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Is Sales Forecasting Worth the Effort?

Many companies struggle with forecasting, big time and many sales forecasts are consistently dead wrong. They spend a lot of time and energy and don't get all much out of it.

Here is the six (6) step process that sales forecasts generally take:

  • Step #1: The sales reps provide a forecast. Each sales rep guesses what he or she thinks she might be able to sell, and then predicts they'll make about 5% less. That way, if a deal falls through, the rep can still make the number, but if not the rep will look like an over-achiever.
  • Step #2: The sales managers adjust the forecast. Because each sales manager knows that his sales reps are padding, he adds and subtracts from whatever numbers he gets from the sales reps, reflecting his best judgment of what he thinks will really happen.
  • Step #3: The sales VP re-adjusts the forecast. Because the sales VP knows that the sales managers are changing the numbers, he figures that the numbers aren't accurate, so he plays around with them some more, adding and subtracting as necessary.
  • Step #4: The marketing VP does his own forecast. Because the marketing group doesn't trust the sales group, they make their own forecast, usually based upon the numbers they would like to make combined with some BS market research.
  • Step #5: The head of manufacturing does his own forecast. This long-suffering individual actually has to worry about inventory and other issues, so he makes his own forecast of what he's going to build, hoping that whatever he builds will actually be sold.
  • Step #6: The CEO makes up a new forecast. The CEO wants to make sure that the stock price keeps going up (thereby increasing the value of his options). So he tells the investors that the company will make big numbers. He then tell the rest of the company to go back and change their forecasts match his promises.
Frankly, most of this activity isn't all that useful. It only creates an illusion of predictability, when in fact there is very little predictability when it comes to selling.

I wonder sometimes whether it makes sense to spend all that time and energy on what's really just an internal political rock-fetch.

Wouldn't it just be easier to look at what was sold over the past few months and assume that the next few months will follow about the same pattern?

Honestly, in most cases, I think you'd probably end up with a forecast about as accurate as the one that emerges from all the organizational brouhaha.

What do you think?