Q: Accuracy is still a goal with forecasting; how accurate can we be? We have short lead times on many of our projects, which makes it hard to predict way into the future. We did well with sales in the first half of the year ”“ we”™re up 25 percent over last year. Now I”™m trying to get a handle on the rest of the year to know if it”™s going to be OK.
Thoughts of the day: Building a forecast is as much or more about planning out marketing with a little bit of math, as it is about sales. Build a confidence scale that helps you to predict the future. Look for trends. Quiz customers about their plans.
Take a look at your marketing tools. Think about all of the ways buyers hear about your company. There are referrals from networking sources, referrals from customers, direct mail, leads from the website, social media leads, trade shows, speaking engagements, sales force generated opportunities and open houses. The list goes on and on.
Is each marketing source producing leads this year? Any at the same level of lead generation as last year? Which ones are producing leads at a higher level? Which are lower?
Compare last year”™s leads with sales results by marketing source. Create ratios: sales/leads generated for each type of marketing and overall. And another set of ratios comparing cost of the marketing effort/leads generated, and cost of marketing effort/sales generated to get a cost/lead and cost/sale (payoff ratio).
Now calculate the increase in sales this year. How much more revenue is desired? How many more units need to be sold? How many more leads would need to be produced overall to hit those sales numbers?
Once you know the overall number of leads needed this year, start figuring out where they are coming from. Which lead sources are converting at a higher rate; this year versus last year? Which are converting at a lower rate? Don”™t concentrate on just one source ”“ marketing is all about having a robust mix.
Based upon comparisons of last year with this year, you can figure out how likely it is that the current level of marketing will produce what you need this year. Set up calculations in a spreadsheet so you can forecast and monitor results. Bring the calculations down to one final number: total sales expected for this year. Keep your eye on how that number changes, as the months unfold. Does it stay ahead of goal or behind?
You can back up calculations by doing some research. How are your salespeople doing at establishing new contacts? Easier or harder than last year? What percent of market share do you have in each market?
If you”™re over 30 percent market share for any product or area, expect that sales results may start to decline. While you may get a boost from being a bigger player, it”™s also likely you”™ve picked off most of the low hanging fruit in that market. Think about entering additional market areas to boost sales quickly.
Ask customers what they”™re seeing and doing. Are their sales up or down this year? Do they expect to end the year with a bang, or do they expect things to get quieter?
Take a look at the number of new customers in the last 12 to 18 months. What additional opportunities do those new accounts bring to the table? Why did they buy and how did they find out about you? Any new marketing ideas in there that you could test?
Looking for a good book? Try “Marketing Metrics: The Definitive Guide to Measuring Marketing Performance,” by Paul Farris, Neil Bendle, Phillip Pfeifer and David Reibstein.
Andi Gray is president of Strategy Leaders Inc., strategyleaders.com, a business- consulting firm that specializes in helping entrepreneurial firms grow. She can be reached by phone at (877) 238-3535. Do you have a question for Andi? Please send it to her, via email at AskAndi@StrategyLeaders.com or by mail to Andi Gray, Strategy Leaders Inc., 5 Crossways, Chappaqua, NY 10514. Visit www.AskAndi.com for an entire library of Ask Andi articles.
