Business Planning: Questions about Forecasting
Do you have plans for your business? Do they include forecasting for sales or closing current prospects? This article will provide you information about business planning and ask you a series of questions about forecasting. Whether you're an executive, a manager or a team leader, the following information will be beneficial to you.
Let's assume that your forecast consists of sales into existing and new accounts, sales you hope you will make from beating the bushes for suspects and sales already in process to some extent or other. In this strategy, we will look at new business sales; later, we'll come back to reality, checking sales that have already made it from your suspect to your prospect list. Let's begin a four-question reality check of your new business forecast.
Question 1: What Are Your Projected Sales? Look at the total figure you are projecting in sales from these yet-to-be customers. Now, consider what mix of products/services you project you'll sell into each of these accounts, and for what margin. Be conservative - don't project every new sale at the levels of the largest new sale you've ever made. Once you have worked this out, divide the value of your average new sale into your total target to get the number of new customers you're going to need to come in to finish on forecast.
Great - now you have a clear picture of your targets for new customers, product mix and revenue/margin figures. Hold those thoughts. Before asking Question 2, look at your sales cycle.
For the purpose of this discussion, assume you get your business from quotations or proposals. These quotations/proposals come about as a result of one or a series of one-on-one meetings and/or presentations. Your one-on-ones are a result of initial appointments from lead-generation activity, and your primary source of lead generation is either cold or warm calls. If your deal cycle is different, then simply apply the thinking we're going to explore to the milestones that characterize your typical sale. From Question 1 you know the number of new deals you need to close to hit the new business figure for this year. What are you doing about closing them? If you're not investing in enough focused activity, then, regardless of how desirable or possible the result you've projected, you just won't hit your numbers. But how can you tell if you're involved in enough of the right activity to assure your success? That's the focus of Question 2.
Question 2: What's Your Proposal Hit Rate? Before you can determine the likely effectiveness of your activity plan, you need to do some research. Look into past experience of your typical sales cycle to fine-tune your forecast. The first thing you'll need to estimate is how many proposals (based on your experience) you'll have to produce to hit the number of deals you've forecast. If you don't have useful previous performance figures, then estimate conservatively. Err on the side of more rather than fewer proposals. Let's say you get a 1-in-3 hit rate with your proposals. Then, to close 10 deals, you'll need requests for 30 proposals.
Question 3: How Many Meetings to Get to Proposal? These proposals resulted from one or a series of meetings/presentations and selling activity. What does your previous performance tell you about the number of prospects you need to engage in one or a series of one-on-ones to get one prospect to the proposal stage? How many brand-new suspects do you have to meet before you find one that has an identifiable need for what you offer, the budget, wherewithal and willingness to get a proposal from you? Again, conservative realism is key. If 1 of 2 contacts you meet results in a request for proposal, then your target of 30 proposals demands that you meet at least 60 new people.
Question 4: How Many Calls to Get a Meeting? We assumed that you won these meetings from targeted cold or warm calls to suspects identified from your research. How many calls will you need to make? Let's say you have a 1-in-4 hit rate converting calls to appointments. To get 60 appointments, you'll need to speak with 240 new prospects. Finally, let's say it takes an average of four calls to get each of your target suspects on the telephone after you've mailed them. You have 960 calls to make this year!
In our example, your modest target of 10 new deals demands that you
- make 960 calls to speak with 240 new people!
- to get meetings with 60!
- to get to the proposal stage with 30 to close 10.
When you work out your own forecast, it will uncover the reality of the work before you. If this were your forecast, assuming an even spread of activity over a 250-day business year, you'd need to make about 20 calls to new people per week; meet a new suspect very four days; dispatch a proposal about every eight business days; and close a deal every five weeks. These hard measures are the only objective means to determine the reality of your forecast. Given where you are right now, how are you doing? Are you hitting your call, meeting, proposal and close targets so far this year? Be honest - if you are not meeting those targets, then it's back to the drawing board.
An in-depth look at your forecast will sometimes tell you that you simply don't have the time or resources to undertake the necessary activity. If the activity level required to hit your numbers is simply impossible, given other commitments like existing account selling, implementation, servicing or any other responsibilities you might have, then you cannot hit your forecast numbers without making changes. Do what needs to be done to hit the key milestones, and do it now!
If it's obvious you won't be able to hit your originally forecast numbers, do something about any mis-projection now. You will never have more of your year left than you do today! The message is simple. Take a hard look at your forecast for new business, and reduce it using a set of SMART (Specific, Measurable, Achievable, Realistic, Timebound) activity/result milestones that allow you to determine whether you are on or off target. Make your forecast a living tool that ensures your success by comparing your actual progress against each of these milestones on a daily, weekly, monthly and quarterly basis, and adjust your course if you start to slide off target. Success or failure in sales does not happen by accident. The future is entirely in your hands.
About the AuthorJim Sirbasku is co-founder and CEO of Profiles International, a leading provider of human resource management solutions and employment assessments for businesses worldwide. For more information about analyzing your workforce and planning your business, visit our website.
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