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The recent embarrassment for the Government
By The ICON Team on 15/10/2012 - 1 Comments
The recent embarrassment for the Government over the awarding of the West Coast mainline franchise to First Group over Virgin and then having today had to announce the cancellation of the agreement highlights a very important aspect of selling and why it is important to get it right.
The issue with the failed First Group bid was the payments they claimed they would make to the government based upon the increase in sales they forecast they could achieve due to increasing capacity. Clearly First Group had bet their ‘shirt’ on these forecasts, so begging the question ‘what made them think they know Virgin’s business better than they know it themselves’
So getting your sales forecast close to reality is a critical part of the information you need to keep your business safe and on track (no railway pun intended), and as this example shows important for your business credibility.
Indeed the most successful companies I have worked with over recent years have all had an extremely strong grasp on their sales outlook, and could predict within 10% what their sales for the next 3 months would be. Generally speaking if you can see 12 weeks ahead you have time to react when things change and take appropriate action.
Sales forecasting is never easy and there are numerous reasons why it can be a real challenge:
Short lead time - Customers who order at the last minute and therefore there is no ‘visible’ order book to base a forecast on
Unpredictable customer behaviour – Delayed decisions on going ahead on projects or with placing orders despite verbal agreements
The information is not readily available – No system in place for where to look for orders
No Forecasting Process - You can’t get your sales staff to commit to, a reliable forecast
How you approach your sales forecasting depends on what type of business you have, but the starting point is always to drill down and get granular in what you DO know. In other words making best use of the information and intelligence, you already have in your business
Sales orders you already have on the books – organise these into the months you expect the sales to fall
Prospects and leads – how likely are they, and when do you think they will land
Regular Customers – The people whose business you know and order regularly, plus other opportunities you feel confident of
Last year’s volumes - What sales you achieved by month last year and why and where it came from
Seasonal Trends - Are there seasonal trends you can use to base this year’s forecasts on
Sales Team – Install a process by which you can forecast by customer, department, sales area, sales rep, and product or revenue type. Look at your history and see what assumptions you can make about what might happen this year.
Of course once you have the forecast of what is likely to happen, there is also the approach of setting a sales target and identifying strategies by which to hit it through sales and marketing efforts.
Knowing your likely demand pattern means you can now quantify if there is a looming problem, and so now you can plan to fill those sales gaps, or pull the emergency cord.
Depending on your business type you will have different ways to address this:
- Is the shortfall specific to a certain sales area, sales rep, revenue stream, department or branch.
- What action can be taken to bring sales in to fill the gap – step up marketing, visit / call clients, chase up enquiries.
This is obviously not a replacement for a robust sales and marketing strategy – if your sales are feast and famine, more towards the famine end of the scale, or just plain unpredictable, then think about getting some help to get your sales working.
You should look at your sales forecast monthly to make sure all known circumstances are reflected – keep your sales forecast live all year. The budget you set is only relevant at the start of the year.
Don’t know where the sales are coming from?
If you genuinely don’t know where your sales are coming from month to month then you possibly have a real problem with your business model. It’s very challenging to have commitment to staff and overheads without visibility of where the revenue is coming from. And if you ever need to raise finance, you will need to show you understand your revenue streams and where they come from.
If you want to know more about getting your sales forecast right, get in touch. At ICON we have 573 strategies for increasing sales and I can talk you through these all day if required!
There are 1 comments for this entry. Leave your comment below >>
Nicholas - January/21/2013
The temptations of the bttoom step are pretty strong. There’s the security factor, of course, because it’s always easier to stay in our comfort zone than to bust out of it. And I think many people look for a predictable but smaller income over an unpredictable but possibly larger one. But there are also distinct rewards: for example, I enjoy the one-on-one time with clients that comes with the doing side of my work. I haven’t (yet) found a way to get that same human contact into the investing part of my activities. Actually, that’s a helpful exercise If we look at what pulls each of us down the staircase, (which is going to be different for all of us), that can give us insight into how we might be able to structure our higher step activities so they meet those same needs (and maybe meet them better).