How accurate are your sales forecasts? I met with a CEO last week who told me that when he cuts whatever his sales team tells him in half he usually comes out about right. I asked if he applied the same rule to other areas of his company and he explained that he didn’t have to, the other areas of his company had better forecasts. I wanted to press on with a follow up question to find out why he thought it was ok to accept mediocrity from the sales team but not everyone else. But it was at a holiday networking event and I decided it would be better to follow up another time.
How accurate are your sales forecasts? The pipeline report from your VP of Sales should be an accurate projection of future revenue. But in our experience it’s generally not. It’s usually nothing more than a wild estimation of hopes, dreams and wishful thinking. Opportunities that died months ago linger on in the pipeline even when the sales person cannot explain the decision process and the prospect will not return calls. Revenue potential is often just a guess because your sales people were afraid to ask the tough money questions they need to explore to get a real number in the report. Margins get squeezed because your sales manager allows her team to lead with price rather than asking questions that drive the conversation toward a discussion about value.
The only consolation is the chances are pretty good your competitors are working with forecasts that are just as inaccurate as the ones you review. Unless of course they’re working with someone like us. What would happen to your business if you started holding your Vice President of Sales to a higher standard and demanded the same level of accuracy you expect from your Chief Financial Officer?