Four Simple Forecasting Rules for the New Year

As the New Year begins and the “revenue meter” officially (and regrettably?) resets to zero, most sales and management teams are in the process of fine-tuning their forecasting process. Most cash flow and profit and loss statements are dependent upon accurate sales and revenue projection figures and, in the interest of preventing reoccurrence of the “garbage in equals garbage out” syndrome, here are some simple rules that will help you and your team improve the accuracy and efficiency of your forecasting.

The first two apply when a sales manager must either create a forecast for the coming year, or sign off on the viability of a sales target that’s been handed down. Use these to ensure that your annual forecast target is realistic.

1. Regardless of how sophisticated the forecasting method, your forecast will only be as accurate as the data you put into it. Your current fancy forecasting formula or software doesn’t matter if you feed it irrelevant, inaccurate or outdated information. Metrics that should be recorded and monitored consistently for each individual salesperson include total conversations had today with new unique prospects, scheduled meetings set with clear agendas in place (no “I’ll drop by Tuesday afternoon”), meetings attended (physically or virtually) that resulted in a “yes” or “no” decision (no “maybe” outcome meetings), and closed agreements that created new income.

2. Forecasts must have STAR (Simple, Timely, Accurate, Reviewed) quality to be useful. Track and update the hard numbers that connect to each of these simple metrics. Update them each week to keep them timely. Analyze them so you have ongoing ratios that accurately establish the current patterns that will help you predict future outcomes. Review the numbers weekly in voice-to-voice discussions, either one-on-one with individual salespeople or during group meetings.

The next two rules apply when you have committed to a goal for your team, and must now ensure that your compensation scheme supports the sales forecast. Here, you must work with each member of the team to create a comprehensive plan that carries meaningful personal rewards and turns the team’s sales goal into reality. Follow  these to help ensure both outcomes.

3. Compensation plans that are too complex are never as motivating as simple and direct methods. Make sure each individual forecast connects to a simple, comprehensible, personal goal for that particular salesperson. For example: Closing X dollars in sales revenue from new clients this month, in return for a payoff of Y dollars of commission that is payable this month. When the goals are this simple and direct, salespeople will be more likely to use their own performance numbers and metrics to identify and commit to actions that turn the goal into reality. They will also be more open to coaching that helps them figure possible areas of improvement. 

4. Companies should compensate for desired outcomes. Using the example above, if the company wants X dollars in new sales income this month from new clients, you should have in place a financial incentive that rewards the salesperson for achieving that outcome. Otherwise, don’t expect it to happen.

Accurate and timely sales forecasting is a constantly evolving and never-ending process that should involve something more than blind luck and a dartboard. Only by accurately tracking and assessing your team’s activities and results will you arrive at more precise sales projections that you can “take to the bank.” 

Jim Marshall is owner and president of Sandler Training of Tampa Bay, which provides sales, corporate and management training to high-achieving companies and individuals. Contact him at 813.287.1500 or

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