How To Improve Your Sales Forecast?

great Ideas Justyn,

Since I'm an independent without a sales manager and without a quota that I must meet your ideas are valued immensely.

I've tried the Dale Carnegie/ACT! sales funnel and get lost in the complexity. I've also read Jacques Werth's "High Probability Selling" book and find that concept to be closer to where I am in that when I focus on taking orders off the street and not trying to build a backlog of quotes and activity I make more money.

Most of my orders are under $500 so I need to bag a lot of them to make my nut.

Chuck

The most accurate way I’ve found of forecasting sales is somewhat cumbersome the first time you do it, but the accuracy is dead on.

First, you research your sales and prospecting history. Take a long, but reasonable period of time, say a year. Reconstruct all of your sales and prospecting activity. Sales activity is pretty easy since you have pipeline reports, etc. Prospecting is much more difficult. It may take hours, even a couple of days to reconstruct. Break your history down until you know:

Which markets you prospect into
What prospecting methods you use for each market
How many prospects you see each month for each method
Average monthly close ratio for each method
Average number of sales per market and per method
Average sales volume per sale for each method
Average commission per sale for each method

Then you forecast based on that. For example, if you cold call and your historical numbers are:

200 cold call dials per week
2.35 prospects per week
1 sale per week—close ratio of 42.55%
Average commission 875.00 per sale
Average volume per sale $25,000
Average commission per month (4 week month) $3,500
Average volume per month $100,000

You have your answer. Now, the question is how many cold calls are you going to make? If you determine you are going to increase your calls from 200 per week to 600 per week, you’re forecast is:

600 calls per week
7.05 prospects per week
2.999 sales per week
Average commission per week $2,624.13
Average volume per week 74,975
Average commission per month 10,496.52
Average volume per month 299,900

Your forecast will be accurate IF you actually do what you say you are going to do. The accuracy will vary from month to month, just as your sales and prospecting history did, but over a period of time, your forecast will be accurate. Even on a month-to-month basis your forecast will be pretty darn close. If you have monthly numbers for a period of three of four years, this method will get you dead on for each month of the year.

In the example above, if the salesperson actually triples their activity, they will meet their projections over the course of a year (assuming their market doesn’t change radically, but unforeseen outside factors can’t be factored in). Their problem isn’t the forecast, it’s actually doing the work necessary to triple their activity each week.

This historical forecasting method works for any prospecting method—just so happens cold calling is an easy example to use. It also works no matter the product/service or the length of sales cycle.

It has two major drawbacks--most salespeople won't reconstruct their history and, the biggest, in order to be accurate, the salesperson actually has to do what they based their forecast on.

Great ideas Paul,

You've put a whole lot of thought into our profession.

Let me see how I can do the math thing with what I do.

The main reason I got into selling advertising specialties is that I can sell virtually any company or organization something to help them grow their business.

I frequently walk from door to door, and I can hit about ten doors an hour. In about four hours of this I will usually have two or three potential new customers to work.

On the phone I can do about 50 dials per hour. I can usually find one new potential customer an hour this way.

In simple math if I make 100 contacts, I can find 3 that are warm enough to cultivate. Typically it takes about 3 months to get a chance at a first order from them. Close rate is all across the board.

Thanks again for your very specific reply.

Chuck

I admire your tenacity in the work you do Chuck. It sounds like you are an independant rep with no boss and no quotas. It takes a highly motivated person to do what you are doing. A true entrepreneur.

Continue to build 'relationships' with those 'warm' prospects. Once they order from you, you will probably have an on-going customer and steady source of sales and income if you 'cultivate' them and become their go-to guy.

	#11
Sales Pro 1000	great Ideas Justyn, Since I'm an independent without a sales manager and without a quota that I must meet your ideas are valued immensely. I've tried the Dale Carnegie/ACT! sales funnel and get lost in the complexity. I've also read Jacques Werth's "High Probability Selling" book and find that concept to be closer to where I am in that when I focus on taking orders off the street and not trying to build a backlog of quotes and activity I make more money. Most of my orders are under $500 so I need to bag a lot of them to make my nut. Chuck

	#12
pmccord	The most accurate way I’ve found of forecasting sales is somewhat cumbersome the first time you do it, but the accuracy is dead on. First, you research your sales and prospecting history. Take a long, but reasonable period of time, say a year. Reconstruct all of your sales and prospecting activity. Sales activity is pretty easy since you have pipeline reports, etc. Prospecting is much more difficult. It may take hours, even a couple of days to reconstruct. Break your history down until you know: Which markets you prospect into What prospecting methods you use for each market How many prospects you see each month for each method Average monthly close ratio for each method Average number of sales per market and per method Average sales volume per sale for each method Average commission per sale for each method Then you forecast based on that. For example, if you cold call and your historical numbers are: 200 cold call dials per week 2.35 prospects per week 1 sale per week—close ratio of 42.55% Average commission 875.00 per sale Average volume per sale $25,000 Average commission per month (4 week month) $3,500 Average volume per month $100,000 You have your answer. Now, the question is how many cold calls are you going to make? If you determine you are going to increase your calls from 200 per week to 600 per week, you’re forecast is: 600 calls per week 7.05 prospects per week 2.999 sales per week Average commission per week $2,624.13 Average volume per week 74,975 Average commission per month 10,496.52 Average volume per month 299,900 Your forecast will be accurate IF you actually do what you say you are going to do. The accuracy will vary from month to month, just as your sales and prospecting history did, but over a period of time, your forecast will be accurate. Even on a month-to-month basis your forecast will be pretty darn close. If you have monthly numbers for a period of three of four years, this method will get you dead on for each month of the year. In the example above, if the salesperson actually triples their activity, they will meet their projections over the course of a year (assuming their market doesn’t change radically, but unforeseen outside factors can’t be factored in). Their problem isn’t the forecast, it’s actually doing the work necessary to triple their activity each week. This historical forecasting method works for any prospecting method—just so happens cold calling is an easy example to use. It also works no matter the product/service or the length of sales cycle. It has two major drawbacks--most salespeople won't reconstruct their history and, the biggest, in order to be accurate, the salesperson actually has to do what they based their forecast on. __________________ Paul McCord Best-selling author, Speaker, Sales Trainer, Management Consultant Power Selling

	#14
Dougd55	I admire your tenacity in the work you do Chuck. It sounds like you are an independant rep with no boss and no quotas. It takes a highly motivated person to do what you are doing. A true entrepreneur. Continue to build 'relationships' with those 'warm' prospects. Once they order from you, you will probably have an on-going customer and steady source of sales and income if you 'cultivate' them and become their go-to guy. __________________ CoachDoug60

How To Improve Your Sales Forecast?

General Sales Discussion