According to a study recently released by Sales Performance International (SPI), inaccurate sales forecasts have eclipsed declining revenue as the number one problem facing sales managers today. “Sales managers certainly don’t like missing their revenue goals, but they really hate getting their forecasts wrong,” says SPI CEO Keith Eades.
It’s easy to understand why. Sales managers are now under unprecedented pressure to develop accurate sales projections and to know exactly where a company stands at all times. Failure to do so can mean losing the respect of Wall Street, the support of investors and even your job.
“The number one reason sales managers are being let go or fired for performance reasons is based more on forecasting than it is on revenue,” declares Eades.
Forecasts can be inaccurate for a variety of reasons including the economy, misunderstood sales pipelines, customer budget cuts, competition, market shifts, product inadequacies and supply shortages. Good forecasting, on the other hand, can lead to appropriate goal setting, the right inventory levels and maintaining manufacturing and customer service levels – and ultimately revenues.
It’s for this reason that sales managers must establish performance standards based on sales methodologies and techniques that have proven successful in previous years. Enforcing these standards can create consistent levels of performance throughout the organization and a much-needed degree of predictability. So too should sales managers foster strong communication channels among reps to gain insight into a sales team’s ongoing progress and circumvent obstacles.
Nevertheless, there are unforeseeable factors, such as acts of terrorism and forces majeure that can have a disastrous impact on the accuracy of a sales manager’s forecasts. Eades says that under such circumstances, sales managers can expect some forgiveness – but not for long.
“There may be some anomalies that may come about. In that case, markets and/or people will give you some slack. But that’s only short lived,” says Eades.