Sales is more than just a numbers game...

What’s the sales (forecast) algorithm for your business?

While reading a recent issue of Popular Science, I was intrigued by the article “The Santa Cruz Experiment: Can a City's Crime Be Predicted and Prevented?” (October, 2011). It’s fascinating and appears to hold great potential. However, what triggered a related thought to the challenge of accurate sales forecasting (i.e., your sales algorithm) was this: “One of the most common criticisms of predictive policing is that it will not tell police officers anything they don’t know already.”

When I talk to organizations about instituting a disciplined sales approach, and the need for good data gathering, resistance to software and information technology reflects a similar sentiment. Salespeople would rather operate on their own intuition than trust a computer model (or algorithm) to help them predict the close of a sale. 

As the article points out, “An algorithm is a progressive series of calculations used to process and analyze large sets of data.” Said another way, it’s not foolproof in predicting an exact outcome; it merely points to the likelihood of something to occur based on past behavior (or available data). In my mind, that’s the Catch-22 in sales forecasts; if you can’t get people to enter the data, you won’t be able to get the algorithm to reflect a reasonable prediction.

Since I believe most customers have a defined purchase process, and most organizations can likely map a common sales cycle, I struggle to understand why it seems so difficult to build a more predictable forecast model. Rather than ‘gut probability’, often reflected as a percentage of likeliness to close (get the order), it seems to me that you should be able to weight factors against common data points (e.g., time lapse, stage of the sales cycle, past performance/seniority of the salesperson, etc.) and develop a more accurate sales forecast prediction.

My recent discussions with sales professionals, managers, and business owners and executives on this topic have given rise to the notion that the unpredictability that can’t be factored in is “people”. That applies to both sides of the sales equation; on the customer side and the vendor/supplier side. However, the Santa Cruz Experiment leads me to believe that even in high-touch sales situations, where long term relationships help drive business, some predictability could be factored in.

Read the article from Popular Science and let’s get some discussion going on this topic. Also, think in terms of those companies that don’t have the luxury of large software and information technology budgets. Can the average company develop and implement a predictive sales model?

S.M.A.R.T. goals may be a simple litmus test for Sales Forecasts

As a volunteer with a nonprofit, I have been helping program participants define and carry-out “S.M.A.R.T. goals”; individually, the letters stand for: “Specific, Measurable, Attainable (or achievable), Realistic and Timely”. To help you understand the concept, here is a link to a simple write-up from the Office of Multicultural Affairs, University of Kansas, which outlines the process for students.

When it comes to setting these goals, I find many people struggle with defining the goal in a SMART manner; especially when there are so many variables in their life. The variables may include income, housing, job, education, etc. I can appreciate the challenge; it’s what I often refer to as, “How do you eat an elephant? One bite at a time!”

And so it seems with sales forecasts. Salespeople often struggle, and are regularly challenged by management, to put a strong definition around a particular sale, or quantity of business. I have written a number of blog posts, articles, and even recorded Podcasts on the topic of sales forecasting. It’s the most searched (for) string that directs traffic to our Website; some of traffic ends up at this blog, too (we have a category named “Sales Forecasts”).

That alone leads me to believe that there must be a less elaborate way to forecasting sales. You don’t need some fancy CRM system that spits out charts and sales funnels to have a disciplined approach. It’s as simple as knowing where you are going and how you are going to get there. You can do that on paper – 3 x 5 index cards will do.

But, for those running a business, nothing short of a disciplined process is in order. You have seen it before from me, “It takes a disciplined process to produce an accelerated sales cycle.” That said, why wouldn’t a SMART goal process work for sales forecasting?

Enter a round of laughter on my part. When I began to write this post, I quickly realized that the S.M. part was easy, but the A.R.T. is not. The chuckling came as I reflected on how many times people have told me there is an ‘art’ to selling; it’s not a science. Also, I am overdue on a book review for “Strengths Based Selling” (Tony Rutigliano and Brian Brim) that talks about how understanding your “…innate talents and strengths and use them to sell more effectively.” are the qualities of the most successful reps.

That may be so for some, but in my management of sales teams over the years, it wasn’t until I got everyone on the same page that I could better forecast our numbers. If I could get the team to have “clearly-defined, written-down goals” in the form of a sales forecast, then we could work together on specific pieces of business, in a timely manner (the “T” in SMART).

Once that was accomplished, it was a matter of fending off the merry-go-round discussions of what was realistic business to be had and whether it was attainable based on what we had to offer (i.e., competition, product, services, price, etc.). Therein lies the stalemate in my mind; management and sales holding to an undefined position when it comes to attainable and realistic business.

Laughter subsiding - I can already see the notes coming my way about how selling is an ‘art’ and not a ‘science’ – I believe there is a way to overcome the obstacle. By putting in place a clear definition of what constitutes good business (i.e., great product fit, good pricing, excellent service), it’s only a matter of whether you’re the right vendor and can deliver the order on time (by the client’s deadline, or your own to make the forecast date).

Opening this up to the floor, so to speak, weigh-in with a comment on what you think about SMART goals when it comes to sales forecasts.

Better Forecast Probability from a defined Sales Cycle

By NvestNtech’s Biz Dev Team

The most sought-after item across our blog and Web site is some form of related content to Sales Forecasting. Common terms are used to make reference to finding a better way to more accurately project when business will close. Often, “probability” is the root cause of missed forecasts; if you can refine the probability estimate for a sale, you are likely to have a better, more accurate sales forecast. Improving probability can be as simple as knowing your sales cycle.

To take the art out of forecasting and add a degree of science to the forecast effort, take some time to develop ten steps of a typical sales cycle. The steps are milestones that someone can clearly see as an indication of getting closer to a sale. These milestones can take the form of a fully developed list of contacts, identification of competitors, a product presentation or demo, and as you near the close of business, a fully qualified price proposal.

To each one of these steps, assign a 10% probability of close; the ten steps will become 100%, with the last step being order entry. Each step is more than a brief word or two.  You will need to describe the step in some detail, e.g., 10% - Makes use of a similar product or service,  20% - Demonstrates a well-defined use or need for an alternative vendor or product, 30% - Has determined there is value or is willing to consider a purchase/sale outside their own current vendor or products in use, and so on.

Keep refining the steps in the sales cycle so that every sale takes the same path. Each step should build on the previous step in an orderly progression. Although the time between steps may vary based on the salesperson and customer, don’t let salespeople (or their managers) ‘leapfrog’ the milestones. Doing so only defeats the purpose of a more disciplined approach to quality sales forecasting.

Putting this discipline in place, you can begin managing sales efforts by getting from one step to the next. Looking at it another way, to move from 40% probability to 50%, you need to overcome any barrier that is holding you back from getting to the next milestone.  Overcome the barrier and your probability will go up 10%. This is a more tactical approach to selling and one that is more easily managed by the salesperson, and sales management.

This more focused approach is why we say, “It takes a disciplined process to produce an accelerated sales cycle.”

This is a reprint from the March, 2010 issue of the NvestNtech monthly eNewsletter. For a complete copy of this issue, along with additional articles, please click here.

Podcast: How many sales calls should I make each day?

You are uncertain with how to determine the number of sales calls or customer visits you should make in any given business day. Depending on the sales demands of your product or service, the number of calls may vary. Each business or industry is unique and often selling a service can be more time consuming than selling a product. In this episode of the One Goal - Revenue Generation ® series, Peter Kusterer of NvestNtech offers a simple and straightforward way to set a reasonable number of sales calls, across a specified account classification. Download this episode - “How many sales calls should I make each day?”

Offer your comments, questions, or initiate general discussion with other listeners of the One Goal - Revenue Generation ® Podcast series. Use this LinkedIn Group to discuss your own personal selling situations as they might relate to an individual podcast episode, or in a broader sense of the profession of Sales.

Click on this link for the Podcast directory that includes the One Goal - Revenue Generation ® series, as well as additional Podcast episodes and related topics. Our podcasts are featured on iTunes, Odeo, and Podcast Alley.

Podcast: Quota, Forecast and Budget; an easy explanation

You hear the words Quota and Forecast used interchangeably. Are they the same thing? What about Budget; is this applicable to Sales, too? In the simplest form, Forecast is what is thought to be possible, Quota is what needs to occur, and Budget is what it takes to keep the lights on in the business. In this episode of the One Goal - Revenue Generation ® series, Peter Kusterer of NvestNtech explains, in an uncomplicated way, how each one of these important sales measures should stand on their own. Download this episode - “Quota, Forecast and Budget; an easy explanation.”

Offer your comments, questions, or initiate general discussion with other listeners of the One Goal - Revenue Generation ® Podcast series. Use this LinkedIn Group to discuss your own personal selling situations as they might relate to an individual podcast episode, or in a broader sense of the profession of Sales.

Click on this link for the Podcast directory that includes the One Goal - Revenue Generation ® series, as well as additional Podcast episodes and related topics. Our podcasts are featured on iTunes, Odeo, and Podcast Alley.

Podcast: The introduction to Disc One - Manage the Sales Cycle

The One Goal - Revenue Generation ® series is grouped into discs and tracks. Each Podcast is a track, and the discs are arranged much like a chapter in a book. As you download each Podcast, you will find additional information embedded in the file that will help you navigate across the discs and tracks in the One Goal - Revenue Generation ® series.

Disc One - Manage the Sales Cycle. This disc includes those topics on managing the sales cycle and following a disciplined process to secure an order. In this episode of the One Goal - Revenue Generation ® series, Peter Kusterer of NvestNtech introduces Disc One - Manage the Sales Cycle. Download this episode - “The introduction to Disc One - Manage the Sales Cycle.”

Offer your comments, questions, or initiate general discussion with other listeners of the One Goal - Revenue Generation ® Podcast series. Use this LinkedIn Group to discuss your own personal selling situations as they might relate to an individual podcast episode, or in a broader sense of the profession of Sales.

Click on this link for the Podcast directory that includes the One Goal - Revenue Generation ® series, as well as additional Podcast episodes and related topics. Our podcasts are featured on iTunes, Odeo, and Podcast Alley.

Forget about the solution – look at the root cause, first

When I wrote about the Prediction Market Industry, I was quite taken with the notion of what constitutes ‘transparency’. Stumbling upon the definition that transparency (this came from a doctor) is “…being clear about what we know and don't know.” has left a lasting effect on my thinking, especially around sales forecasting.

Early in my career, my career mentor challenged me with the maxim, “Define the problem and the solution will present itself.” What Mike was trying to get me to do was to look for the ‘root cause’; what contributed to this problem in the first place. Of late, I find people are spending a great deal of time putting forth solutions without regard for what caused the problem. Often the solutions become a Band-Aid and offer a short-term fix, or less.

This is not reserved as a business observation, only. I see it carry over to many facets of the work and life balance we all face. What I have been looking for is the ‘why’. I believe some of it may be related to the rapid-fire communication we wallow in day and night. From social media to an overabundance of communication tools and devices, we rarely get a break to just stare out the window and take a break – think about the momentum to ban text messaging while driving.

I caught a feature article on Ken Burns (“famed Americana documentary filmmaker”) in Fortune magazine that noted how much he enjoyed driving and taking-in the scenery; it was good for idea generation, reflection, and thought. I share his desire to avoid the trials and tribulations of air travel. Not only have I rediscovered the joy of driving, I now appreciate Webinars as a more effective tool than many a business trip by plane.

When thinking of problem solving, where do you think we miss the mark? Is it along the lines of my premise that we fail to pursue the root cause? Or, is it bigger than that? What can we do to become better problem solvers in the future?

The unwritten laws of sales management for the newly appointed

While reviewing some resumes recently, for people seeking sales positions, I reflected on my first assignment as a sales manager, and many other assignments since then. In any job, or activity, there are certain unwritten laws or conventions that seem to hold true, but you do not learn them until actually experiencing one, after the fact. During the aforementioned reflection, I came upon six – and there are many more – unwritten laws that will surface shortly after any new appointment to sales management.

Low Sales Numbers – When asked why a candidate’s sales performance numbers appear low - this happens with some salespeople inherited in a new appointment, too – they will respond with the unwelcome “I was wondering about that, too.”

Inverse Performance – The first 90 days sales performance of a newly hired salesperson will be the inverse of prior performance prominently displayed on their resume.

Cold Calls – The amount of time available to make cold calls is directly proportional to the availability of an Internet connection – be that Wi-Fi at the coffee shop, or wireless via a cell phone. The more time available to surf the Internet, the less time there is to make cold calls.

PowerPoint Rangers – When a single page of bullet points in a Microsoft Word document will do, hours (if not days) will be spent creating a PowerPoint presentation with animation and graphics.

CRM vs. XLS – When asked to submit a forecast for the coming month in the company’s CRM (or contact management system), as a substitute, a highly polished, colorful, and multi-tab spreadsheet will arrive as an email attachment.

GPS vs. old school map – The more sophisticated and capable the GPS, or Smartphone-enabled navigation, the salesperson owns, the greater the odds you will arrive late and to the wrong location for your prearranged sales call. The expanded version of this unwritten law includes a complete demonstration – by your sales rep - of the capabilities of the device, before you embark on your trip; you will become an undesirable benefactor of additional lost selling time.

Now it’s your turn. What are some of the unwritten laws you have found to hold true as a sales manager?

CRM - Just another boat anchor on The Good Ship IT?

While reading Peggy Noonan’s “Neither a Hedgehog Nor a Fox” in the weekend edition of The Wall Street Journal, I was taken by the quote attributed to then President Ronald Reagan, "Man has never developed a weapon he didn't eventually use". 

But I couldn’t help but see it in a different light as it relates to software information systems under the label of CRM (Customer Relationship Management). Here’s a competitive weapon that companies have deployed en masse, yet from what I can see, few are really effective and miss the mark when it comes to utilization and efficiency.

Whereas a large multinational company that has thousands of salespeople and solid marketing support may be able to use CRM to near perfection, the average company seems to be stuck in contact management mode; CRM ends up looking like an electronic rolodex that is often out of touch with current events.

Whether I am doing a sales training, or visiting clients and companies that have deployed these systems, I often find that most people struggle to make CRM a useful tool within their organization. Salespeople are frustrated with the complexity to do the simplest of actions and record events, Marketing isn’t quite sure how to employ tracking on a contact by contact basis, and integrated sales and marketing campaigns are nowhere to be found.

The other elusive gain is sales opportunity management and a solid forecasting model. It’s normally a built-in functionality of the system, but seems rarely used to any extent across the sales team. More importantly is the fact that the only sales opportunities in the CRM appear to be the ones that are more than 80% probability, i.e., a sure sale.  Where is the ‘cradle to grave’ tracking of each sales opportunity? How can you judge the pipeline of business, or a true ‘close ratio’ of all sales opportunities?

What’s been your experience? Does your team use your CRM to its full extent, i.e., to its complete design capability? Did you start out with the best of intension and slowly erode to a stalemate?

Sales Review: Secure your Quota, then look to others for Growth

Reviews of the latest sales results may happen on Friday afternoon, or a Monday morning, but the effect is the same; someone is going to be asked why they came up short against their Quota. When it comes to a sales review, many sales managers take on the persona of a Monday morning quarterback.

In this case I like the term Monday morning quarterback because the definition (from Encarta) seems to sum up the event: “somebody who second-guesses: somebody who, after an event or situation has occurred, criticizes what has been done ( informal )”. 

Good sales managers think in terms of a critique of the situation versus what I see more often in the form of criticism of the individual (salesperson). Maybe I am splitting hairs, but I see one as helpful and objective in comparison to the other as negative and picking away at the person. Getting personal serves no useful purpose when evaluating performance against a Quota.

To keep any sales manager off your back, the easy answer to the situation is to meet or exceed Quota. I see Quota, Forecast, Pipeline, and Budget as different things, although they are interrelated. Building Pipeline – which reflects all sales opportunities – helps drive Forecast. Forecast is the defined sales and close dates that will reflect this month’s sales results; Forecast is the portfolio of sales opportunities that have a high probability to close. You need an ample Forecast to achieve Quota (the demands put upon you by the business and for which you are held accountable to close).

Sales will likely come from existing customers and new business. Whereas new business is seen as growth, it’s existing business that lays the foundation to achieve Quota. Businesses need to grow, so Quota will always be stepped-up from year to year.

Although today’s stock market may be a poor choice in comparisons, it can be a lesson in diversification. It’s not unusual to see salespeople chase new business – like a high risk, high return stock – in hopes of meeting or exceeding Quota. What they may forget is that it’s existing business that can help solidify results for the long term. Good customers can provide low to moderate growth in your business and offer a more solid foundation to achieve your numbers.

As you review your current sales results, secure your Quota from existing customers. Make sure they are having their needs met and receive extraordinary service. Look for new sales opportunities within existing accounts; offer new products or services that help them reduce costs or improve productivity. Develop divisions or subsidiaries of existing customers in the same way you may look for new business elsewhere. Once your Quota is secure, then look to others for growth in the form of new business from prospective accounts.