Good Times, Uncertain Times, Modern Times?
Take just a quick look around – pinch yourself. The recession is over, but something is amiss. First congratulations and elation, you survived the recession. But, second glance reveals the scenery is different. Something just doesn’t seem “right”.
You’ve just attended the first round of post-recession conventions, association meetings and networking sessions; most of your friends are posting some pretty strong months. In a few instances your pals are crowing - business jumped back to a 2007 levels. As you review your most recent sales report, the numbers look good. Happy days are here again – well almost.
Certainly it is great to finally have the recession behind us - but nobody feels like celebrating. Why? Well, a whole lot of people feel just like you. To the unwary it seems like sunny blue skies and warm fuzzy bunnies. Yet that sick feeling of uncertainty somehow lurks all around us. Are the good times really here or will the other shoe drop tomorrow? What’s going on?
Forecasting is harder in today’s climate
Today it’s nearly impossible to comfortably forecast future business levels using traditional methods. This is a radical change from pre-recession times. Not that long ago, distributor managers were able to understand and predict future business trends in the subsequent six, eight or maybe ten months approaching - in their heads. That intuitive skill seems to have gone away.
Without some well thought out tool, today’s distributors are lucky to predict next month’s levels. Good months are followed by dismal months with little or no warning. Economists call this a saw-tooth recovery – distributors and other small businesses call it nerve-racking.
In the current conditions, forecasting and planning must be “kicked up a notch”. Distributors who lack these tools find themselves at a major competitive disadvantage. All the industry experience in the world won’t help you. Plus, if you rely on your sales team for data points, and they don’t operate under a process – you may be doubly jinxed.
Because they lacked a process (a real documented process with definitions and measures of success) many distributors waited too long into the past business downtown before streamlining their operations. Similarly, many will wait too late in the upturn before spreading their wings into full expansion.
So what is needed for forecasting?
Regular review and a well thought out update procedure are a good start. The forecast will never be perfect but just a couple of slight changes can add a whole new measure of confidence.
Lots of distributors go through some type of annual sales planning. Sometimes driven by their manufacturing partners, other times pushed forward by progressive marketing groups (like Affiliated Distributors or IMark), these companies assemble a once a year “guestament” of future sales.
Whether they refer to it as a sales plan, budget or forecast most are derived from data which was provided by the sales group. Salespeople are asked to provide their “best guess” of business levels for the following year and this information is rolled up into branch, region or company reports.
Two issues come immediately to the surface. First, salespeople have very poor forecasting skills. More importantly, once the data is collected it is rarely updated for the next 12 months. As witnessed by our industry in 2008, a lot can happen in a year.
The problem with most salesperson generated forecasts
The problem with salesperson generated forecasts is this; salespeople lack faith in their own abilities and most question exactly what their management team might do with the numbers once submitted. The data provided back by salespeople can be substantially flawed.
Without training the typical salesperson’s attempt to provide forecast data might fall into one of the following categories:
- No clue whatsoever – recognized by the salesperson’s lack of ability to explain how they arrived at the numbers.
- Sandbagging – early in my sales career, a senior salesperson told me, “There are sandbaggers and there are losers. Always give management a number you know you can easily beat.” How do you run your business with this kind of data?
- Pie in the Sky – generally new salespeople who imagine they can double their business in the first two months. I would give them a gold star for optimism but an ‘F’ for realism.
- Whatever management is looking for – characterized by a detailed conversation with the boss about what kind of growth they are looking for. And followed up with a regurgitation of that message.
How to improve the process?
That which is measured improves – creating measures and metrics improves the results of the forecast. Salespeople are closest to the customer situation. They need only be “trained” to provide better numbers. As strange as it may sound coming from a person who often conducts sales skill training, I don’t believe this is something that comes from a day planted in a chair in the conference room. Instead, it comes via long term coaching.
Instead of an annual 12 month projection, salespeople are asked to provide projections for the next 30 and 90 days on a monthly basis along with their “normal” annual projections.
Expect pushback – new processes of any kind involving the sales team will generate backlash. However, the time required to revisit accounts and create a new projection will diminish with each passing month. The time required to complete the task can be further minimized by focusing in on each salesperson’s top accounts (remember the 80/20 rule).
As each additional month and quarter passed, the projections become better. Failure to improve provides a number of questions for the manager – salesperson conversation. Think about it. If a salesperson has a large order come without at least some anticipation, a wary sales manager might wonder exactly how engaged the seller actually is within their accounts. Conversely, a major drop in business without anticipation again indicates a lack of customer connection.
Some distributors have created funnel reports which include much of this same information. The major difference between most funnel-based activities and a rolling forecast is the time factor. And, timing is everything. So by adding the time factor salespeople must begin thinking about potential business in a new way. It’s not just will there be an order, but also when will the order happen. This added dimension improves the total sales team.
Improving the selling skills at the same time
A regular complaint around distributor salespeople is their lack of connection with the management teams of their customers. One distributor confided: “We seem to only meet the top guys at our accounts when an emergency looms. Either, we are about to be tossed out on our ear or the customer is contemplating legal action. And, generally if our sales team knows them at all there’s not much of a relationship.”
In the world of knowledge-based distribution, most salespeople are long on technical savvy and short on business sense. Upper level mahogany row contacts at customers don’t respond well to techno-talk. Walk into their office and launch into a spiel on the latest gizmo feature and the visit will be short. However, if you take time to understand their business – they can provide insight into future decisions and forthcoming spending.
Clearly the search for accurate projection information leads to more thoughts around business conditions. Salespeople are open to discussing topics like:
- The customers own position in the market
- Cost pressures, new competitors and market trends
- Factors driving business conditions for the customer
- Large orders the customer’s team is working
Each of these topics gives the salesperson better perspective for feeding data back to their own management. But that really is secondary to their ability to better understand the customer. And, that is a selling advantage.
A sales process results in better sales success
Research indicates that companies with well-developed sales processes are more successful in achieving their financial goals. What’s more their customers are much more likely to view them as strategic business partners. In my own mind, process building is done best one small piece at a time. We at River Heights Consulting call this building action blocks.
Give us a call or drop us an email if you would like to learn about creating action blocks in your own process.