Sales Forecasting & Sales Planning (Sales forecast is where financial…
Sales Forecasting & Sales Planning
What managers report shapes the way managers think. In order to change the game, the scorecard needs to be changes. Better reporting for better business.
Performance evaluation measures and compares actual results and action to those goals
You can manager what you measure
All management involves goal setting, measurement, objectives, and strategy
Why sales planning?
Planning makes execution possible
Deviations result from lack of planning or misplanning
Sales plan consists of key control points for sales management:
Forecasting, job role definitions, training & development plans, targeting, sales execution, and performance evaluations
Macro sales plan
Past & present sales trends of the company
Market assessment metrics
Micro sales plan
Changes at customers
Changes in general business environment/market
Changes at competitors
Changes inside the firm
Past & present sales trends
What happens when you measure that your sales plan is not getting you to your sales goals?
Update/revise plan, define additional roadmap actions, bring additional measures (if time left to achieve goals is little, when there is a crisis, or any anticipated situation arise that you need to take into account, skills are not adequate to execute the plan or resources are not adequate to execute the plan)
Sales forecast is where financial and sales management meet
Helps to provide input for other functions:
Finance to set up cash flow, expense budget, inventory levels, project banking requirements
Lack of healthy forecasting might be disastrous for the company
E.g. inaccurate demand prediction effecting profitability, share price, etc.
Types of sales forecast:
Bottom-to-top sales forecast
Reflects data for all micro plan elements
Sets meaningful dialof between manager & seller
Feedback from customers is reflected
Involve qualitative as well as quantitative data
Attain active involvement & ownership of sales force
Salespeople have a tendency to overestimate as well as underestimate (both problematic)
Salespeople's resistance to forecasting are accountability and time-consuming
Sales managers' resistance to forecasting are lack of trust in mechanics and manager's ability to forecast/assess
Provides reality checks for managers & sellers
All channel forecasting should be based on the same format as well
Should include a format
Improve forecast: best case scenario, worst case scenario, minimum commit, must make, best can do commit
Management forecast/judgement should be reflected
Top-to-bottom sales forecast
What does it do?
Uses objective and subjective methods to accumulate and analyze quantitative and qualitative data
Starts with economic conditions, industry potential, market potential to allocate forecast based on territory, product set customer segment, etc.
Must serve shareholder value, cash flow, profit, return on investment, etc.
Manipulations of historical data are included
But seasonal adjustments influence forecast; must be taken into account!
Relies on historical modeling: historical data extrapolated to forecast future data
Types of statistical modeling used:
: emphasize more recent data and systematically discount old information
: relies on data that measures how sales happen (x # of calls make y # of sales)
Time series modeling
: relies on observed sales trends and may use exponential smoothing
: relationship between sales and several independent variables
Sales manager and top management should be using the same or similar metrics for measurement
Usually a management committee analyses and approves the forecast
The key to successful sales forecasting is using variety of techniques that combine top-bottom and bottom-top
Besides structures, use of technology to forecast sales is vital in today's complexity
Understandibility, acceptance, and communication are critical for successful forecasting execution