It is forecasting one of those things that you must do but always ends up being a source of many discussions about why it is what it is. Today, making an accurate forecast is even more challenging because the market is so confused. If you are trying to do it with complex excel spreadsheets, as I did earlier in my career, I bet you are finding out that it is tough to get forecasts done and keep them current without spending an excessive amount of time and effort if this sounds like you, read on!

Forecasting – Nightmare or Competitive Advantage?

Why is Forecasting so Important-

When you are running a business you always have to make decisions about what to do – where to invest, – who to hire – who to fire – what is most important and what can we do later – will my business grow or fail – why and what can I do about it. A critical part of making the right decisions is having a good picture of what the future looks like i.e., a forecast.

Companies do forecasts in many ways-

Some are dictated from on high based on how they feel about the business and what they think it should be. Often this happens in small companies, and sometimes that is all it takes to get people to do what is needed to get the business started. However, you grow to the point that you need to develop a forecast that covers more than just a feeling for what the company should be.

This is usually when excel spreadsheets get developed that, over time, get more and more complex as you add more and more information – new opportunities, probabilities and sales stages, distributors and reps possibilities, and what orders are on the books and when will they ship to name a few. As you build these spreadsheets to show what is happening in various business lines, geographic regions, and channels, the complexity grows and grows. Forecasting becomes a significant activity every month. I have seen customers where the VP Sales spends more than a week every month just trying to converge on a forecast that everyone accepts.

Eventually, it would be best if you had a better solution-

But the choices are limited, with most sales business management solutions available in the market. Forecasting can be automated and built on an ample opportunity and business status database. When you have a data-driven forecast methodology, you can get out of the rationalization issues with manual forecasting because any forecast item is tied to an order, order history view, or a new business opportunity with detailed situation information to confirm the data.

Suppose you are in an electronic component supplier or a semiconductor company. In that case, you need a forecasting tool that can deal with run rate business, distributors, reps, and complex products and services on a global scale. It needs to have a lot of automation and validation capability and provide detailed situational information in a way that it can be updated quickly and correctly as required. When I ran semiconductor sales organizations, I started using the NEHANET CRM/Forecasting tool to implement a dynamic process in my sales team to get high accuracy. The real-time forecast is done with minimal time load on my salespeople. With the tool, we had a prediction that was always up to date and had complete justification for each line item in real-time. When you get management to have confidence in the forecast data, you get out of the constant review and rationalization activities in many companies. I got to the point that the optimistic and conservative forecast for the next 18 months was always approved and automatically used to derive the new year’s annual operating plan, almost without discussion.

What would you have to do to get a forecast solution that drove the company?

To get to a high confidence forecast solution you need to have a tool that does a couple of things exceptionally good:

  • Monthly forecasts are easy to enter and automatically roll over every month, so you do not have to re-enter any of the data.

  • Data about past shipments and orders scheduled to be delivered over the next few months are visible and accounted for when creating the forecast.

  • New business Opportunities convert to forecasts when they reach a particular stage of the sales process. For example, when an opportunity goes into the sales funnel qualification stage, it must be forecasted with a confidence of 50%. This happens automatically, generating a base forecast showing what to predict based on the part, system volume, confidence, and production dates.

  • Business rules to drive forecast updates are set and tracked.

  • Performance to forecast metrics track what happened vs. what was predicted to help improve forecast accuracy.

  • Forecast history is tracked, forecasts can be summarized by product, region, customer, or salesperson and channel. You can see what each view is predicting for the future and converge quickly on the final statement.

To do an accurate, dynamic forecast, you need to have comprehensive business data, not only what has happened but what you see coming down the pipeline that should be forecasted when they reach the right level of confidence. When the forecast solution is integrated within the CRM solution with real-time sales history, order status, WIP situation information, and new business opportunities, you can see what the forecast justification is quickly and visually, so everyone understands the data behind your forecast outlook.

You can also build business rules to drive forecast performance. For example, if someone wants a sample, they need to become a business opportunity. If a change is part of a strategic customer’s business, it must be forecasted. If a prospect reaches a particular stage like qualification, it must be predicted. You can also set confidence levels based on where the business is coming from. If it is an ongoing business, you should set the confidence too high. If you have just sampled the part, the trust should below. You can also automatically lower confidence if an opportunity is not in the production stage, and the production date is now or past.

Forecasting is both an art and a science. If you have the right tool, the science, data-driven part of creating a forecast and getting management buy-in becomes easy. The art part of forecasting will never change, and that is the part where you must add your experience and judgment to get to a forecast that is aggressive but achievable consistently. If you are spending all your time getting the data pulled together and manipulating the spreadsheet to get to an answer, you are in dire need of some help. Give us a call to see how a CRM with integrated sales information, new business opportunities, and sophisticated workflows and automation can make forecasting something to be proud of.

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