Saturday, May 8

Sales Projections Drive Me Nuts

by Eric Pratt

Does your company do projections? QeH2 does, and I hate it.

Don't get me wrong, I completely understand the value and necessity of accurately projecting sales, expenses, and profits. If your company isn't doing projections you should, it's the only way I've been taught to uncover and address issues before they get out of hand. Plus when you're growing they're fun to look at and dream right?

What I don't understand is how anyone can reasonably expect me to forecast how many new clients our sales department will bring on this month or next week.

Long term forecasting is much more realistic in my opinion as you can use trends and history to forecast your average number of new clients, dollar volume average, routed hour average, etc. It's no different than gambling odds, over the long term the law of averages plays out but in the short term huge variance is possible. Probable actually.

What drives me nuts is figuring out how to answer..."How many clients can you sign in May?" I usually don't give the answer being sought because I kinda have a smart mouth. Here's a short recollection of a recent conversation we had in our weekly executive meeting while going through our financial.

"How many hours are you going to sign in May?"

My Mind: "What a ridiculous question"
My Mouth: "Why do you keep asking me that?"

"We need to know for the projections

Mind: "If I knew who was going to sign the line and when my life would be easy"
Mouth: "I can guess if you'd like, but that's all it would be"

"Well, what did you sell last month?"

Mind: "What the hell does that have to do with this month?"
Mouth: "More than you thought I would sucker"

With a hint of frustration....."Help me out here Eric"

Mind: "Oops, I did it again"
Mouth: "How many hours do you need?"

"Well we have some open route to fill, I think 12 hours is a good number"

Mind: "Piece of cake, they should of asked for more"
Mouth: "That would be great, I'll get it done"

Another Partner: "Don't you two think we could be more accurate with these projections?"


Mouth: "No"

After some research at this point we determined that our average was nearly 9 hours per month over a reasonable period, projection adjusted from 12 to 9 moving forward...

Other Partner: "So 9 is the projection but we should try 12"

Mind: "Why stop at 12 if you're dreaming?"
Mouth: "My goal is 30, while we're setting goals let's aim high"

What was really accomplished here? Actually something good came out of it for the sales department (monthly projections at 9 instead of 12) but the point remains I have no idea which clients in my sales pipeline are ready to come on, which will drag it out a few weeks, and which will never sign. I think I know, I'm actually pretty sure about a couple.

Bottom line is you never know until they take the cap off their pen. Some months we will blow those numbers away and some months we'll miss badly. Over time the numbers will average out and my guess is we will actually average 12 or more moving forward as factors have changed vs the period we built that average over. From that perspective something bad came out of the discussion, our projections could actually be less accurate. Best part of that meeting for me, expectations went down and our ability to exceed expectations went up. If you're in sales you know well that exceeding expectation is what it's all about.

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