Is Your Sales Prediction a Forecast or a “Wish-cast”?

Are your sales predictions based on a data-driven forecast? Or are they more a reflection of your ideal or desired outcome?

Let me give you an example from my own experience on how “wish-casts” tend to play out. At a recent meeting at a Fortune 500 firm, the company’s CEO took an Executive Vice President (EVP) to task over her revenue forecast, saying, “These numbers aren’t acceptable. You have to do better over the next two quarters. Come back with a 15% increase over last year or don’t come back at all.”

To be fair, the original numbers presented to the CEO reflected a 4% year-over-year increase. But clearly, that wasn’t enough. The CEO’s objective was to report higher numbers to the board, analysts, investors, and beyond. The only problem with this scenario, however, is that the new numbers requested by the CEO were inaccurate — or worse, potentially unattainable. There was no real basis or rationale for increasing the numbers, other than the fact that the CEO wanted to see a higher projected number. And as a result, the company’s sales organization had no choice but to face excessive pressure to meet their CEO’s revenue “wish-cast.”

Fast forward two quarters down the road. Here’s what happened:

Fortunately, the sales team successfully achieved a number higher than the EVP’s initial 4% forecast but still below the CEO’s requested 15% target. As you can imagine, the CEO wasn’t pleased with this performance but was nonetheless able to report a certain level of success on the quarterly earnings call. Unfortunately, the numbers alone don’t tell the full story. Achieving “success,” from the CEO’s perspective, came at the expense of margins and future growth. For the Sales team to hit this more aggressive target, they had to offer customers greater-than-usual discounts and sacrifice cultivating prospects for the rest of the year (which, in turn, damaged the margins associated with those new opportunities).

And in spite of this, the same scenario would play out again while forecasting for the second half of the year. However, this time, with few critical differences.

First, the Sales organization was now in a weaker position to impact revenue — a byproduct of the sales pipeline being leaner after having been pillaged for short-term gain in the first half of the year. This alone made it challenging for the sales team to compete effectively in the marketplace. In fact, the situation became so dire that two senior sales leaders started actively looking for new opportunities because they no longer believed in the business’s ability to succeed in the future. This created a domino effect wherein the working environment became increasingly negative, to the point where the company’s two major account teams felt discouraged and disengaged. It was clear that the business was on a downward spiral.

Watching this play out was painful. Unfortunately, I’ve seen it happen all too often — and there’s a good chance you have, too. But it doesn’t have to be this way. Here’s what CEO’s can do about it:[/vc_column_text]

1. Increase Your Involvement with the Sales Organization
Executive involvement with sales is too often characterized by reviewing (and approving) forecasts — and little else. As a leader, however, you have an opportunity to make a big and lasting impact. Start by focusing on what you can do to build a stronger sales organization because, after all, it’s your business’s definitive strategy-execution engine. If the strategy doesn’t guide or even correlate to what happens in the field, it’s really just an academic exercise with little value. The sales function is directly linked to business strategy. Avoid the tendency to delegate that work to other parts of the organization that can’t execute on that business strategy (i.e. impact revenue growth). Part of this involves being invested in enabling and empowering your sales team to operate at a higher level. To do this, it’s critical that you: 1) create a sales structure aligned to your go-to-market strategy; 2) recruit and hire high-performing talent capable of executing on that strategy with your customers; 3) build a “coaching” culture that aims to develop and improve the performance of your sales team from day one. If you’re only inspecting their performance, you’ve missed the boat here.

2. Avoid Counterproductive Pressures
When reviewing revenue forecasts, if you only ask: “Can you get more revenue into this month/quarter?” followed by “Why not?” without discussing any of the factors that contribute to these results, then you are setting yourself up for failure. As an executive, you deserve to have a clear understanding of forecasts and expected results. This is something the sales team can easily put together for you. However, when the projected numbers don’t match your expectations, it’s very easy for anxiety to start to take hold across the entire organization.

As a starting point, don’t increase the frequency of revenue and forecast reviews. Doing so only creates more pressure and stress for your team. Keep a regular forecasting schedule and set clear expectations around how the team can achieve the goals you’ve set. If your requests don’t materialize — especially in the short-term — avoid relying on heavy-handed pressure tactics to drive results. (It rarely works.) This is not to say that you can’t motivate your team to succeed; after all, that’s the way you can ensure that your team constantly performs at a high level. This is called eustress: a positive kind of pressure that motivates and pushes people to perform with a high degree of success. Unfortunately, more often than not, many leaders go well beyond eustress and push their teams to a state of distress. This creates a culture of fear and ultimately causes people to operate and behave in counterproductive ways (i.e. misleading customers, overcommitting, deeply discounting, etc.). Not to mention, it will cause people to retreat, especially when the stakes are exceptionally high.

3. Understand the End-to-End Sales Process
Evaluating forecasts and results at monthly and quarterly milestones is essential, especially for a publicly-traded company. This is what helps executives understand early on any sales patterns that either inhibit or contribute to revenue growth. The best way to evaluate this is by being involved at the early stages of the sales pipeline, not just when deals are about to get closed. Doing so provides a bird’s-eye view onto the overall health of your revenue streams and can help inform decisions about where additional resources could be most valuable for achieving business objectives. If you only look a month or even a quarter ahead, there’s really very little you can do to impact those objectives. Getting involved further back in the process gives you — and your team — more opportunities to implement changes and can (and will) positively improve desired outcomes. There’s no question about it: forecasts are important decision-making tools for any executive. You have the power to influence the future strength of your business almost uniquely through your interactions with sales. Don’t miss out on this opportunity to make a lasting impact. Resource form salesforce blog

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