Perhaps ‘bad’ is a little strong. You’re reading this and thinking ‘how can it be bad when you exceed your sales forecast? I should stop here and talk about forecasts a little more.

Some managers use more than one forecast: the ‘drop dead’, which is the forecast they say they’ll make come hell or high water; the ‘manager’s shout’, which is what the manager thinks will come in; the stretch forecast, what might come in if all the stars are aligned, there’s a following wind, that kind of thing. Other managers take a more scientific approach to forecasting, either based on probability assessed and averaged across the pipeline, or – better – based on which deals should close in the period, excluding altogether those deals that should not close in the period.

Another crucial relationship is that between whatever interpretation of your forecast you use and your target, the sales you’re supposed to make.

It’s bad when the actual sales you end up making exceed your sales forecast for a number of reasons:

– if you’re a publicly quoted company, it’s viewed in a fairly dim light because it doesn’t give the analyst and investment community confidence that your business is predictable and your business planning is solid

– the company might feel that your sales targets are set too low and you and team are making too much money too easily. They may either raise targets mid-stream or ask you to improve your forecasting so they can plan properly

– companies crave predictability. If you can smash it out of the park one quarter, there’s a chance you can crash and burn the next. This kind of ‘lumpy’ revenue stream causes jitters for the same reasons as already outlined

But wait, I hear you say, what about the bluebirds? The bluebird is the deal that comes in out of the blue. Well, ask yourself two questions: one, how often do these deals happen, to which I would say hardly ever. Two, if this was your deal and you genuinely didn’t know it was coming in, then how close are you to your customers, prospects and opportunities? Control is everything, guesswork is nothing.

In a previous post I talked about why forecasts miss. Of course, the sales forecast is different from the sales target. The former is what you think you will sell in a given period. The latter is what you’re supposed to sell.

If you miss your forecast on the high side, in other words you exceed it, then people tend not to get concerned, even though they should. When you miss your forecast on the low side, as I alluded to in the previous post, it’s usually either because you don’t have a good sales process or your people aren’t following it.

But what if your sales forecast is less than your sales target? That happens a lot too, right? The sales target is $1.2 million and you’re only calling out $850,000 for your team. What to do here?

The first thing is to have an accurate forecast. If you have a well defined sales process and your sales people follow it, then you should have an indication pretty early in the sales period that you don’t have enough opportunity value to hit your number. Having an early accurate indication that you’re going to come up short gives you the chance to do something about it. This might be in the form of increasing your demand generation efforts to get more value into the hopper, but perhaps this doesn’t give the deals enough time to come to fruition before the time period is up.

If that’s the case, you need to coach your sales team to improve their effectiveness, either increasing the size of the deals on the table, or increasing the percentage of the deals you win, or – the hardest to do – accelerating the sales process so that the deals drop into the sales period.

Of course, it might be that your team’s sales targets are simply too aggressive. If, however, you can get your sales team to consistently and accurately hit the forecast, then you have a strong argument for more help to consistently and accurately hit the target.