Forecasting Programs

Developing a forecast that links future sales initiatives and marketing programs by both market segment and product line is absent in most organizations. Sales departments can often be too unstructured resulting in a significant communication gap between the sales function and others corporate functions. To be the most effective, the forecast should be directly linked to the strategic plan.

The one thing we can be certain about a forecast is that it will be wrong. This admission does not make the case for not having one that is detailed enough to reflect the strategic plan or business plan.

While the sales culture may tend to result in elusiveness when it comes to measurement and accountability, the fact remains that a good forecast model will help to drive and focus sales activities. All too often sales has the tendency to spend a disproportional amount of time at existing accounts where the return in sales volume based on the time invested cannot be justified.

Forecasting can take on many forms depending on the function within the organization that is planning based on the forecast.

    1. Sales Forecast – the total forecast by week, month and year represents a business model of expected sales. Having this forecast broken down by market segment and accounts, both existing and targeted, within each market segment, begins to bring the forecast to life. If the forecast is constructed properly it will outline the key activities that sales must implement in order to have a chance to perform on the forecast.

      For example, if the average time it takes to penetrate a new account is four months and new account sales are forecasted in June, sales calls on these target accounts will need to begin in the January/February time frame. If a project at an existing account will yield $100K in sales in the first three months after it is completed, and this $100K is forecasted for the 4th quarter this clearly establishes the time frame where this project must be completed by the end of the 3rd quarter.

      The sales forecast must be linked directly into the strategic plan if the plan is to have any value. Sales, as well as the rest of the company, needs to be aligned with the strategic plan and the forecast if the company is to achieve its goals.

    2. Product Forecast – while the sales forecast and product forecast are essentially the same, they are presented differently. In the manufacturing world the sales forecast represents dollars for product sold. To be any value to manufacturing, and the support functions like purchasing, quality control and human resources, this dollar sales forecast must be presented in a product format. Which products are forecasted to be sold and when? This is essential if the manufacturing department is to be able to plan for the manufacture of the forecasted products.

      Forecasts for non-manufacturing companies have the same issues except the product that they are “manufacturing” are services. Manpower requirements must be mapped out according to the sales forecast.

    3. Leading and Lagging Economic Indicators – forecasting is based on information supplied to you by you key customers, educated “guesses” based on you assumptive ability to penetrate target accounts, the expected success of new products and/or services, and leading/lagging economic indications that have s history of correlation to sales.

Everything starts with the sale, or forecast of the sale. The better the forecasting, the better position the company will be to support the sales initiatives and to maintain a high level of customer service.

This program will help to establish a better foundation for forecasting.

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The Business Avionix Company, Inc.
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