Four Simple Sales Forecasting Rules

Four Simple Sales Forecasting Rules

As the New Year begins, it’s natural for sales teams to start thinking about ways to fine-tune their sales forecasting process. Below are some simple rules that will help you and your team improve the accuracy and efficiency of its forecasting.

The first two rules apply to the common situation where a sales manager must either create a forecast for the coming year … or “sign off” on the viability of a sales target that’s been handed down from on high. Use these first two forecasting rules to ensure that the annual target you commit to is realistic.

RULE #1. Regardless of how sophisticated the forecasting method, the forecast will only be as accurate as the data you put into it. It doesn’t matter how fancy your software or your formula is. If you feed it irrelevant, inaccurate, or outdated information, it won’t give you good forecasts! Metrics you should record and monitor consistently for each individual salesperson include: total conversations I had today with new unique prospects; scheduled meetings I set with a clear Up-Front Contract in place (no “I’ll drop by Tuesday afternoon”); meetings I went on (physically or virtually) that resulted in a yes or no decision (no “maybe” outcome meetings); closed agreements that created new income for me.

RULE #2. Forecasts must have STAR (Simple, Timely, Accurate, Reviewed) quality to be useful.Track and update the hard numbers that connect to each of the SIMPLE metrics you just read. Update them each week to keep them TIMELY. Analyze them so you have ongoing ratios that ACCURATELY establish the current patterns that will help you predict future outcomes. REVIEW the numbers weekly in voice-to-voice discussions, either one-on-one with individual salespeople or during group meetings.

The next two rules apply to the situation where you have committed to a goal for your team … and must now make sure that your compensation scheme actually supports the sales forecast. Here, you must work with each member of the team to create a comprehensive plan that a) carries meaningful personal rewards, and b) turns the team’s sales goal into reality. Follow the next two rules to make sure both outcomes take place!

RULE #3. Compensation plans that are too complex are never as motivating as simple and direct methods. Make sure each individual forecast connects to a simple, comprehensible, personalgoal for that particular salesperson. For example: Getting X dollars in sales revenue from brand new clients this month, in return for a payoff of Y dollars of commission, also this month. When the goals are this simple and direct, salespeople will be more likely to use their own performance numbers to identify and commit to action that turns the goal into reality. They will also be more open to coaching that helps them figure out where there is room for improvement. (How many conversations with new unique prospects are now leading to scheduled meetings with clear Up-Front Contracts? How many should be? What must change to make that new target happen?)

RULE #4. Companies should compensate for desired outcomes. Using the example above, the outcome the company wants is X dollars in new sales income this month from brand new clients. If you aren’t willing to set up a financial incentive rewarding the salesperson for achieving that outcome, you shouldn’t expect it to happen!

Read this blog post to learn more about helping your sales team set the right goals.