Forecasting revenue is a massive component of sales performance management (SPM), and plays a sizable role in plan design. Accurate projections help supervisors assess a vendor's needs and tailor strategies for future sales. The figures are mostly expectations for representatives – agents need their regular quotas so they know how many goods or services they need to move.
Sales forecasting isn't an exact science. The predictions are subject to forces that are well beyond anyone's control like the whims of consumers and market trends. As a result, managers must be prepared to account for influential factors that could skew revenue in positive or negative directions.
Accounting for customers
It is almost impossible to predict how clients will behave. Mitchell Gooze, the author of "The Secret to Selling More," believes that a common problem with forecasts is that managers have too much faith in their employees to create sales even when consumers are hesitant to make purchases.
"There's a belief that salespeople can 'make something happen,' whether or not the customer is ready to buy. Salespeople tend to match the customer to the selling process, but the real question is, where is the customer in the buying process?" Gooze told Selling Power Magazine.
Gooze recommends researching buying habits before forecasting new sales figures. Statistical insight allows managers to create attainable goals that representatives can meet so they can earn their sales incentives. Realistic goals help keep agents on track and focused on their work.
The best part about forecasts is they aren't set in stone. While it would be beneficial to reach and exceed projected figures, it isn't always feasible. When managers project unrealistic numbers, representatives quickly become frustrated with themselves and their work. This negative thinking can be more detrimental to a business than the inability to meet quotas – sales success is predicated on confidence and agents who are frustrated won't be able to move goods or services.
It is vital that managers regularly review forecasts and compare them to actual revenue. Inc. Magazine writes that analysis is important for SPM, and promotes cohesion within a team. Every company uses a different schedule for going over their numbers. For instance, Tim Berry of Palo Alto Software uses a monthly plan.
"If there's a set time, everybody involved knows. You look at, compare and plan for actual results… you start to see management happening," Berry told Inc. Magazine.
The reviews should be held based on sales periods. Companies that measure quarterly success should analyze forecasts every three months, while other vendors can follow Berry's plan if they have a monthly sales schedule.