How To Make Annual Sales Forecasts Come True: Seven Lessons
November 1, 2004

I am often amused at the predictions of each week's football game scores that appear in the local newspaper, or in the office pools, local delis or other venues where personalities attempt to become "sports" experts. Inevitably, surprising things happen to these well-thought out predictions. Half the time, it seems, they turn out to be wrong! 

Every year, sales managers across the country develop annual sales projections for the coming year. This means that the sales manager must derive realistic sales and gross margin figures with his/her sales representatives. Not an easy task. It's hard to predict the future, as we all know. 

Unfortunately, like those unhappy bettors who lose money because they believed in the football predictions, companies who plan based upon questionable sales forecasts likely "pay the price."

This doesn't mean that sales organizations shouldn't plan for the future. Rather, it means that sales managers need to be diligent in creating effective sales planning procedures for their teams, and vigilant in staying close to the street, and most of all, the customer, as the year unfolds. Projections don't simply happen because we have planned for them! Like the football "experts", sales managers can be sure of one thing. Once the year begins, things will be different than we anticipated. 

Let's assume that you are a sales manager with ten sales representatives reporting to you. Each rep has @100 assigned accounts, and of these 100 assigned accounts, about 20 are generating at least 80% of the rep's profits. As an astute manager, you have the rep create his annual plan using extensive analysis of his top accounts, determined by those generating to first 80% of his gross margin revenue and profits. Then, you review market conditions, as best you can, and apply the upcoming year's business strategies into the mix as you and your rep arrive at next year's projections. Factoring in a "fudge" factor for wind conditions, the greenhouse effect, who wins the senate race in Montana, you arrive at an annual projection for each rep, that when totaled with every other sales rep's projections, creates the Annual Sales Forecast. 

This took a lot of work, didn't it? Companies are relying upon the Annual Sales Forecast to create meaningful budgets, allowing for operating and capital expenses to be allocated, and enabling the CEO to feel comfortable about a "ROI" number that the shareholders will look forward to earning.

As a former Sales Manager, I know that the real work begins after the Annual Sales Forecast is submitted and approved. So, what can you do as a sales manager, or sales representative, to meet or exceed your Forecast? Here are seven lessons that may help:

Lesson One: The Annual Sales Forecast is not going to come true because we planned well. It will be met or exceeded because we stayed close to the customers included in the Forecast on a consistent basis throughout the year.

Lesson Two: The more you question your customer about their coming year's objectives, in advance of developing your Forecast, the better you as a supplier will be able to match up the products or services you provide that provide your customer the solutions that will help them meet their objectives.

Lesson Three: The more you are willing to view your Forecast as a "strategic" view of each sales territory, but not as a "tactical" working model, the better your chance of meeting or exceeding your Forecast.

Lesson Four: The "tactical" working model is stimulated by the "strategic" Forecast. Meaning, each account must be worked with as a "customer of one." The rep must interpret the Forecast number into day to day "blocking and tackling." Every call on the account must be built on an "advance" that will enable the rep to ultimately provide the customer solutions that best satisfy the customer's needs. This comes out of "customer of one" call planning, investigation and questioning, and vigilant follow-up on agreed upon commitments.

Lesson Five: The sales manager must be willing to help his rep stay focused on those accounts that comprise the rep's Forecast. The sales manager must have a system to keep the rep's work focused on the meaningful activities that will enable him to meet or exceed his forecast. The sales manager must help the rep by enabling him to improve his call planning, and the sales manager must improve his own skills as a coach as he observes and provides feedback on his rep's calls and activities.

Lesson Six: The sales manager must allow for flexibility and change, staying focused on competitive and market climate changes throughout the year, and on identifying new product and service opportunities that can better support the company's reason for being.

Lesson Seven: The sales manager must discipline himself and his reps to stay focused, and not allow excuses and sexier things that come along throughout the year to be excuses for not getting the tactical work done on time.

In summary, the above lessons are ideas that I believe make the Annual Sales Forecast less of an exercise in whimsical predictions, like the weekly football predictions we see on the sport columns, and more of a process that yields numbers that companies may "bank" upon.

Like winning in football, Annual Sales Forecasts are achieved through good planning, and then by blocking and tackling, throughout the year. As sales managers, we must have our team build our projections from the ground up, and then stay close to the ground throughout the year. As sales representatives, we need to do the work necessary to stay on task, and make our forecasts "come true."