 3rd tier call every six months. What are we trying to accomplish? Relationships. It’s all about relationships. Still true today, people buy from people! All of your 1st tier customers should be your key account or best prospects. Increase ten-fold, the relationships you now have within those accounts. fightFailure to win this battle will guarantee you lose the war! This is a priority so treat it as such. Do what is necessary to cultivate the relationships

Your goal is to follow the same procedure for the next tiered accounts, but in a more restrained role. Tier 2 accounts can be thought of as the next Tier 1 accounts so starting early puts you ahead of the curve. The last tier of customers need to be jettisoned or cultivated. As a salesperson, no one likes to say goodbye to a customer, but consuming more resources than their sales potential is capable of replenishing, it is time to cut the strings.

I will leave you with this thought provoking question: Why win additional customers if you cannot keep the ones you have?

If you find this useful, Contact Me or please leave a comment. If you have a Twitter account and found this article useful, it would be much appreciated if you would retweet this at the beginning of the article!

Happy Selling!

Ed Warner

Sales-Transactional vs. Strategic

We all hear it, but for those that don’t really understand the difference, the nuances of strategic selling overshadow the transactional aspect, but not so much that one can’t be strategic in a transactional sales opportunity.

Transactional selling is really about treating the product or service as a commodity image7rather than a strategic investment. We participate in transactional engagements on almost every trip to the grocery store, and we for the most part, don’t give it a second thought. But what would happen if that item was now a major piece in your way of life that required a substantial cash outlay? Exactly! Now look who has to “kick the tires” and really do some investigating! In addition, for you (the male) that are married, you also have to get the VP of Household Finance to sign-off on the purchase. You have just stepped into the world of strategic selling.

Very little value add is afforded a transactional sale and what exists is mainly in the form of immediate need/price matching. You have a [need] for 100 roles of paper; I have them for 50 cents [price] a roll. The reason for little or no value add is there are no non-standard business inputs (needs) that would require much more than the exchange of goods and cash. A salesperson would only need to uncover the need, establish a quasi-relationship, and fill that need for product or service. image2The biggest challenge in this short sales cycle window is for the salesperson to uncover the maximum price the buyer would pay, all the while the buyer is determining your lowest selling  price. The main characters in this off-Broadway play are usually the salesperson and the  procurement department.

The image below is a chart from Neil Rackham, the author of “Spin Selling”, a course I took and can recommend. Neil does have a newer book, “Rethinking the Salesforce” that teaches the same principles from his previous book. Although aimed at bigger sales organizations, it is highly effective for smaller groups that wish to grow their business in a volatile market as it addresses the technological changes that have occurred.

Click on chart for bigger picture….


Strategic, consultative, solution, complex, relationship, and even enterprise selling are pretty much the same term, and for the sake of this article are going to be treated as such.
Strategic selling is a long-term sell that typically takes 6 months or more. In some extreme cases, I have witnessed a 18 month sales cycle. In today’s environment, these are taking even longer and transactional sales are beginning to mimic the cycle times of typical strategic sales. Strategic selling is a systematic sell in that a formal process is undertaken on both the buying and selling side. A strategic sale is one that demands a ROI because it is usually a capital investment project. The dollar amount will vary according to what you sell and to whom, but my experience in enterprise sales the typical deals are $500k-$1M. With this dollar amount there is a lot at stake on both sides.

The complexity of a strategic sale involves many decision makers from the buying side and many reviewers from the selling side. This is the reason I wrote in a previous article about having a game plan, hence your effectiveness to manage a sale of this nature is compromised unless you have a formal process because of the complexities in this type of sale. The following are additional points that are just as important to remember.

  • Relationships with the customer is of the utmost importance
  • Solution sell to a customer’s perceived need
  • Your skills as a listener and your ability to formulate a workable solution will play a major role
  • Substantial time will be invested once the deal is qualified
  • Your skills as it relates to dealing with C-level executives are paramount. Know how to talk their talk

I hope this gives a better feel to what’s involved in either type of sales. Regardless, appropriate selling techniques have to be used in order to maximize your effectiveness for not only what you sell, but to whom you are selling. This short article does not cover the complete scope of strategic selling, which in itself could be many chapters.

Thanks for taking the time to read this and as always, I do appreciate and welcome your comments. Feel free to contact me should you have additional questions.

Happy Selling!

Ed Warner