Often times when we look back on past projections, we find that the sales targets were not hit and the revenue fell short. When I talked with the president all seemed fine. A number of accounts were in the pipeline and things were moving along smoothly. It was looking good for sales growth during that particular year. But, when we come back a year later, the optimism did not always translate into top line growth of that magnitude.

So, what went wrong?
What can be done to have a better perspective going forward?

A way it can be done is to build up a history. I had another client that would do this. They would build up a history of the sales forecast and track how each sales person did against their particular forecast. They would know who would most likely hit the forecast and who was likely to come up short. If one person would constantly come up at about 75%, then they would know to start discounting their projections and really challenge them to come up with a more realistic number.

Consider taking this same approach, look back at the projection and see how your sales people measured up. In particular, even better is if you can break it down into pieces:

1. How many prospects did they visit?

2. What percent of prospects did they close?

3. How many new customers did they generate versus what they had expected in their budgets?

You could even break it down even in a little bit more detail by seeing how many prospects they actually turned into a sales call. They objective is to find out where is the leak in the process. At what point in the funnel are they not being able to keep prospects moving through the pipeline. That leak can give you a good idea on where they can be falling short.

This can be a process that private equity firms and other investors might use when they go to evaluate a company. They’ll look to see the past budgets for the past couple years and then match it up against the revenues that were actually achieved. That will become an important measure on how they look at the sales forecast in the business plan they’ve been presented with to invest in the company.

So to have a better forecast going forward in your sales area, take a look in the rearview mirror and get a better sense on the past history and adjust your projection going forward based upon the past pattern that you’ve seen.

Jon Paul, MBA, CPA, CMC, CM&AA

President, Value Added Finance Resources
Bringing new insights on results and maximizing company value