Tag Archives: spreadsheet forcasting

A Well-Rounded Sales Forecast

Friday, November 6th, 2009

Hybrid or SUV?

Imagine being a fly on the wall in the Chrysler board room in 2001. Margins were jumping as sales of SUVs boomed; times were good. If management used a statistical forecast based on the previous years’ shipments to predict the future, they would be told one thing:  Build more SUVs!

We all know the story: 5 years later (about the time it takes to get a car from design to market), Toyota Priuses were selling like hot cakes and Chrysler was heading toward bankruptcy. Clearly, running your business on a statistical forecast could cause you to miss future trends.

It would be equivalent of driving by looking in the rear view mirror.

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Income Shouldn’t Soften the Blow of a Missed Forecast

Wednesday, October 14th, 2009

“Dear Stockholder: We missed our revenue forecast, but it is okay because we made more income. Please don’t be mad.” Is this really an acceptable position for companies to take? Why do companies miss their own revenue forecasts?

In a recent article in the Wall Street Journal, Pepsi Bottling Group Inc. announced an increase in profits, despite missing its forecast.

Over my career, I have created many revenue forecasts including when I worked at Western Digital and WebEx Communications. The last thing I would ever do is say that forecasts can’t be wrong.

But, are companies using the best tools and practices available to reduce the risk of a bad forecast? Most companies have not kept up with the changes in technology and still use Microsoft Excel to build complex volume, price and mix models based on complicated assumptions and variables to estimate a range of outcomes. Unfortunately, these models usually leave out the most important contributor to the amount of revenue to be generated — the “sales force” — and are usually out of date as soon as they are created.

Now, don’t get me wrong, it isn’t that businesspeople aren’t smart enough to realize that the sales team is extremely valuable due to their proximity to the ultimate customer. The problem is that the back end of the business doesn’t have a tool that gives them real-time visibility into customer demand.

That was until Right90 came up with an on-demand application that takes the input of each salesperson, by customer, by product, by geography and tracks the changes in volume, price and mix in real-time.

Imagine the potential savings: reduced inventory and obsolescence, improved on-time delivery and in-full delivery, reduced stock-outs and premium freight just to name a few.

Core Tenets of a Great Sales Forecasting Solution: Adoption

Thursday, October 1st, 2009

Systems only work when people use them. It doesn’t matter whether your solution is über-secure, uses the latest technology or costs a significant amount of money. If nobody uses the system, then the effort was a waste.

One of the biggest issues with collecting the sales forecasts is getting sales reps to forecast. Let’s face it — sales reps don’t like forecasting and will avoid anything that takes time away from selling. So, how is it possible to get them to adopt anything?

Option 1: Coersion

Sound familiar? Sure, you might be able to force users to enter data into the system. But have you ever seen someone do a really good job when his or her arm was being twisted? Not to mention, this method requires constant reinforcement to change old habits. If you’re lucky, you might get something that you could call a “forecast” But it’s probably not high quality to begin with, which doesn’t leave you with much to work with.

Option 2: Prayer

I heard a rumor that this has worked in the past. Once. Unfortunately, you’re still the one on the hook for making the system work.

Option 3: Tailor-made

A minute saved is a minute selling. What do sales reps care most about? Closing deals and making their numbers. Forecasting is necessary, but the less painful it is, the better. If you want them to forecast, make the process as simple and fast as possible. Eliminate redundant data entry tasks like typing in the same number in two different places and help save your reps time.

If you’re getting good data from the field, be sure to give the team something back as well. Help them run its business better. Use the field’s data to show it where the reps can improve. Uncover opportunities, patterns and trends with facts from their forecast. No matter what, they still won’t like the doing it, but if the system is easy to use and helps them sell more, you’ll have achieved a tolerable medium.

Spreadsheet and Home Grown Sales Forecasting: It’s time to move on

Monday, August 31st, 2009

Your organization has become increasingly sales and marketing focused; with the rise of the VP of Sales to much more strategic role. But, your company is still using spreadsheets for sales forecasting!

Does it bother you that such a strategic process is being run with stone-age technology? It should. The bad news: You are missing significant value and risk being overtaken by your competitors. The good news: Misery loves company. According to Ventana Research, 49% of companies are still in using archaic (Excel or home-grown solutions) methods to automate sales forecasting.

So, how do you explain to the now strategic VP of Sales why your company should move off spreadsheets or some other home-grown solution and give you weekends with your family?

Spreadsheets:

  1. Spreadsheet hell. When is the last time you were in a forecast meeting and you spend more time arguing who had the latest version of the “final final plan.” One of our customers actually had NINE different versions of the Annual Operating Forecast. The CEO and CFO had different versions!
  2. Lack of accountability. If everything is in spreadsheets, it is virtually impossible to measure forecast accuracy or hold sales reps accountable to their forecast. They can always argue “you had the wrong version—here is the correct one—and my forecast was correct!”
  3. Garbage in = Garbage out. Many companies use JIT or Lean Concepts for SCM and Demand Planning Applications, yet they use spreadsheets for forecasting. It seems crazy that the back-end of the cash-to-cash process is highly automated like a finely tuned machine, but the front-end is being run by an archaic process using spreadsheets. If you expect to get a great production plan based on your wonderful SCM and Demand planning application, you are mistaken; those applications take Sales Forecasts as a primary input. If the Sales Forecast is no good, then the Demand Plan will no good.

Home-grown

  1. Hit by a Bus Syndrome. One of our customers had a wonderful home-grown forecasting solution. One smart IT person built and maintained it. He went on a two week vacation, the system broke down and the company was literally crippled. Should your company run a strategic business process with a single point of failure?
  2. It’s in the IT Queue. When is the last time you re-aligned your territories? Or re-arranged your product hierarchy? Can your IT group keep up with your business changes? Typically, not. That means you get in the IT Queue and wait for your home-grown solution to catch up to changing business models. Sales Forecasting (and the VP of Sales) can’t wait for the IT queue.

Sales and marketing differentiated businesses make crucial decisions based on the sales forecast; they need to grow up from spreadsheets or they will lose to competition who prices more competitively and has faster product availability. How do best-in-class companies price competitively and have faster product availability? They are best-in-class forecasters and they don’t use spreadsheets.