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Forecasting: Busting the Crystal Ball

22 Mar, 2006 By: Howard Meltzer imageSource

Forecasting: Busting the Crystal Ball

have a better chance of striking it rich at the blackjack tables in Vegas than
forecasting your monthly sales. It is one of those aggravating issues faced by
virtually every dealer in the industry from the day they enter the business, yet
there does not seem to be an effective solution.

Some sales reps are more than willing to sign their names in blood that certain
deals will be closed before the end of the month. That, however, rarely happens.
Someone else sneaks in and gets the deals or there is a credit problem that
can’t be resolved until next month. Whatever the excuse, and there are
thousands, the deals never seem to materialize according to the forecast.

The fallout from bad forecasting can be a major hit to any dealership. For
example, if a dealer orders equipment based on the sales forecast chances are
very high that both the quantities and model mix will not only be wrong, but
result in products sitting in the warehouse. The product then has to be
liquidated via a heavy discount just to get it out of the house.

To mitigate the problem, we have seen sales managers actually cut the total
forecasts by as much as 50-75 percent. These kinds of variables represent a
serious lack of control and are dangerous to the business. But even if there is
no foolproof way to solve the problem, it can be alleviated.

Know the Needs

Sales reps are optimists. They habitually base most of their forecasting on gut
feel rather than on hard and objective fact. This can be a killer. They do not
know how to ask themselves one simple question, “Have we met all of the
prospects’ buying criteria?”

A sales rep has to first run the prospect through a needs analysis and follow
the steps necessary to meet those defined needs, including an in-house demo and

If it is has been agreed that all of the requirements have been satisfied and
there is a basis for an agreement, then the prospect is legitimate and should be
forecast accordingly. If there are any objections and additional needs must be
met before the deal can be finalized, it should not be included in a forecast.

This technique is equally useful and important for sales managers. When
reviewing sales reps’ forecasts, you will find it helpful to ask a few simple

• What are your prospects’ buying criteria?

• What have we done to meet those criteria?

• Have we reached agreement with these prospects?

• Do your prospects have decision making authority?

• What is the time frame to closing for each prospect?

The bottom line is if you get clear and positive answers to each of those
questions then there is a solid 80 percent probability that you have a deal and
the odds of a tighter forecast number will increase dramatically.

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