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   Thursday, September 6, 2007

I've been using forecasting models for the best part of twenty years - and still, it is not an exact science! I have great empathy for sales managers, sales directors annd anyone who has to produce a forecast - even finance people (but don't tell them!).

Experience has taught me that most organisations rely on one or two of the most popular forecasting methods already in place. While these methods suffice when it comes to predicting a probable total outcome number, they can completely miss the boat when it comes to identifying which line items will actually close or what to do if an opportunity is not fully developed.

My objective is to help you leverage some Value Selling concepts to zero-in on the actual line item of the forecast and what to do about it if it is underdeveloped.

The Common Route

In the most common forecasting method used by leading B2B sales organisations, each forecast item is assigned a probability of closure (arrived at by the sales person's gut feel or a set of defined - sequential - purchasing milestones) in terms of percentages, 25%, 50%, 75%, 90% and the like. They then multiply the probability by the pound amount to derive the forecasted performance. (This is the one most training companies I've worked for use.)

Often, the management further factors those numbers based on the individual track record of the sales person or manager submitting the forecast - creating a customised forecasting system. Use of this forecasting method demonstrates an organisation's attempt to convince them that a sale will happen.

The problem with the "wishful thinking" forecasting process is that it does not help the sales person or sales manager identify what to do about a forecasted item to improve its actual probability for closure. Furthermore, it assumes that the above steps are independent, when in reality they are interdependent. In other words, it reinforces hope, not action.

Another Method
Another common method involves isolating some percentage of the pipeline and simply factoring it by a set number. For reasons beyond the scope of this short column, 30% is the most common factor used by steady-state organisations in a stable market. For example, if they have £1 million in their "probable" list, they factor it by 30% to end up with a forecasted number of £300 thousand.
Once again, this may accurately predict the total outcome, but not the individual line item outcome. What's more, the factor number can, however, vary according to market conditions, sales skills, market segment issues or maturity of the market among other reasons. This factoring method may be adequate when things are in a steady-state, but can easily surprise a sales executive when there is an unforeseen downtrend in their market, or the economy at large.

A Twist To Traditional Forecasting Methods

I would like to propose a twist to these well-known forecasting methods that approaches the sale from the opposite perspective. Simply put, it is a method of convincing the sales person of why a sale will not occur. The end result is a list of tactics for the sales person to execute in order to improve the forecasting probability for each item, and to more accurately identify which items will actually close.
For example, the forecasted item starts off at 100% and then cumulatively falls from this mark if the sales person has not:

1. Identified and confirmed the business issue that will be addressed for the prospect with the product or service (multiply by 0.9)
2. Confirmed the prospect's view of the people, process or technology problems that need to be resolved (multiply by 0.9)
3. Confirmed the differentiation of their solution with the prospect (multiply by 0.9)
4. Confirmed there is enough Real Value in resolving the problems from the prospect's perspective to commit a purchase (multiply by 0.9)
5. Developed the Real Value and vision to address a significant business issue with a qualified decision maker (multiply by 0.5 - this factor is more stringent because most opportunities stall due to missing this one critical activity, usually delegated for execution to an internal sponsor, who is typically not prepared for the process)
6. Developed and confirmed a plan with the customer of the next steps, which, if successful, will result in their commitment (multiply by 0.9)
Using your calculator, multiply all of these factors together and you will find that the opportunity ends up at around 30%, as predicted by a steady-state situation. The individual factors can be adjusted to better reflect the factors in your market, sales skills of your organisation or maturity of your product/service.
In this fashion, we are reinforcing the buying steps that a prospect needs to traverse in order to make a decision as well as their confirmation that they are in lock step with us in the buying/selling dance. If any steps are unfulfilled, it clearly identifies for the sales person the priority of the step and what tactic is required to further develop the opportunity.
Talking to the Right Person

Lastly I want to stress again the importance of making sure that the salesperson is talking to the decision maker. In the last year we have research that states 75% of salespeople are not talking to the right decision maker. When a lost deals analyst is carried out, 50% of deals lost are a direct consequence.

I wonder how many line items in the forecast are represented by the REAL decision maker. That is to say, as the sales cycle progresses towards that 100% confirmation, is the sales person actually talking to the decision maker?

I constantly come across the same on-going mistake people make in sales – and that is they are, indeed, NOT talking to right decision maker.


The Most Underused and Powerful Method of Lead Generation
Are you worried about whom you'll sell today so you can feed your family tomorrow? Are you jealous of the top producers who are getting phone calls from new prospects every day? Wouldn't you love to come to the office and find your mail box full of messages from potential clients?
I'm going to show you the easiest, quickest and most effective lead generation method to grow your business, using word of mouth or referrals.
Referrals are the most effective way to create a steady stream of customers for your product or service. In most businesses referrals generate over 70% of their sales. However, salespeople spend the least amount of time, money and energy developing referral sources.
Doesn't it make sense to put your focus, attention and resources into the lead generation activities that will reap the greatest benefits?
If you aren't currently using a system to generate referrals, you're leaving thousands of dollars on the table and missing out on a golden opportunity to skyrocket your sales.
According to statistics, the average person has a relationship with 250 people!
In other words when you write a list of everyone you know personally, it will likely add up to around 250 people.
What this means is that every client you currently have opens a door to 250 more!
So, when you know how to get your clients talking about your business, you'll have a big network you can easily tap into.
Could anything be better for lead generation for your business?
Developing referral sources begins by creating relationships. Smart sales people will break even or even lose money to create a relationship with a new customer.
Why?
They understand that once they have a relationship with a client, selling to them becomes much easier. So it makes sense to do whatever you can to create new relationships.
Word of mouth is a very powerful tool. When you harness the power of word of mouth, you can build relationships with hundreds of people through the network that your clients have.
Since we all trust our family and friends more than we trust sales people, getting a new client by referral is easier than getting a new client by any other means of self promotion.
A referral gives you instant credibility with the family and friends of all your current clients. When your clients refer someone to you or your business, they are giving you a personal endorsement. They're saying to that friend or family member they trust you and whatever bond you have with your clients can and often will get transferred to their friends when they're enthusiastically told about you.
According to industry sources, customers who come to an individual or business by referral:
• Spend more money on each purchase
• Buy more often
• Are more loyal
• Refer more customers
• Trust your advice
So by seeking out referrals you'll increase your income and have more time to enjoy life.
Most of the time getting referrals is free. Even if you do spend money to maximize your lead generation by referral it's the best place to spend your marketing dollars.
In order to get referrals on a regular basis and to continue to grow that number over time it's important to have systems in place and a plan for generating referrals.
In the next article I want to share with you the first few pieces of "How to Master the Art of Referrals".


Start Something Big When You Start an Online Business
Start Something Big When You Start an Online Business
Copyright 2005 Benjamin Scott
You life is an open path before you, but you might not see
it because of the over full inbox tray obstructing your
view. Its hard to be philosophical and wise when you just
need to finish a few more things in order to see even a
little of the soccer game, piano recital, or first steps
you heard were happening but had missed because of work.
Worse, you missed a lot of important events for work you
did not even like or want to be doing. People change and
grow, and perhaps you have outgrown your job and present career. It may be time to look into something more, something different. Start something big in your life, and start an online business.
Starting an online business is not difficult. YOU do not
have to be a computer expert. You do not have to be rich, successful, or any preconceived notion of a business person. Thanks to the Internet revolution, people of many backgrounds can come together and run businesses and achieve financial freedom from the comfort of their own homes. There are many viable options for individuals interested in trying to start an online business. This career avenue affords personal freedom, lucrative financial success, and the personal satisfaction of owning a business. Few business opportunities can offer these three attributes in one stunning package, asking little down and demanding little background knowledge. Start an online business, no matter what your background and interests, and you will be starting a change in your life that will reach beyond your pocket book and into your self-esteem. You can know every day that you are working for yourself and your own goals. You set your bottom line, and you decide what issue you will tackle each day. This startling independence will bring out the best in you, motivating you to challenge yourself and reach for new heights.
If you are truly interested in the process to start an
online business, look no further than the Internet itself
for information and helpful hints. The web is full of information relating not only to the various kinds of businesses you could start, but also to the unique issues you will face operating your own online business. You will find step-by-step guides to lead you through the process, and you will never feel blind as you take this risk for your future. These guides will prepare you for important decisions and prep you for all the next steps. You will find a community of other individuals, as varied from you as can be, who share similar interests in online business and who can share a wealth of knowledge. When you start online business, you are walking into a new lifestyle of community, personal freedom, and financial success.

About the Author:
Benjamin Scott operates a successful internet business
working from his home personal computer. After experiencing much of trial & error, Ben will take you by the hand and show you how to duplicate his success using the internet as a roadmap to financial freedom. Visit his website at http://www.eazyincome.net