It always amazes me when I hear that a CEO does not want to make a modest investment in improving the quality of their sales forecast.
CEOs and CFOs alike will agree that the business value of an authoritative, timely and actionable sales forecast is huge, ranging all the way from higher margins and more revenue, to happier customers and smoother internal operating efficiency.
A lack of trust
So I asked some CEOs why that when they saw major business value in a better sales forecast, they did not make investing in getting a better one a higher priority. The reason that came back was both surprising and not: most CEOs do not believe that it is possible to get a sales forecast better than what they have today!
Most CEOs consider the sales forecast subjective and unreliable. So rather than trying to systematically remove the subjectivity, they instead marginalize the forecast and rely instead on separate forecasts created by Operations and Finance, usually based on histories of performance. The problem with this approach is that it tends to be backwards looking and it can miss or ignore important signals about where the business is going.
We have worked with customers that have seen dramatic improvements in their business results by making their sales forecasts better. Companies like Sharp and Thomson are figuring out how to take the subjectivity out of their forecasts and are getting a lot of benefit by doing so. We have seen examples of inventory reductions over 20% and margin improvements of over 500 basis points based entirely on an improved sales forecast.
Top 5 objections
Here are my top 5 reasons that CEO’s decide that investing in Sales Forecasting is a lost cause / waste of money:
- Flaky sales guys don’t bother to get their forecasts done well or on time.
- If customers don’t know or won’t tell us what’s happening, what can the rep do?
- Too much uncertainty for anyone to predict an outcome.
- Happy-eared sales people think they can close everything.
- One word: Sandbaggers.
Tags: CEO, forecasting, list