Few areas of selling are more dicey than sales forecasting.  So much so that, inside many companies, the process is so broken it looks like this:

  1. Top management needs a story to tell investors, and thus asks the sales manager for a forecast.
  2. The sales manager asks the sales reps what they think they’ll sell, based upon their current gut feeling.
  3. The sales reps make a wild guess at what they might actually sell, then subtract 10 percent as a fudge.
  4. The sales manager compares that forecast to the sales quota and adjusts both to match.
  5. The marketing group issues its own forecast, based upon statistics from a “market research” firm.
  6. The manufacturing group ignores all of the above and forecasts what it plans to manufacture.
  7. Top management looks at the three forecasts, throws them out, then makes up numbers that will look good.
  8. The accountants jigger the books so that, regardless of what was sold, the quarterly report resembles the CEO’s story.
  9. If, for some reason (like the laws of mathematics) Step 8 isn’t good enough, the CEO fires the sales manager.

Sound familiar? 

The key turning sales forecasts from the debacle above into a truly useful management tool is to remove as much of the politics as possible.  Here's how:

1. Decouple forecasts from quotas. 

There's nothing wrong with having sales quotas, but the time to talk about those quotas (and compensation) isn't when you're trying to come up with a meaningful projections.  This takes some mental discipline on the part of the sales manager, who must resist the temptation to conflate the two activities.

2. Reward accuracy rather than penalize it. 

While there's no question that the sales team should be able deliver the sales that are needed to make the company successful, the forecasting process needs to reflect reality, not wishful thinking.  Shooting the messenger is dumb.  What’s needed is “just the facts” attitude with rewards for getting the facts right.

3. Remove the amateurs from the process. 

Part of the problem with the standard scenario is that everybody gets involved, bringing along their own, weird organizational baggage. Marketing, manufacturing, accounting and top management should react to the sales forecast, rather than drive it.

While the forecasting process may be broken within many companies, taking the appropriate steps listed above can help take the politics out of the process and make sales forecasting a truly useful management tool.

Learn even more about how to build a successful sales process with the free e-book below: