Here’s how to set up an effective sales forecasting model for your business.

Sales forecasting can be simple. If you have an existing business, you pick a number which usually represents a gain expected over last year's sales performance. But we all know that simple isn't a very good method or more companies that favor "simple" would be more successful. Simple does not effectively address persistent and ongoing problems in creating realistic forecasts and budgets to support those forecasts. There are too many variables, too many moving parts, too many unknowns. In the end, the simple sales forecast is more aspiration than it is science.

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    Most budgeting begins with the sales forecast because the forecast determines many different decisions: staffing, capital expenditures, inventory levels, and so on. If you are reading this blog, chances are good you began looking at your 2017 forecast and budgeting in the waning months of 2016 and perhaps firmed them up in early January. Now, it is nearly the end of March, the first quarter is almost history, and how well did you do? If your forecast is pretty much on target, great. If it is already off the grid, it is time to revisit the assumptions behind the projections you made only four months ago. Failure to adjust denies the dynamic nature of forecasting and budgeting. Forecasts and budgets are a process, not one-time events.

    The goal of the sales forecast should be a careful balance between meeting sales goals and profit goals. The goal is to have profitable sales, not sales at any cost.


    So how do you get acceptable—or good—results? Start with last year, the economic climate, your competition and things you have done to make your firm more effective (upgraded people, created processes and procedures to reduce waste, bring on new products or new customers, and so on). Exploit opportunities in good times. Hunker down in bad times, but not to the point of decimating your core capabilities. Companies that have won in good times and have solid profits and positive cash flows can usually benefit from downturns by acquiring competitors who are not as stable, gain customers who are under served, and perhaps build aggressive platforms for growth that are in place when the (inevitable) economic recovery happens.

    Start up/early stage company forecasting and budgeting For start ups/early stage companies, the sales forecast is most likely going to a version of "simple" as described above. The forecast is usually dictated by available capacity and capital. If this is a product company, the limited capital has to be spent on equipment and acquiring/converting inventory into finished goods. If it’s a service business, the sales forecast is usually limited by customer demand, competent talent and the time available to deliver the service. That is generally true for many kinds of service companies (for example beauty salons, consulting companies, insurance agencies, and accounting or law firms).

    The above observations are predicated on starting the company without orders in hand or client demand arranged before beginning operations. Having orders in hand reduces risk and enables a better degree of certainty in the early month or months of operations. In my experience, it is rare for the start up to begin with a "book of business."

    Growing/established firm forecasting and budgeting The existing firm has a somewhat easier time in forecasting because there is a sales history in place, and many of the production/operations processes needed to satisfy customer needs have been determined and refined over time. For the existing firm, unless the sales process is a one-time or two-time sale (think Nature Stone, for example) or there is a long time between the first sale and the second sale (home painting, perhaps), the forecast is related to finding and converting suspects into prospects and then to customers. Many firms have a business model where the next sale to a present customer may be a year or more into the future, so the need to find and convert prospects into new customers is always present.

    For companies whose customer base purchases regularly (think the grocery store, the lawn care company, other service firms where repeat business is likely), there is no substitute for efforts to retain customers. Even the best companies suffer customer defections. Lost customers who do not renew or are not retained drive the sales forecasting process to replenish the pipeline by acquiring new customers.

    Driving the sales forecast Because life for most firms begins with customer acquisition, the prime sales forecast focus must be on finding, servicing and retaining enough good customers to cover the overhead of the venture and make a reasonable profit. There are metrics in every business. What are the key sales metrics for your firm? Do you know how much it costs you, for example, to acquire a new customer? Is it the number of sales calls per day? The number of calls/visits per customer for long lead time selling? The amount of money spent on social media, direct marketing? The one thing I am certain about is once you have acquired a good customer (definition: profitable, satisfied with your service, pays promptly, not a lot of hassle), the cost to keep that customer is generally less than the cost of mining the potential field to take customers away from their existing service/product providers.

    It is relevant to consider developing a solid marketing and customer service plan to support your customer acquisition and retention goals. Great companies that are successful in filling their restaurants, getting goods out the door fast, handling the inevitable customer problems (and so on) figure out how to do these things at least as good as, if not better than, their competition. That also means the sales force must be trained in the products/services you sell (waiters and waitresses in restaurants, the copier or office supply salesman, the person who is selling machining/shop services) on a regular/consistent basis. The best companies spend at least some time every week on training to upgrade product/service knowledge and customer satisfaction techniques so the customer needs/concerns are addressed in great ways to reduce customer defections.

    The company described in the case study below did virtually all the things a good company should do to make sales forecasting and budgeting a scientific process. As you will see in the narrative following, things don't always go well, no matter how well planned.

    A few years ago, I was asked by the President of a middle market company to help him establish a board of advisors to give him fresh outside insight into the problems and opportunities facing his firm. This company was a metal bender, providing components/sub-assemblies primarily to the transportation sector with a secondary customer base in food service equipment. The President, who was second generation, cut his teeth in sales and he was good at that job. He had taken the COSE Strategic Planning Course and had done extensive analyses of profitability and sales by customer and industry group.

    RELATED: Learn more about COSE’s Strategic Planning Course

    His sales forecasts were driven by strategic business unit performance and competitive analysis. There were a limited number of customers. Sales mirrored Pareto's 20/80 axiom that 20% of the customers often make up about 80% of the sales. There were less than 150 total customers, with no single customer generating more than 10% of sales. He knew almost everything one should know about the top 25-30 customers that dominated the sales results. He and his top sales people got close to those customers, and they treated those customers very well, frequently hosting them at local and national sports venues and they even took several of those customers on fishing and hunting trips in unique locales.

    RELATED: Read more about understanding the importance of strategic business unit analysis

    The sales force were compensated based upon sales quotas established at the beginning of each fiscal year and were also tied to gross margins because there was a certain amount of discretion available in pricing or terms. Getting to 95% of the sales quota with no more than a 2% negative deviation from planned gross margin dollars on those sales dollars allowed successful sales people to receive substantial performance bonuses at the end of the plan year.

    RELATED: Are you compensating your sales force fairly? 

    The sales forecast each year began by studying prior years' activity and trends for each of the top customers. The industries the firm served generally ran parallel to the health of the economy—when the general economy was good, the firm's customers generally did well, too. When the economy was in a downturn or recession, those customers similarly suffered. The President and his sales people regularly talked with the top customers about their own plans for the coming planning period and that input provided a pretty solid base upon which to make sales forecast projections. In other words, they did a lot of things right.

    We had a board of advisors meeting in mid-December of the third year I had been on the board, just prior to the annual holiday party. The President was in a great mood. The cause for his elation quickly became apparent when he told us that for the first time in the 20+ year history of the company the annual sales forecast for the company had been met. Not all SBUs met their targets, but overall, the sales success was cause for celebration. I should add that the company typically forecast aggressively, and that year was no exception to that norm.

    RELATED: How to set up a board of advisors

    I was asked to stop by the headquarters in early January for an informal one-on-one advisory chat. The euphoria of mid-December had evaporated in late December and early January when the President started fielding calls from key customers asking where their yearend orders were and when their products would be delivered. It didn't take long for him to discover the sales force had held back December orders (and deliveries), not placing them in the order book or production scheduling until early January. Almost 10% of annual sales (representing over $5 Million in sales) fell into this abyss.

    We talked about how this happened. The President initially wanted to kill the offending sales people. When I suggested he might want to avoid committing a felony, he gradually calmed down. Upon further discussion, he realized he had created this behavior. As he explained to me, because historically the company had never gotten close to the actual forecast, this had not been an issue in the past. He further revealed his sales force knew from past forecasting, budgeting, quota setting and bonus practices, the sales quotas for the coming year would be higher than the quotas for the prior year. It could have been predicted, but wasn't, that the sales force acted in their own best interest to get a running start on the sales quotas for the new year. And, true to historical tradition, the new year's quotas were substantially higher than those quotas determined in the prior year.

    Luckily, with a lot of back office scurrying and a prodigious production effort, almost all of the affected customers were able to be retained, but the company came very close to losing some long-term profitable accounts.

    So even when you think you have it right, you might not!

    Some Takeaways

    1. Simple sales forecasting is too easy and often does not produce good results.

    2. A sales forecast, whether established through scientific methods of analysis or aspirational, needs to be tied to budgets.

    3. Forecasts and budgets are a process, not an event. Results (sometimes even daily or weekly, but certainly monthly and quarterly) must be reviewed for progress (or lack thereof) towards profit and sales goals, with forecasts and budgets adjusted to reflect the new reality of the environment in which the firm operates.

    4. Expect the unexpected. Unfortunately, you cannot plan for every contingency, but how you react to the unexpected (held back sales, for example) is where the "rubber meets your road." Dealing effectively with crises is what frequently separates good CEOs from great CEOs and good companies from great companies.

    Jeffrey C. Susbauer, Ph.D. is Associate Professor Emeritus at the Monte Ahuja College of Business, Cleveland State University where he has taught strategic management and entrepreneurship courses since 1970. A long-time consultant to scores of businesses, a member of the boards of advisors to over 60 companies, he co-founded and serves as the principal instructor for the COSE Strategic Planning/CEO Development Course for the past 36 years. 

    The course is concerned with providing entrepreneurs with education to guide their vision, strategic thinking and execution in their businesses. Learn more about the Strategic Planning/CEO Development course or contact Jeff via email.

    Next up: Digital Marketing: 3 Takeaways

    Digital Marketing: 3 Takeaways

    Jason Therrien of thunder::tech lists the top three takeaways from his recent COSE Business Growth Boot Camp.

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    Next up: Digital Marketing: Focus and Set Realistic Goals for Your Campaign

    Digital Marketing: Focus and Set Realistic Goals for Your Campaign

    In the lead up to a special COSE Business Growth Boot Camp Series that launches this month, we sat down with Boot Camp presenter Marisa Pisani of Adcom to get a sense of what attendees are going to take away from the events.

    Thirty years ago, the potential marketing channels available to businesses were limited. Phone. Billboards. Direct mail. TV. Print. That covered the bulk of a company’s choices.

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    The marketing world is much different today. The number of channels open to businesses is seemingly endless, especially as it relates to digital marketing. So, how do you focus on which of these avenues makes the most sense for you? And just as importantly, how do you set realistic goals you can use to gauge the success of your campaign?

    Those are going to be two of the questions addressed by Adcom’s Marisa Pisani during a unique two-part COSE Boot Camp Series. In the first workshop to be held from 7:30 to 10 a.m. on Feb. 22, “Business Growth Boot Camp Part 1: Understanding Digital Marketing & Creating Measurable Results for Your Brand,” Pisani will explain what options are available to you today and which of these, given the limited time and resources small businesses have available, make the most sense to become a priority for your business.


    RELATED: Learn more and register for the Business Growth Boot Camp.

    And there’s a lot to consider. Among the topics Pisani will cover include:

    Build a strategy: Every company is unique. How does your company’s strategy intersect with the options that are out there?

    Know the options: Will paid search be a good use of your limited funds? Or should you focus on increasing traffic to your site organically? Pisani will lay out the pros and cons of the options that are out there and what will yield the most conversions.

    Learn from the best: How can you apply the blueprints other companies have used to find great success in their digital marketing campaigns?

    Pisani will follow up this presentation with a more granular discussion on March 22 from 7:30 to 10 a.m. during “Business Growth Boot Camp Part 2: Think Outside the Box.”

    Related: Learn more about Part 2 of this Business Growth Boot Camp series.

    This session will build on the lessons learned during Part 1. Now that you know where to spend your time and money, how do you scale it and make it more automated? The points addressed during this follow-up session will include:

    Measurable results: Launching your campaign is only half the battle. What are you doing that’s measurable? And what are you learning about your audience?

    Refine your campaign: And using the data you’ve gathered, how do you focus your campaign to make it as successful as possible? What’s the best way to stay in front of your customers to keep your brand top of mind?

    At the end of the day, it’s important to remember that you are not marketing to machines. You’re marketing to human beings. This Business Growth Boot Camp is a unique, fun way to learn how to reach these humans using proven, realistic methods that give you the best chance to grow your business.

    Secure your spot for this unique Business Growth Boot Camp experience today. You can register for Part 1 by clicking here. And learn more and register for Part 2 by clicking here.

    Next up: Digital Marketing: What Is It and What Does It Mean for Small Business?

    Digital Marketing: What Is It and What Does It Mean for Small Business?

    The New Year offers a perfect time to tackle fresh challenges for your business. You’ve prepared a game plan for the year ahead, made projections, mapped your budget, and identified new investments you intend to make. You’re ready to go. Time to accomplish everything on your list, one by one.

    The New Year offers a perfect time to tackle fresh challenges for your business. You’ve prepared a game plan for the year ahead, made projections, mapped your budget, and identified new investments you intend to make. You’re ready to go. Time to accomplish everything on your list, one by one.

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    After so many years, you’ve developed a process, and established a working formula that could be described as semi-effective. The low hanging fruit—the practical stuff that’s easy to tackle, easy to measure—always makes it to the top of the list, while the more organic, harder to quantify stuff such as your marketing strategy, get relegated to the back burner.

    The promise of a new marketing strategy in the new year and the challenge of stepping up your marketing game is challenging indeed, and formidable by nature. Every year you endeavor to get a handle on it, and every year it slips through your fingers. Before you know it, it’s July, the THIRD QUARTER has started, and you’re still struggling to get your foot in the game. Eventually you give up altogether, put your marketing priorities on autopilot and hope for the best, or at least for a better shot at it next year.


    The results of your marketing efforts are not always easy to measure, because traditional forms of marketing haven’t always lent themselves well to the assurances of instant gratification. The natural response is to put your marketing strategy on the shelf, and hope it takes care of itself.

    Thankfully, we live in a time where traditional forms of marketing are being replaced by the use of new information channels and new methods that enable small businesses to analyze what works and what doesn’t, in real time. This is the age of digital marketing: No more wondering whether a particular marketing campaign is paying off. Now you can manage and track quantifiable results in real time.

    You’ve effectively run a business for many years. Your reputation is sound, and your client base is solid. But lately you’ve noticed the same faces walking through the door. How do you break with tradition and make the most use out of the ever-allusive digital space, crack the code and bring in new business?

    The good news is you already understand the basics of digital marketing, in a purely intuitive sense. After all, you engage in the digital space every day as a person, a consumer, and, of course, as a small business owner. It’s everywhere, embedded, coded, for your convenience whether you’re conscious of it or not. In fact, the very ubiquitous-ness of digital marketing might explain why it can be both easy to utilize and hard to grasp at the same time. The biggest challenge is often knowing where to dive in.

    Fortunately, you’ve been in business long enough to have gathered a lot of the basic tools needed to survive in this new territory: company website, Facebook page, client list (with important data like email addresses and names), even your own Twitter feed.

    Trouble is:

    1. Your website is out-of-date and unresponsive (i.e., it doesn’t translate well on mobile and other handheld devices).
    2. Your client list is stuck on a local network somewhere in your office and has never been imported into an email Marketing service such as MailChimp or an online marketing resource like Constant Contact.
    3. Your Facebook page hasn’t been updated since Labor Day Weekend, 2013.
    4. Your Twitter account is so dormant that, even if you wanted to tweet about your latest promotion, you couldn’t remember your login credentials to do so.

    These factors amount to a tremendous disconnect between your business and the purchasing habits of today’s consumer, and the trends of the marketplace in 2017. Consider these seven useful tips to help get a handle on this new wave in marketing communications.

    1. You need an upgrade. To bridge the gap, temper the divide, and build a global client base, start by rebuilding your website on a content management system, such as WordPress that lends itself well to the demands of the new marketplace. This is enormously important. Most consumers today are searching and making purchasing choices with a mobile device. If your site was built before 2012, chances are it doesn’t translate well in today’s mobile environment. Upgrading to a more contemporary, responsive website that clearly lists your products and services, and allows consumers to contact you on the go, and make buying decisions with you from their phones, is tremendous.

    2. Re-write, remove, edit, and update old content to improve the search rankings of your website. You’re essentially killing two birds with one stone here. On one hand, you’re giving your content a much-needed upgrade. On the other hand—by re-crafting the content on your website with a focus on keywords—you’re essentially optimizing your site in the process. It’s not enough to tell your clients who you are and what you do these days. You’ve got to strategically craft the content on your site (through the use of code optimization, link building, and other methods) in order for it to register with the search engines of the world. This ups your online profile, and ultimately leads to new business.

    3. Start using that old blog page if you’ve got one. One of the simplest, most effective ways to ensure your site continues to rate well with the search engines of the world is to keep it stocked with fresh content. Having an active blog is a great way to accomplish this. Try posting regular content once a month or every couple weeks about certain aspects of your business. Make it educational. Fill it with keywords (or terminology central to your business), and soon you’ll see your rankings improve. You don’t need to re-write War and Peace here. No one’s going to read that anyway. Regular, easy to read, bite-sized content on your blog (unique to your business) goes a long way. So, delete that old post from 10 years ago, the one with all the cobwebs growing around it, and start fresh!

    4. Stay connected with your client base by utilizing your contact email list. Ensure it’s up to date and use it to create regular eblasts, promotions, and newsletters to communicate with your clients. You don’t need to reinvent the wheel here. Keep your promos simple. Re-purpose content from your blog and, with it, craft the occasional newsletter. Another great advantage to using e-marketing tools is many of them offer you the ability to manage and monitor the effectiveness of each marketing campaign in real time. Each app provides built in metrics that allow you to monitor the click rate and conversion rate (i.e., those customers who did more than just window shop or browse) of your latest marketing campaigns, and ultimately the purchasing habits of your customers. Strong stuff.

    5. Utilize social media. Here’s where that old Facebook page of yours (the one that hasn’t been updated in years) comes into play. Take the content from your Blog, or the promos from your latest newsletter and send them out on social. Re-post to your Facebook, Twitter, or Instagram pages. But don’t just regurgitate the content. Tweak it, and edit it for context. This is where you can have a bit of fun with your marketing strategy. Slice, dice, and customize your marketing efforts. Tailor your message to fit the medium.

    6. Do the time. The biggest commitment you need to make when it comes to digital marketing is time. And it’s not always as simple as carving out an hour in your day, at the same time every day. This is ephemeral stuff. Keeping your digital marketing efforts up to date requires stealing time when you can get it. The digital flow of information fluctuates too much to settle for anything less. Being there with something fresh, oftentimes at the spur of the moment, is key. The tools used for your digital marketing efforts are ultimately perishable products. The relevance of information continually ebbs and flows. Your digital marketing strategy will dry up unless you care for it on the regular. Shooting from the hip, and keeping the lines of communication open are key. You already have the tools in place to reach your clients when you get the urge. A stolen moment goes a long way in the digital space, and you never know what posts will resonate with your customers. Sometimes it’s the simplest stuff.

    7. Get buzzed by association! This is an effective and perfectly legitimate strategy in digital marketing. Consider sponsoring a popular event in your area. Well attended, buzz worthy events (and the people and organizations involved with them) often promote themselves organically. Reposting, sharing, hashtagging, you name it. Making room in your yearly marketing budget to support and sponsor these types of events will insert your company name and logo into the digital market stream by proxy. Ride the wave.

    There you have it. The democratization of business right at your fingertips. You have the potential to grow your business, expand your sphere of influence, and multiply your client base with the touch of a button, from the comforts of your office. Knowing which channels to focus on and prioritize is the challenge. It’s OK to pick and choose. The New Year is here. Don’t water down your to-do list with other seemingly more manageable priorities. Keep your marketing strategy front and center, up-to-date, and off the back burner.

    Michael J. Miller is a part of the Go Media team.To learn more about building the right digital marketing strategy for your business, contact Go Media, your Cleveland Digital Marketing Specialists.

    Next up: Tips for Your Business: Don’t Just Network, Engage!

    Tips for Your Business: Don’t Just Network, Engage!

    “There’s no denying that building a professional network is critical for successful business owners, and networking is a great way to establish new contacts and engage with and learn from others,” says Ed Stevens, Chairman and CEO of Stevens Strategic Communications, Inc. “Social media sites like LinkedIn are helpful networking and promotional tools, but they cannot take the place of face-to-face interactions that allow you to expand your network and cultivate quality relationships.” Here are a few sure-fire strategies to connect and engage at your next networking event: 

    “There’s no denying that building a professional network is critical for successful business owners, and networking is a great way to establish new contacts and engage with and learn from others,” says Ed Stevens, Chairman and CEO of Stevens Strategic Communications, Inc. “Social media sites like LinkedIn are helpful networking and promotional tools, but they cannot take the place of face-to-face interactions that allow you to expand your network and cultivate quality relationships.” Here are a few sure-fire strategies to connect and engage at your next networking event: 

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    1. Do Your Homework. When attending a networking event, preparation is key. Find out who else is going to be there, make a list of people you want to meet, and then do a little research so you can talk intelligently to them about their business. If you’re uncomfortable approaching someone, ask someone you know to introduce you.

    2. Set Goals for Yourself. Networking is not just a race to collect as many business cards as possible; it’s about opportunity and making real connections. By setting goals for yourself, for example the number of new contacts you want to make, you can better focus your time and energy on meeting the right people. 


    3. Don’t Just Talk, Listen. “You’d be surprised at how much people are willing to share about issues and challenges in the workplace in order to find solutions,” says Stevens. “You’ll find much more success if you try to help someone solve a problem, even if you are just making a referral or pointing them in the right direction, rather than trying to make a sale.

    “I’ve found that you can’t do everything by yourself in business,” says Stevens. “If done right, networking is an opportunity to meet knowledgeable people, make connections and exchange solutions. Remember, we are all in this together.”

    Want more expert advice? Check out COSE Expert Network, an online forum connecting business owners with creative solutions to the tough questions they face every day. 

    This article originally appeared in the March 2, 2015, edition of Small Business Matters.

    Next up: Don't Just Sell: How Being a Trusted Advisor Can Yield Big Business

    Don't Just Sell: How Being a Trusted Advisor Can Yield Big Business

    Selling isn’t just selling. It’s about building a relationship with your customer. Here’s how you can do that.

    People buy from people they know and trust.

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    You’ve probably heard that sentence a million times. But how do you build that trust with your customer so that you’re able to close your sale? Nationally known sales trainer and consultant Marvin Montgomery says it’s all about becoming a trusted advisor to your customer during the sales process.

    Below are the steps you can begin taking now to gain your customer’s trust.


    Take time to listen

    The first step along the road to becoming a trusted advisor is taking time to listen to what your customer says. This is important because it allows you to sell on value and not price. You can show your client how you will design a custom-made solution for your client.

    Offer a solution

    Once you have ascertained what the customer’s challenge is, you can present your solution. Don’t just do an information dump here, Montgomery says. Walk through a needs analysis once the customer has explained what they’re looking for.

    There’s no such thing as ‘no’

    Don’t use the word, “No.” It’s never “no.” Instead, Montgomery says, you should be using the words, “Not now.” Make plans to follow up with the customer later on to get an update on what their current needs look like and whether your product or service might be needed now.

    The follow up

    By the same token, your sale isn’t complete just because your customer gave you a, “Yes.” Take time to follow up with your customer after the sale and continue to build on the relationship that you started.

    At the end of the day, the techniques listed above will help you overcome objections and better explain how what your company is selling matches up with what your customer needs. For a deeper dive on the power of prospecting, and the latest sales techniques and fundamentals, register for the Nov. 2 Sales Academy, led by Montgomery and his fellow sales trainer Hal Becker.