Home > Personal Selling > How To Improve Your Sales Forecast?

How To Improve Your Sales Forecast?

If there is one thing that you could do to improve your forecast accuracy what would it be?

I'll start this thread by telling you what I do and if you like preach!

It's all about focus and there is one thing that you could do to improve your sales results is… Show how you will be making your number.

I want to see a list of deals that you are going to close and the list needs to be big enough to make your number. These are the deals that you commit to closing in your sales period. If you don’t have enough deals, then what are you doing to improve the situation? If you do have enough deals are you certain they will close? Does your customer agree with you?

Showing how you will be making your number is part of forecasting and as such there are three stages for all those quarterly run forecasts. In the first month you have to Frame your forecast, by the beginning of month two you have to Firm your forecast and by beginning of month three you have to Fix your forecast. Forecast accuracy needs to be measured from the Firm forecast – therefore you have to be pretty certain the deals are going to close – and it’s no good calling low and then making your number as that’s just as bad – shows no control.

Three things I look for when people say a deal will be closing. Is there a Business Imperative to which the customer is working? Does the customer agree your Value is greater than your competitors and what Influence can you assert on the decision making process?

The alternative to showing how you will make your number is factoring. Factoring was invented to make you feel better and to make you feel comfortable. There is no focus.

Guess where you focus your time if you forecast which deals will be closing? Guess how comfortable you feel by naming those deals? Guess what you are going to want to do to make sure those deals come in? Try it, it’s uncomfortable, but the focus improves results.
- by Firstborder
I haven't done sales forecasting before. Thank you for the idea. - by realtor
What a great question. I do have one note on something you said "I want it to be big enough to meet your number". I think you implied this, but I think it's more important that the number be real than impressive. If there's a deficiency in your forecast, let's deal with it now.

I've seen all types. The guy who falls short of the big impressive number he gave during the monthly meeting, month after month. The person who simply guesses, sometimes wrong, sometimes right. The person who low-balls the number every month and the ones who never stray more than 10-15% +/-

I personally think the biggest factors in accurately forecasting are:

- Being completely honest with ourselves about where the prospect stands at each stage of the sales cycle. Okay, so one person said they would buy. Can they? Who owns the money to do so? Who else is involved? Salespeople have this weird filter on our ears. Someone says "the proposal looks good", we hear "we'll cut the check tomorrow".

- Asking questions. What happens to the contract after I send it over? Who signs it? Are they in the country? What are the clients time-frame motivators? They certainly aren't the same as ours.

And here's the thing that drives me nuts:

- Offering incentives to make us look like better forecasters. You didn't do a very good job asking questions, or chose to hear what you wanted to hear. Now it's a week before the end of the quarter and your boss wants to know where the deal is. After a day or two you mutually agree that a discount/freebie is needed to get that signature. Esentially we're manufacturing a forecast and losing money in the process. If we had done a better job we would have known that the contract couldn't possibly be signed for three weeks and saved us all some stress/revenue.

My apologies in advance for the lengthy and opinionated response!

Justyn - by Justyn
Justyn - good reply! thmbp2; - by Firstborder
What kind of sales jobs require regular forecasting?

When I was a mfgrs rep in the electronics industry some of my principals asked for a 90 day rolling forecast, but I don't think anyone really believed my numbers because they were always way off.

Does that mean I am a bad salesman?

Chuck - by Sales Pro 1000
Not at all. It just meant that organization didn't put much weight on forecasts. You may want to look more into it, as I think forecasting is more important for the sales rep than the management team. By understanding where your opportunities are in the sales cycle, you can better determine where to spend your time.

For example, if you have plenty of opportunities ast the top of your funnel (<20% close probability), but not many toward the bottom, then you can ease up on the prospecting and focus more on moving these opportunities further through the sales cycle.

Justyn - by Justyn
Good input, Justyn.

Today in my quest to sell advertising specialties I'm an excellent example of what Zig Ziglar once called a "wondering generality".

Maybe I should find a book on forecasting commodity sales and put more punch in my system.

Any ideas?

Chuck - by Sales Pro 1000
In commodity sales (or any sales environment where a single transaction is less than say 1% of your quota) I would think that "funnel" management is more important than forecasting individual deals. When your transactions reach the >1% of your quota (50 deals = 100%) I think it's more important to get better at forecasting individual deals.

I browsed over my bookshelf and nothing stood out as a great resource for forecasting or funnel management. Though any "system" that has a 5-6 step sales cycle will speak to it to some degree. I wish I could point you to something. Maybe I'll include a chapter on it in my next book ;sm - by Justyn
Thanks for the additional input Justyn.

I'd say the issues that I have to contend with are the same as those folks who sell printing, insurance or autos.

Lots of competition and lots of choices and few deadlines to create a sense of urgency.

Chuck - by Sales Pro 1000
A useful excercise might be to take all of your existing "prospects" (people that have at least shown interest in your product). Try to classify them into 3-4 buckets. Maybe: gathering information, high-probability buyer, waiting on paperwork.

By breaking them out into these buckets you can see which areas of your funnel have are healthy, and which ones you might want to spend more time on.

I wouldn't spend too much time with formal forecasting. What you might do though is determine over time, what percentage of your prospects in the last two phases typically close during a month. Let's say 75% of the people who are "waiting on paperwork" will close, and maybe another deal or two will come out of nowhere. Moving forward you can at least make an educated guess on your revenue for that month by taking a look at the last 1 or 2 stages of your funnel. You'll be able to determine how many prospects you need to have at each stage of the sales process to hit your target numbers.

Just an idea.

Justyn - by Justyn
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 - by Sales Pro 1000
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. - by pmccord
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 - by Sales Pro 1000
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. - by Dougd55
Weekly Updates!
Questions and Answers about Selling
Subscribe to our mailing list to get threads and posts sent to your email address weekly - Free of Charge.