Selling is like playing chess on five chess boards while standing on your head. Why are we so surprised when we misread the situation, or a large deal fails to land when our forecast models predict?Joe Paranteau, Author, Billion Dollar Sales Secrets
Every day business leaders attempt to understand and predict when revenue will land.
But the reality is that human-based forecasting is subjective and error-prone. A miss in a sales forecast creates pessimism in your market and might impact how your company allocates resources. Business success depends on forecast accuracy, but what happens if the inputs are flawed?
These flaws can be attributed to many causes, and it’s hard to place blame on anyone factor when they happen. The good news is that there are improvements you can make and processes you can put into place to both identify and move past the two most common flaws that result in a failed sales forecast. Let’s take a look at a case study.
John was a competent VP of Sales, leading a focused global team of sellers who had been riding a wave of successful growth. Their company was getting a lot of buzz, and planning for the IPO was already in flight. In fact, the phrase “like shooting fish in a barrel” came to John’s mind as he looked at his increasing growth month over month and quarter over quarter. But last month was different. Every sales leader forecasted a drop in projections. It wasn’t significant, but it was a drop.
The sales managers were confident this was a glitch. Salespeople were not updating their CRM system because they were so busy with their increasing customer demand. At least that was the story that sounded good. It was a logical reason to explain away the miss, and other managers not wanting further inspection jumped onto this argument.
John was now poring overlooking at the forecast data, which showed double-digit decreases in every period forward. He hid his hands in his face and sighed.
In Las Vegas, there are only two ways to lose money: chasing your winnings and chasing your losses. While John and his company’s story is fictional, it’s based on real-life cases of companies. Clayton Christensen, former Harvard Business professor and author of The Innovator’s Dilemma, saw this and the rise and fall of Digital Equipment Company (DEC). The ill-fated story of DEC led him to create his well-known theory of disruptive innovation.
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