Consilium | s a l e s t r a n s f o r m a t i o n |
In July I won a magnum of champagne at a conference for guessing the number of jelly beans in a large jar.* Fluke, or skill at forecasting?
* Thanks to Richardsons the accountants
Consilium | s a l e s t r a n s f o r m a t i o n |
There were 2,173 beans in the jar
I guessed 2,138
an error of 35 or 1.6%
Consilium | s a l e s t r a n s f o r m a t i o n |
Would that sales forecasts
were always as accurate,
and on the safe side
‒ it’s good to over deliver
rather than disappoint.
Why are most sales
forecasts so inaccurate?
Consilium | s a l e s t r a n s f o r m a t i o n |
Forecasting is tough!
► There are many methods, companies ask their sales
forces to forecast using measures such as:
● confidence factor
● sales stage
● objective tests
● the customer’s buying process
● requiring them to commit to a number
► Then there are the methods sales people often use:
● “I won’t tell them about this deal, I’m still negotiating my target”
● “I’ll tell them whatever will get the boss off my back while I look for
my next job”
► The sales director still has to make an accurate prediction
Consilium | s a l e s t r a n s f o r m a t i o n |
Simple arithmetic rarely works
► % confidence factors are error prone: ● in almost any culture ten
‘ten percenters’ don’t make a certain sale
● one man’s 60 percenter is another’s dead cert
● international sales forces will vary according to their culture
► Objective tests are less error prone, but beware; optimists will still fool themselves and the pessimists will avoid committing.
Consilium | s a l e s t r a n s f o r m a t i o n |
tests for each
opportunity*
1. Is there a real opportunity? Are you certain the prospect will buy something
from someone soon?
2. Is it suitable? Is this opportunity a good fit for me and my company?
3. Is it winnable? Or is there an existing supplier who may be impossible
to displace?
4. Is it worth it? Given the effort required and the likelihood of success.
Use
* Part of Consilium’s two page sales plan
Consilium | s a l e s t r a n s f o r m a t i o n |
Then it’s simple Rate each sales opportunity ‘A’, ‘B’ or ‘C’:
A Sales that are certain to come in
B Sales that might just come in
C The rest of your sales pipeline
Commit to a total of all the ‘A’s.
‘B’s are there as ‘cover’ in case any of the ‘A’s slip or drop out.
Consilium | s a l e s t r a n s f o r m a t i o n |
The wisdom of crowds
► You can sometimes use simple arithmetic if you are careful and have
● a large sales force, say 100+
● a large number of unit sales, say 1000+
► BUT remember to factor this period’s predictions by previous periods’ performance
► It won’t be perfect, but it can act as a guide. The larger the numbers the greater the accuracy … and it won’t be accurate at the level of an individual or even a department.
► You are relying on ‘the wisdom of crowds’
Examples of the
wisdom of crowds At a 1906 country fair in Plymouth,
800 people participated in a contest
to estimate the weight of a slaughtered
and dressed ox.
Francis Galton observed that the
median guess, 1207 pounds, was
accurate to within 1% of the true weight
of 1,198 pounds.
Just over a century later 40 guesses
at Oxford’s Venturefest came within
11.4% of 2,173 jelly beans!
Consilium | s a l e s t r a n s f o r m a t i o n |
Use the 4 tests and ABC, but if you must forecast using
simple arithmetic, remember
SCALE is important!
Consilium | s a l e s t r a n s f o r m a t i o n |
More on the
four tests
here:
Pictures courtesy of Microsoft clip art, Wikimedia and others.
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