Business Performance | A Sales Guy

How to Build an Accurate Sales Forecast

I gave my two cents earlier this week on why sales and earnings forecasts fail. They fail because of lack culture NOT because of lack of smarts.

Chris Waldron called out culture in his comment on the post. I think Chris is right.

There are only 3 things needed to build an accurate forecast; data, interpretation and culture. That’s it.

If building an accurate forecast is important to your business, start with building a culture of reality. Reality is at the core. An organization that confronts reality accepts what the information is telling them and plans accordingly. There is no King James bible interpretation going on. Their is no discarding of the data because someone doesn’t like it. It is what it is. If the data is telling you business is going to slide, accept it, build an accurate forecast around it, figure out away to minimize and move on.

If forecasting is an exercise to support a predetermined number, it’s not forecasting and a culture of reality doesn’t exist. Don’t waste anyones time, just give out the numbers and move on.

A culture of reality is critical to accurate forecasting. Allowing the organization to accurately interpret the data to arrive at the most accurate representation of future revenue is key.

That brings us to the data. I’m a gut guy, so this is hard for me. However, I accept it and dig in. An accurate forecast needs data. It needs:

Historical information
Editorial dialog
Customer data
Competitive data
Trend analysis
Industry analysis
Company data:
1. Support analysis
2. resource availability
3. Product availability
4. New product development
5. New product availability
6. Marketing plans
7. Customer satisfaction
8. etc
Expected Macro Economic Data
1. Consumer Spending
2. GDP Growth
3. Consumer Confidence
4. Interest Rates
5. Inflation
6. Housing prices
7. Government regulations/intervention
8. etc

All of this info and more can influence the numbers. Building a forecast without all the data, internal and external, marco and micro is a hollow effort.

Use the data, it’s the foundation.

If the culture is there and the data is there, interpretation is the special sauce. It’s what differentiates the professionals from the amateurs. Interpreting the data to create an accurate forecast is an art. There is no science to it. The best people I’ve ever seen can look at the data and with an amazing accuracy determine the impact to the forecast from the data. It’s a little bit experience, it’s good data, it’s knowledge of their world and it’s a little bit gut.

I purposely chose not to be perscriptive in this post, because I don’t think forecasting is all that hard. It’s only hard when the culture allowing for good ones doesn’t exist. Build a culture of reality, get good data and learn to interpret it. The forecast will come out fine — and by that I mean ACCURATE!

The Sales Forecast, An “Informed Guess” (customerthink.com)
Explaining Common Sales Forecast Formulas (brighthub.com)

August 26, 2010 | Filed under: Business Performance,Leadership | View Comments |

Bad Forecasts Aren’t a Mistake

The New York Times had a great op-ed piece today about companies missing forecasts. The premise – CFO’s and CEO’s are over confident in their beliefs.

I completely agree with this and think the premise can be extended even further to sales people. You can usually see this “hubris” in sales when sales people are well connected with the customer. The customer gives them their forecast, their expected sales for the next year and the sales person takes it to heart.

They believe their relationship with the customer and their knowledge of their “business” is spot on. This confidence drives faulty forecasts.

The New York Times does a good job explaining this, there is nothing I can add. That being said, I think there is another reason for faulty forecasts — forecasts have never been expected to be accurate.

Forecasting HAS never been an exercise in accuracy. Forecasting has always been an exercise in articulating how much growth is going to be had not an authentic expression of what is really going to happen.

Nobody wants to hear your going to lose money. No one wants to hear business is declining. No one wants to hear that the numbers are falling. Therefore, no one is allowed to forecast the truth. REALITY is something forecasts omit 90% of the time. Sales and corporate forecasts are marketing tools designed to build confidence in the company, the division or the sales person. They are rarely a fair representation of reality.

Know one wants to hear the truth — unless it is good.

An unprecedented number of companies missed 2009 earnings. Why? In my opinion none of them forecasted a decline in business from 2008 to 2009, despite all the economic signs and information suggesting 2009 would be brutal. There was more than enough information in the fall of 2008 that suggested for most companies growth was an impossibility and a decline was most probable.

Rather than embracing the data and building a forecast and plan to minimize the decline, most companies moved forward with completely unrealistic growth forecasts.

This intolerance of negative forecasts permeates all the way to sales. Sales forecasting is rooted in the expectations of growth, not accurate forecasting.

If sales teams want to improve productivity, improve forecasting accuracy and minimize surprises, the culture of forecasting needs to change. It needs to move from telling people what they want to hear to telling people what is actually happening.

If your company or sales team has never forecasted negative sales numbers yet has had a decline in revenue, that’s the first sign your company doesn’t forecast but promotes. If you have sales people or executives who have put forth compelling data based arguments for a decline in revenue or sales and they were marginalized or removed, it’s another sign you don’t forecast, you promote.

Real forecasting uses data, the good and the bad, to determine the most accurate prediction of future revenue. It’s that simple.

If some forecasts are deemed OK and others aren’t, reality is quickly being flushed from the process. When that happens just ask the powers that be, what number they want to see and give it them.

It will save everyone a lot of time, time your going to need to figure out how you can make that completely unrealistic forecast.

There is no such thing as a good forecast or a bad forecast . . . just an accurate forecast.

The Sales Forecast, An “Informed Guess” (customerthink.com)
Sales Forecast Accuracy – The Results Are In (and it’s not pretty) (customerthink.com)
How Important is it to Have Accurate Sales Forecasts? (strategic-business-planning.suite101.com)

August 22, 2010 | Filed under: Business Performance,Sales Process | View Comments |

The Next Big Thing

There is always a next big thing. Before it happens, we fight it. Our brains tell us if it doesn’t exist then it’s not real. If it’s such a great idea, it would already would have happened. The next big thing elludes most of us. Our brains just won’t let us see it.

This is the grocery aisle for energy drinks. How many can you count? This aisle didn’t exist in 2001.

Red Bull created a new industry. They were the next big thing. They are now just one of many, because next big things create industries and markets. Industries and markets need the next big thing.

There will be a next big thing, even if our brains tell us there won’t be. Will you see it coming?

August 14, 2010 | Filed under: Business Performance,Entrepreneur | View Comments |

Work to Get Out of Work

It’s usually called busy work and I see it more often than I’d prefer.

Work to get out of work happens when we say, no I’m too busy.

The problem is “busy” is another way of saying, everything else is less important. Usually everything isn’t less important. Being busy is how we get out of the important work. How would it sound if instead we said; “I can’t, email is more important.” or “I can’t, finishing this report is more important.”

It would be harder to get out of the important work if we always had to explain what we are prioritizing.

There is work and then there is important work. The important work should always come first. Too bad this isn’t always the case.

It’s not that we aren’t working, were just not prioritizing the important work and that’s a problem.

August 11, 2010 | Filed under: Business Performance | View Comments |

4 Keys to Proactive Sales Management

I see this far too often. Sales managers and sales leaders reactively manage their people. They reactively manage because they to manage to results. Results are a trailing indicator in sales. If you manage to results your too late.

It’s a common approach in sales. The sales rep misses quota. The manager says that’s not good, don’t miss quota again. The rep misses quota again, the manager puts him on a PIP (performance improvement plan), which in essence lays out goals the rep must meet in the next 30 to 60 days or be fired. In the less agressive scenerios like this, the manager works with the rep to figure out what is wrong but even then it’s still being reactive.

I have always felt this is a bad way to manage and lead sales teams, yet it has staying power and seems to be the course of action for most organziations.

Being reactive does little for anyone. The key is to be proactive. Like most things in life getting ahead of the problems or preventing them entirely is far better than trying to fix them. The key is find the leading indicators of failure.

To find the leading indicators I break down sales management into 4 integrated categories; planning, execution, results and talent.

Failure and poor performance can and will be seen early in any and all of these categories. They are a barometer for failure or success.

If a poor plan is put in place, failure is imminent even if it’s executed well by a talented sales person. – Manage the plan.

If a great plan is in place but is executed poorly by a talented person, failure is just around the corner. – Manage execution.

If the sales person lacks the skill or talent a good plan won’t make a difference. – Manage talent

If it’s a poor plan, executed poorly by someone with out the talent you’re screwed. – Manage all three.

If it’s a great plan, executed brilliantly, by a talented sales rep and the results aren’t there, you’ve messed up somewhere. – See 1, 2, or 3. The problem is there.

Proactive management requires a process that embraces and monitors all the critical elements to sales delivery.

My management process works like this;

1) Everyone on my team builds a yearly plan. They share it with the entire team, peers and all. We cut it up, attack it, challenge it, and rework it until its a solid plan. Plans go through a rigorous evaluation process to ensure they’re sound.

2) I focus on execution. Plans are reviewed every quarter asking the following questions: what did you say you would do, what did you do, what did you learn, what are you going to do next quarter. The process ensures proper execution by evaluating WHAT a rep is doing and HOW they are executing to the plan. This allows problems to be identified early and changes made on the front end.

3) I hire for talent, and coach. The most important aspect of proactive management is talent. I hire for talent and I coach them. I have standing one on one meetings every 6 weeks with all of my direct reports. During these sessions we talk about what they do well, what they need to improve on and what they need to stop doing. These are not performance reviews. They are coaching sessions, designed to help them grow as a sales person and as a leader.

A process that embraces all of these elements is proactive. Problems are seen early and symptoms are separated from root cause.

Getting poor results with proactive management is almost impossible. You see it coming long before the boat sinks. It gives you time to course correct, limit the damage or turn things around.

If your results aren’t there, if the numbers are off, if quota is in jeopardy it’s one of 3 things; a bad plan, poor execution or lack of talent. Quick can you tell me which it is? How do you know?

Guest Post: Why Are 50% of Sales Reps Missing Their Sales Quota? (thecustomercollective.com)
Hoover’s Webinar to Reveal Top Tips for Hiring and Managing Sales Teams – “Prospecting and Territory Development Best Practices” (eon.businesswire.com)
CEO Guide to Sales Management – Introduction (frontofficebox.com)

August 10, 2010 | Filed under: Business Performance,Career Development,Hiring/Firing,Leadership,Personal Development | View Comments |

Old School vs New School

There is clearly a new and old school culture clash brewing in the world of business. The clash being between the formal and the informal.

Check out this example between how Verizon and Google responded to a NY Times article suggestion the two companies were talking to end net neutrality.

Verizon’s response on their Public Policy Blog:

The NYT article regarding conversations between Google and Verizon is mistaken. It fundamentally misunderstands our purpose. As we said in our earlier FCC filing, our goal is an Internet policy framework that ensures openness and accountability, and incorporates specific FCC authority, while maintaining investment and innovation. To suggest this is a business arrangement between our companies is entirely incorrect.

Google’s response on Twitter:

@NYTimes is wrong. We’ve not had any convos with VZN about paying for carriage of our traffic. We remain committed to an open Internet.

Verizon’s response is more of the same old, white washed, formal, makes sure it ruffles no feathers and offends no one. Verizon says “mistaken” as opposed to Google who says NY Times is “wrong.” Google used a tweet, said what they felt, used abbreviations and made it conversational. Verizon was anything but. It feels as if 10 different people approved it, before it was sent out. The statement was structured, formal and stiff.

I think we are seeing a shift in the role of formality in business; in everything from dress, to communication, to hierarchy. The old schools is holding on to formality as a course of doing business. The new school is doing away with it in order to reduce friction and accelerate progress.

If this communication were to be measured, how much do you think each of these cost in time, person effort, and money? I suspect Verizon’s cost 25 times more than Googles. Why?

What do you think? Are you old school or new school?

Google, Verizon Deny NYT Story On Their Undermining Of Net Neutrality (techcrunch.com)

August 6, 2010 | Filed under: Business Performance,What I Think! | View Comments |

Results Needed, Immediately

Immediate results don’t happen. If they do, they are rarely meaningful. It takes time to create meaningful results. Yet, in times of crisis the cry for immediate results comes fast and furious. The push happens. The threats rise. The rallying cry is sounded. By carrot or stick the expectation of immediate results is created.

The problem is, results aren’t immediate. Results are the sum of effort, decisions, failure, commitment, focus, drive, partnerships, discussions, analysis, and most important time.

Looking for immediate results will get you results, but meaningful results, that’s a different story.

July 7, 2010 | Filed under: Business Performance,Leadership | View Comments |

Coachability

Everyone has their own philosophy on hiring and what they determine to be the key skills in an employee. The one that is most important to me is coachability.

Coachability is how flexible someone is. It’s how well they respond to criticism, critique, new ways of doing things, and fresh ideas. Coachability is a persons ability to grow through others leadership, direction, and insight.

Only 50% of sales people met their quota in 2009. (source: Bridge Group’s 2010 inside sales metrics survey) I have to believe that many non sales people also missed their objectives and goals in 09. I’m sure some of this can be attributed to the economy, but I also believe much of it is a leadership and people issue.

The only way to turn around an underperforming company, team or organization is through the people. We only have two options when it comes to people; get new ones, or bring up the existing. I prefer the second and that’s why I put so much emphasis on finding and hiring coachable people.

Coachable people embrace new ideas. They are open and actively seek out criticism and critique. They are often focused on personal development and growth. Coachable people tend to be more secure. They are less attached to the status-quo and see change as necessary and good.

Relationships with coachable employees are different too. They are rooted in discussion, assessment and evaluation. Relationships with coachable people are less hierarchical in nature. I’ve found them to look and feel more like partners rather than supervisor, subordinate. I’ve found when managing less coachable empolyees the conversations tend to be more combative, data driven, and defensive, as less coachable employees are very sensitive to criticism, and change. They are often insecure and look to defend their position rather than explore new opportunities for growth. Less coachable relationships are more hierarchical. They are more top down. I find it hard to work with less coachable people.

Coachabilty is a softskill. It’s hard to measure. But I know it when I see it. Coachability is at the core of change. It is at the core of growth. It is at the core of personal interaction. It is critical to development. Coachable people bring a flexibility and openness to situations that enhances success. I like to look at it like being a coach for a tennis or golf pro. Imagine how difficult it would be to get Andre Agassi or Tiger Woods to win if they weren’t coachable. Imagine every time you suggested a change in Tiger’s swing he argued or pushed back. Imagine letting Andre know his performance in the first round of Wimbledon was awful and that he wasn’t playing well, and he’d complain to “HR”.

The coachable get that being pushed, challenged, and coached is the key to their success. They actively seek it out and surround themselves with coaches that don’t let them get complacent. I believe the same thing holds true in the business world.

There are a lot of brilliant, talented, experienced, people out there. People with amazing skills who can get things done. But for me, more important than experience, talent, and brilliance is their ability to adapt and grow and the coachable are far more capable of growing and adapting.

Business changes faster than it ever did. Companies are no longer entitled to a 100 year span on top. Microsoft, less than 30 years old is now loosing to Apple. Google, only 10 years old is being challenged by Facebook. Adaptability is the new success trait. To be adaptable you have to be flexible and a team of coachable engineers, sales people, product people, marketers and more is at the core of that flexibility.

For me, hiring coachable people has been the difference between success and failure. What do you think?

July 7, 2010 | Filed under: Business Performance,Hiring/Firing,Leadership | View Comments |

The Check is NOT in the Mail

Chase Bank just updated their new iPone app and it’s exactly the kind of customer experience all companies should strive for.

The new Chase app does a few cool things. It allows you to transfer money, pay bills, send money to anyone with just their email address, pay credit cards and more all from your iPhone. It’s a pretty slick app. But the killer new feature in this app is the ability to deposit a check right from the phone.

I used it today. I deposited a $10 check and a $150 check. It was a fairly easy process. I logged into the app, typed in the amount of the checks, took a picture of the front of the back and submitted. That was it. About two minutes later I had an email confirmation that the deposit was made.

I am a Chase customer and I love this type of customer experience. In an industry many consider commoditized, Chase is creating ways to differentiate themselves from their competitors.

It’s this type of creativity that drives differentiation. More companies need to do this. I would have love to been sitting in the meeting or around the table when the Chase employe with the idea said, “What if we allow people to deposit checks from their phone?” How would your company respond to such a creative suggestion that challenges every notion of what your industry considers secure? Such outside of the box suggestions are too often met with –”yeah, great idea but.” The but is then followed with every reason why it can’t be done.

Way to go Chase for getting rid of the “yeah buts”.

This app is game changing. Right now you can only deposit a check up to a thousand dollars and no more than three thousand a week. I suspect as they work out the kinks the limits will go up and I will have one less reason to go to a branch . . . and one more reason to stay with Chase.

Chase iPhone app lets you deposit checks by taking pictures (intomobile.com)
Chase Bank Customers Can Deposit Checks Using an iPhone App [IPhone Apps] (gizmodo.com)

July 3, 2010 | Filed under: Business Performance,Customer Service | View Comments |

I’d Fire a CEO Who Over Saw a Sh*tty Culture

Yesterday’s post got me thinking a bit more about culture. So, I figured I’d do another post on it.

Culture comes from the top. I’ve been in companies with phenomenal cultures where I bled the company red and I’ve worked at companies where the culture made me want to vomit.

I’ve been personally successful in developing cultures. I’ve built a few cultures where we were the envy of the organization. To this day we still talk about “the good old days at . . . ” I’ve also made some mistakes and failed at building cultures.

I am passionate about culture and understand what it takes to build them.

It’s simple: LEADERSHIP

Culture starts at the top. I’ve worked with leaders who felt creating and managing a culture was not their job, but the employees. Needless to say none of these leaders are still in their positions — and they shouldn’t be.

If companies with strong cultures outperform companies with shitty cultures then it seems to reason a good culture is key.

It starts with the CEO. He or she owns the development and reinforcement of the culture. If they don’t have the leadership to implement and create a winning culture, they are not fit for the job. Unfortunately, few board of directors hire, fire, have metrics, or implement processes to measure a CEO on their ability to create a winning culture.

I am aware of only one instance where culture was a key metric measured by the board; where the CEO was held accountable for the environment he created for customers and the employees.

In a business world that increasingly looks like the professional sports, with winners and losers changing places every day, culture is increasingly becoming a critical element to winning.

Apple and Google are great examples of where culture is at the heart of success.

A CEO, like a coach, is responsible for creating a winning environment. For me it’s not enough to deliver the numbers by themselves. Numbers with a shitty culture are a house of cards. As soon things get difficult or the river changes direction, the company will be unable to respond.

A CEO’s job is to drive growth and improve shareholder value. I submit this can not be done over the long haul with a shitty culture.

Culture is too important to the success of companies. Companies with good cultures make better products, have happier employees, and create better shareholder value.
I think more boards should add a culture component to their key metrics. I think they should add “culture development and execution” as part of the hiring process. I think they should create metrics to measure culture. I think they should hold the CEO and the executive team accountable for the culture and in the end if a CEO can’t oversee a good culture. The board should fire them . . . I would.