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Featured Article—September, 2005

Top down or bottom up forecasting

By Peter J Kusterer, President, NvestNtech Inc

 

The traditional top down forecast is often based on the total revenue needs of the company that is spread equally across the sales resources for fulfillment. For clarity, this discussion is not about an individual sales quota.

 

If there is a historical track record of sales from prior periods, then the bottom up process begins by rolling up past performance to a forecast of “high confidence”. A comparison is made against the needs of the business and the forecast is adjusted as needed; in most cases, growth dictates this be in an upward direction. The gap that normally occurs in this process represents new business. Here is where many companies reapply a top down approach; they spread the gap across all resources to make up the difference.

 

A better alternative is to accept the initial bottom up forecast and then look closely at individual sales territories, districts, or regions for the new business. In place of a forced or mandated growth number, solicit salespeople and managers to submit qualified growth projections on their own. This creates a personal commitment to deliver the numbers. Any shortfall can then be addressed on an individual basis.  Market intelligence is essential to successful forecasting. Market growth or decline in areas, regions, or market segments must be factored in for a more complete and accurate forecast.

 

Anyone can hide under a 90-day forecast

 

Forecasting is rarely easy. Often forces outside the control of the salesperson can destroy even the best projection or estimation of when an order may be forthcoming.

 

It is the same optimism most good salespeople share in common that makes them reluctant to alter a close date. Add the pressure from management to deliver business and you will find yourself chasing elusive goals and less revenue.

 

To ease the impact of longer sales cycles and missed forecasts, spend time evaluating individual opportunities, not the gross sales dollar projections per territory (or region). Determine the order mix that is required to achieve individual sales objectives. Apply a team concept to closing the business; too often the information on the pending sale rests with one person and their opinion (and skills). Selling is a team sport!

 

Peter Kusterer is the President of NvestNtech, Inc., with more than 30 years of sales, and executive sales management experience. NvestNtech is headquartered in Raleigh, North Carolina. NvestNtech assists firms with Sales and Business Development, Channel Strategy, and Corporate Partnering.

Some forecasted sales seem to just fade away. Look closely at what makes up the sale. Custom or special order products can skew the results of an otherwise sound forecast.

 

Lead times of a non-stock offering of product or services can delay a sale date, or lead to a lost sale. It may not be tracked properly due to it’s lack of an item or product code.

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