Sales forecasting tutorial
- 2. Sales Forecasting 1 AbouttheTutorial Sales Forecasting is the process of using the company’s sales records of the past years to predict the short-term or long-term performance in the future. This is one of the pillars of proper financial planning. As with any prediction-related process, risk and uncertainty are unavoidable in Sales Forecasting too. Hence, it’s considered good practice for forecasting teams to mention the degree of uncertainties in their forecast. A Sales Territory is the customer demographic or the geographical area assigned for sales activity to either a salesperson or a sales team. In these cases, a sales manager generally assigns the territory among members of the sales team. Often retailers, franchisees and distributors operate under specific territories. In this tutorial, we will discuss in detail about how sales forecasting and territory planning helps in the growth of a company. Audience This tutorial is designed for people who have entered a sales-based company and are expected to work in the job profiles of salespersons. Understanding Sales Territory and Forecasting will help them set a realistic target and understand the scope of their operations. Prerequisites Before proceeding with this tutorial, you are expected to understand about sales records and how they are used in the financial planning of a company. It will be an added benefit, if you also know the basics of organizational structure and working model of your company. Copyright&Disclaimer © Copyright 2016 by Tutorials Point (I) Pvt. Ltd. All the content and graphics published in this e-book are the property of Tutorials Point (I) Pvt. Ltd. The user of this e-book is prohibited to reuse, retain, copy, distribute or republish any contents or a part of contents of this e-book in any manner without written consent of the publisher. We strive to update the contents of our website and tutorials as timely and as precisely as possible, however, the contents may contain inaccuracies or errors. Tutorials Point (I) Pvt. Ltd. provides no guarantee regarding the accuracy, timeliness or completeness of our website or its contents including this tutorial. If you discover any errors on our website or in this tutorial, please notify us at contact@tutorialspoint.com.
- 3. Sales Forecasting 2 TableofContents About the Tutorial.................................................................................................................................... 1 Audience................................................................................................................................................... 1 Prerequisites............................................................................................................................................ 1 Copyright & Disclaimer........................................................................................................................... 1 Table of Contents .................................................................................................................................... 2 1. SALES FORECASTING – INTRODUCTION................................................................3 2. SALES FORECASTING – FACTORS TO CONSIDER................................................5 3. GENERATING SALES REPORTS...............................................................................8 4. BALANCING TIME AND PROSPECTS .....................................................................10 5. SALES FORECASTING – COMMON HURDLES ......................................................12 6. ASSIGNING RESPONSIBILITIES..............................................................................15 7. SALES FORECASTING – WORD OF CAUTION.......................................................17 8. SALES TERRITORY PLANNING...............................................................................19 9. LOGISTICS VS CUSTOMER SERVICE.....................................................................21 10. SALES FORECASTING – TEAM SELLING...............................................................22 11. RANKING OF CUSTOMERS......................................................................................23 12. COMMON TERRITORY STRATEGIES......................................................................24
- 4. Sales Forecasting 3 Sales Forecasting is the process of using a company’s sales records over the past years to predict the short-term or long-term sales performance of that company in the future. This is one of the pillars of proper financial planning. As with any prediction-related process, risk and uncertainty are unavoidable in Sales Forecasting too. Hence, it’s considered a good practice for Sales forecasting teams to mention the degree of uncertainties in their forecast. Sales Forecasting is a globally-conducted corporate practice where a number of objectives are identified, action-plans are chalked out as well as budgets and resources are allotted to them. The first step to proper Sales Forecasting is to know the things that fall within your domain directly as a salesperson. This usually relates to your sales staff, clients and prospects. Other factors to consider during the setup of a forecast are the negative ones like – uncertainty, abrupt changes in consumer shopping patterns, etc. One of the most common yet basic challenges that the management of companies face in making business sales forecasts is that their usual approach is a “top to down” one. This approach leaves very little scope for interaction with the sales manager and the salespersons during the data collection process. An Example of Faulty Sales Forecasting Many Sales Forecasting reports give numbers like “this prospect will provide $200 million in terms of revenue to the company and the company’s profit will be $80 million, from which the Sales Department’s profit will be $10 million.” Unfortunately, no one ever cares to understand where this number came from. Many times, it just so happens that this number is nothing but an arbitrary marking of revenues and profits based on simple theoretical calculation. 1. Sales Forecasting – Introduction
- 5. Sales Forecasting 4 For instance, your company had earned a revenue of $120 million in the previous year and the company’s profit was $32 million. What the forecasters did was to simply use the same numbers to do a relational pegging and upped the figures by 25%. They did this without even bothering to ask the people working in the field about the ground reality. This type of a faulty planning results in widely incorrect predications and losses in investment oriented expenditures. And this happens because such planning lacks one of the building blocks of SMART planning, i.e., being realistic. Sales Forecasting cannot be conducted out of thin air. There is no magical trick for an effective sales forecast. Only by the sheer combination of previous performances and future assumptions that come out to be ''very strategic” guesses, which are framed after considering the data that is based on ground reality and not projections.
- 6. Sales Forecasting 5 For a successful and accurate Sales Forecasting, it’s necessary to take into consideration the direction from significant departments of the organization, comprising of seniors, managers, sales teams and finally – your own gut feeling. Let’s list down these sources of instructions and how they contribute towards designing a reliable sales forecast. Directions from Top-level Seniors – It may be initially necessary for you to increase your sales by 10%, however your seniors, being wiser, may ask you to reconsider your target depending on promises made to outside investors as well as stockholders. Directions from one’s own manager – These kind of directions are mostly integrated along with the direction from the top level, but their expectations are generally little more conservative and realistic. If the top management gives you a target of 15% sales growth, your manager will tell you what the real expectations are. Direction from Sales Teams – For instance, if the Sales Teams may project a growth of 10% over the management's forecast figure of 20%; this extra-conservative number is a cushion, so that they could increase their chances to beat the sales forecast. Direction from other Entities – Many other entities also take part in Forecasting. Chief among them are the Research and Development department, Human Resource department, Marketing department finance team, manufacturing unit, etc. Once you are done taking feedback and inputs from all these people, the final question to ask is – what is your interpretation of all these factors? Most often a person’s gut feeling is more accurate than all the numbers put in front of him. Although it’s not advisable to go against the company’s decision, it is always a good policy to do further research till the negative hunch doesn’t go away. Role of External Factors While participating in a sales forecast, it is crucial for you to answer after considering both the corporate and the departmental viewpoints that may arise. This will provide the real balance between the expectations of the management and the real-case scenarios that different departments project. External factors have a very significant role to play in Sales Forecasting. This is mainly because they are not dependent on the organizations’ functioning; the organization is dependent on theirs. Organizations study external factors with great detail because they cannot control or influence them. Just as a forecasting can only inform you about the weather but cannot change it. The most influential factor is the competition, where the competition stands in terms of market share, new line of products, recognition of brand, expansion or contraction of the sales force, etc. Also, whether there is a new competitor in the market or if any competitor is losing out in business. 2. Sales Forecasting – Factors to Consider
- 7. Sales Forecasting 6 There are numerous instances where two financially unsound companies enter into Mergers and Acquisitions. Often, these companies form a strong partnership and emerge as a challenging competitor. Managers need to check whether any of their competitors are involved in any such mergers or acquisitions, and if they are, then what is their collective strength and which minuses of each other they are cancelling out. Some people might say that being a salesperson, you should abide by a philosophy similar to all other staff members, i.e., “winning over the numbers is the game”. In fact, the reality is that winning numbers only proves to the clients that you can perform. Getting numbers is fine, however the individual contributions of team-mates is a significant factor in correlation to the culture of the corporate world. You need to consider many things, such as the economic status of the environment you are operating in, whether the spot of business is going through growth, recession, etc. You would also need to check if there are any government-implemented hikes in the interest rates, pricing of commodities and what is the current rate of unemployment. Foreign and domestic regulatory bodies implement policies from time to time, which also dramatically influences your business.
- 8. Sales Forecasting 7 The fluctuations of the Dollar, Yuan and Euro also play an important part. When it comes to regulation, the question to ask is – are the regulatory norms going through any significant changes that could affect your plan in a positive or a negative way? It might initially seem as a great thing to try to revise any forecasts put in front of you in order to improve your opportunities of showing up at the top level, which will give you and your team the privilege to shine among others. On the other hand, other factors play a major role here. You are not the only one who has been given an isolated forecast; other departments have also been given forecasts depending on the same factors that you might want to manipulate.
- 9. Sales Forecasting 8 Generating sales reports is one of the wisest ways of measuring the progress of your sales team staffs. It also comes in handy for your sales team while making productive changes along the way. Anyway, the days of huge sales reports with detailed information are long gone. In the real world, salespeople dedicate very less time towards analysing sales reports, which could be as less as thirty minutes a week. More over, by the reduction of unnecessary paperwork, the salespeople can dedicate the saved time for selling. Some important areas to consider while making reports are the current position of the business deal in the sales cycle – whether a proposal has been requested, prototypes or demos have been asked for, etc. It is also necessary to calculate the amount of time a prospect is within an agreement with a competitor (date up to which the contract is needed to be renewed or expired) and finally, the growth rate of ongoing prospects (updates against quota). Contact Log This is a different kind of report that the salesperson maintains and it can be reviewed by clients on a regular basis. This keeps detailed updates on the current status of contacting the clients. Some updates can be as ‘first contact made’, ‘upcoming call appointment made’, ‘personal sales call appointment made’, etc. 3. Generating Sales Reports
- 10. Sales Forecasting 9 There are some specifications which are followed because just initiating a large number of phone calls or sending a lot of e-mails or business letters does not comply with SMART principles and might just consume your precious time. Clients are well-informed people, so it is necessary for you to have an understanding of the role played by others within the company and how the internal stakeholders will participate in forecasting of the sales business. Every call to a client should try to get information on the following areas – What are the new products and in which development phase are they (R&D, engineering, etc.)? What marketing agendas are being implemented for the promotion of demand? Is there an increase/decrease anticipated in the marketing budget, if so, how much? How financially stable is the business? What do financial executives suggest? What amount of human resource is required for the progress? What are the recruitment circumstances of the company (whether hiring new recruits or on hold, etc.)? Finally, all the information collected needs to be sent to the management. It is crucial for you to be realistic. The important point here is that you should try to have as much say and support as possible when making a forecast. This will enable all parties to get details and information necessary for them to satisfy their prominent stakeholders and various constituents.
- 11. Sales Forecasting 10 Managing time in Sales Forecasting is very different from that in other tasks. It is simply because it deals in a very dynamic process, so the various tools and techniques that sales managers have in their arsenal will be quite different than other managers. The reason behind that is they have to deal in daily prospects – sharing and number-delivering. Prospect planning plays a very significant role when it comes to sales forecasting. With the correct skills and the required mindset, the team can pursue this process. Experts all over the world agree that it is nearly impossible to strategically analyze your prospects, if you do not know the value of time and the same experts will tell you that, not only the sales people, but even most of the managers are poor at managing time. To maximize the use of your time to its fullest, you have to start with developing a desire to manage time. If you are newly appointed as a sales manager, you might fortunately have the privilege to take a fresh start. The factors that influence your time are: Demands made by the senior management of the Corporate. Demands made by your manager. Demands made by your sales team. Demands made by other departments. Demands made by your customers. Demands made by your family and friends. Other private demands. You can easily conclude that all the above factors are built upon various demands of different people that eat into your productive time. However, by looking at them from a different point of view with respect to what others demand from and what you demand from yourself, you could be able to save some time. If you have a look at the effects these demands have on your time, you will notice that it is the customer-centric values that come into play here. Something that is valuable to you might not be as valuable to somebody else. Normally, the term “value” indicates your perception and if it is right or wrong from your point of view. A good practice would be to come up with a simple personal strategy for yourself. The depth of the details you go in individual fields is entirely your choice. This may seem like a very basic exercise, still it will put into words some of the thoughts you have been contemplating. 4. Balancing Time and Prospects
- 12. Sales Forecasting 11 This may encircle areas such as – What is your sales forecast today? Where do you see it in the next six months, three years, six years, etc.? You could divide the categories into immediate, inter-mediate, quarterly, bi-annually, annually, etc. Again, you will be astonished to know how change can take place over time due to age and situations. So, you should see through this on a regular basis. The moment you would have a better command over the value you associate with time and its management, you would be able to come up with ways to manage time better.
- 13. Sales Forecasting 12 Once you start organizing your work, you will be able to come up with a clear estimation of the amount of your time you should spend on each activity. Still, there is room for exceptions to be made. A wise thing to do would be to keep and maintain a journal where you can keep a record of time spent on different activities in the journal. This gives a clear, transparent idea on how you are keeping up with the plan or the amount of help and practice is necessary in this area. You should first focus on dividing your time into the specific categories according to your responsibilities and priorities, which for example may include: Visits by costumers Personal time Report writing time Reports reviewing time Planning and strategy making time Sometimes, it is observed that despite all time-saving measures taken and all work efficiently organized, there are still hurdles that people face while designing sales forecasting reports. These hurdles are largely caused due to undesirable interferences in work or due to internal conflicting numbers from departments running multiple projects or disagreement on the sales 5. Sales Forecasting – Common Hurdles
- 14. Sales Forecasting 13 forecast numbers as either too conservative (sure but low-profit prediction) or ambitious (unsure but high-profit prediction). Drop-Ins Sometimes your seniors and your team members do not need your report immediately. However, they might still walk to your desk or cubicle and engage in conversations or share opinions that are time-taking. Such actions are called “drop-ins”. Some examples of the various types of drop-ins are: When you are given unsolicited advice on forecasting A customer crisis fell upon one of your sales staffs. One of your colleagues suggests referring to some independent survey. You would initially think that the first and the third may help you in your task. However, following these steps takes away your attention from concrete, first-hand evidence and shifts it towards third-party survey results. The second one may seem like just some unproductive time duration, but the truth is that a large chunk of sales forecasting is tied to inter-departmental working, but not on individual cases, unless it happens to be a big player. Keep in mind that you have included goals and objectives in your plan. Just compare these activities with the priorities you associate with your current task and choose accordingly.
- 15. Sales Forecasting 14 Putting Fires Out It is a common occurrence in Sales Forecasting to come across some strong difference of opinions. When a forecasting is done, it puts a number up for every department. In such cases, dissent is bound to happen. For example, the forecasting said that the Sales Department will register a profit of 10%. However, the Sales Department might feel it is too ambitious. If you think it is not an emergency situation, you do not necessarily have to overreact the same way as others. If others see your overreaction, your reputation may go down, instead of going up. Remember that, these unwanted conflicts can be sorted out by relating them to your plan. Other Projects Very often other auxiliary projects may pop up that may require some of your time and effort. Though they may need your attention, you can push them back in the priority list. Moreover, the ideology here is to stick to the truth. In case of these projects, you should consult the manager and others associated to prioritize things.
- 16. Sales Forecasting 15 So far, we have come across many responsibilities to take care in sales forecasting. There is a lot of expectation from people, both in the company and outside to deliver a forecast as accurate as possible. When faced with such an expectation, many people feel pressure and indulge in a common mistake of taking on as many activities as possible. Job insecurity is one of the biggest reasons behind this. It is common for people to believe that the more functional they are, the more secure is their job. Another reason for this is that many managers think that other people might not understand the complexity of the job. Well, the truth is that your team is as capable as you are. If you have a feeling that the team is unable to perform a wide variety of tasks, then there may be a serious problem either in your mindset or in the skill sets of the team, both of which are matters of grave concern. Although, truth be told – the latter case has a very low chance of happening, as all the employees are recruited by experienced HR personnel, which means you may have some talented staff members and you should believe in them and share your work with them. After all, this is what teams are meant for. Your job is to ensure the salespeople face the least possible number of hurdles on the way. This is where assigning job responsibilities becomes indispensable. There are several advantages of distributing work in Sales Forecasting. One of the primary ones is that Sales forecasting involves getting accurate data from different departments and assigning that responsibility to the people of other respective departments, which will ensure 6. Assigning Responsibilities
- 17. Sales Forecasting 16 comprehensive data collection. The other benefit is that it gets the job done on time and as per the schedule. Assigning the work properly offers the following advantages: It can ease the workload of the manager. It can improve the efficiency of the organization. It can be used to setup a growth oriented environment. It can give the managers the free time for focusing on other strategies. Enlargement of the Job The measure of the enlargement of an employee’s job is the extension of the responsibilities that he/she undertakes. In a Sales Forecasting team, it is important to know the limits up to which a person can work without feeling stressed out. When the person gains proficiency over these new responsibilities, managers can extend their duties regarding other areas. Enrichment of the Job The assignment of new responsibilities is the backbone of the enrichment of a person’s job. This not only means tedious duties, but also the duties whose purpose is well defined. If the job is carried out well, the self-esteem of the employee and the confidence within the employee’s team will be boosted as people become responsible and become good at achieving this goal.
- 18. Sales Forecasting 17 In a Sales Forecasting team, you will be working with sensitive details of purchases, sales, inventory, etc., which many organizations might not want everyone to know about. These details can’t be shared with everyone in the team. The following tasks are to be taken care of by the manager only: Highly sensitive tasks (For example: Reviews of salaries, Discipline) Tasks that involve the settlement of conflicts among employees. Tasks that are not well defined or that are uncertain in nature. Tasks that involve confidential information. It is equally important that the concept of accepting assigned work is wilfully embraced by the team members. They should realize that it is not just a desire, but a necessity for successful operation of sales. However, the goals and objectives must be clearly specified. It is only possible if the managers know the capabilities, strengths and weaknesses of staff. If your staff’s workload is well known to you, you will find it easier to assign them suitable newer responsibilities respectively. The trick is to never overload the staff and to always abide by the standards of performance. In case, people don’t find Sales Forecasting easy, then a manager should be willing to provide adequate training to his team and keep a keen interest in their progress. If the team performs as expected, it is always advisable to give away appropriate rewards to deserving and successful candidates. Dealing with Pushbacks In case of an opposition, you might require to address the task and may also need to either modify or reconsider it. A Pushback can also be a symptom for a bigger issue. For example, an employee who is excellent in computer skills might feel that you are making him/her generate more and more spreadsheets and reports and are unable to balance the load of the work with other members of the team. The team members becoming victims to this type of a trap is very common, especially when somebody masters a certain attribute that is crucial to the task. Think deeply before mistaking someone’s expertise as someone’s obsession. As you would never want to make a star player feel repulsive towards his game. 7. Sales Forecasting – Word of Caution
- 19. Sales Forecasting 18 Reverse Assignment Sometimes, it might be needed of you to work in coordination with an employee. Often such situations involve a managerial ploy called “Reverse Assignment”. The meaning of this is to assign a task to your direct senior. This may feel like being a tad bit awkward at first, but it is almost same as any other type of delegation. Although, you would only be able to delegate the tasks that come within their domain, excluding the administrative tasks. Delegating up requires to be approached with great caution, but if done in the right way, it might really make you visible and give you an opportunity to have more conversations with numerous high profile position holders within your company.
- 20. Sales Forecasting 19 A Sales territory is the customer demographic or the geographical area assigned for sales activity to either a salesperson or a sales team. In these cases, a sales manager generally assigns the territory among members of the sales team. Often retailers, franchisees, and distributors operate under specific territories. Territory planning is a critical area in order to acquire the right results for you as well as for your team. The building blocks of sales forecasting are based on territory planning. To provide a proper direction to the team both in present and the future, it is necessary to have a good idea of sales staff members and their respective prospects. This process relies on efficient management of time and resources. The factors that determine Sales Territory Planning: The number of consumers or their households in appropriate vicinity of the store. The average sales volume/unit area for similar-sized shops in the same location. The annual expenses of the customers in that region on the product. The best way for a company to achieve success is by creating stronger teams all over the organization. You may have been in a number of industries and may have access to a wide range of sales channels to use. This may fall anywhere within the field of internal sales (tele sales), distributors and self-dependent reps (indirect workers of your company and are typically paid on a commission basis. Real-life Scenario However, in a real-life scenario, the customer service department of your company might be more indulged in up-selling instead of just taking care of transactions and troubleshooting. Add to that, your company’s prospects could be as variable as smaller individuals or top global companies. 8. Sales Territory Planning
- 21. Sales Forecasting 20 Your company might also have been trading with various business entities within the same company or maybe in different locations or maybe buying offices. As a final note, you might be catering to multinational companies or global prospects. Some of the most usual ways are by: Geography – By state/province, Postal Zip code, Area of the country, etc. Industry – Selling to steel industry, pharmaceuticals industry, etc. Product Lines – Selling A, B, or C products. Assignment – If you contact a prospect, he should be assigned to you only. Major Prospects – Separation of prospects that maybe over a specific size. Global Prospects – Separating global structures and local prospects. Unforeseen factors – Various unique scenarios. These are some of the many possibilities for companies to try out various combinations and integrations of the various channels of sales. Furthermore, the determination of what is sold by whom and to whom (usually termed as the sales territory) can be done in numerous ways.
- 22. Sales Forecasting 21 When it comes to territory planning, it is important to consider Travelling Logistics. If a capable salesperson requires one, ten, or sixty touches (touches may mean outreach of marketing, voice calls, sales calls in the field, or any mixture of the three) to impress a prospect and make him a customer, then there must an official approximate assigned value of each touch. Another important point is to determine the interval of time associated to each of these activities regarding prospecting (which maybe on a daily, weekly or a monthly basis) and the usual frame of time needed to achieve at a certain present amount of business with all the types of pre- existing prospects (that may range from Higher Value to the Lowest Value, etc.). Customer Service Maintenance Once a prospect becomes a customer, it is important to find out the amount of time that must be dedicated to maintain the prospects of that customer and the persons that collectively make up the sales team – whether it is a salesperson, a coordinator of sales, a sales support personnel backing up the technical end or any team of the aforementioned people. Some important questions to ask here are: Does the prospect contain various contacts of costumers (that may be an agent, buyer, management team, officer of a senior level, etc.)? Is there any involvement of team selling (For Example, prospect manager, engineering team, research and development team, sales manager, etc.)? What are the expenses associated with each type of sales carried out by your department/team (time and money spent on overhead, travel, demos)? In addition to this, it is also necessary to know what are considered as special situations, like a significant order that is incomplete, but possesses the potential to increase the whole team's sales by more than one-fifth once finalized or if there are any new areas in the market that can be explored with a new product in line which has immense chances for growth. In the end, it’s important to know where the company stands today, when it comes to a normal sale and to what degree the conditions of sale will change according to the salesperson, prospect, circumstances, etc. For this, you should always be updated about the number of customers/clients/prospects that you’re dealing with. It is also helpful to be sure to know your job profile – whether you are in the role of being the only point of contact or are authorized to act like a sales support personnel. You should also be aware of the degree of involvement of your manager or any senior managers in the sales process. 9. Logistics vs Customer Service
- 23. Sales Forecasting 22 This is a brand new Concept in Territory Planning as most of the companies, to be more specific, the midsized ones, may choose to implement a mixture of sales territory and prospect managing techniques. Whatever the case maybe, your job could also further diversify from being a part of your core sales team to spontaneously taking care of your own group of clients. The selling of a team is very common in today’s world. Various salespersons are assigned for handling every aspect of the sales process. This may vary from the commencement of a sale to application of a solution, training, and maintenance of prospects. This is why the selling of teams could be figured out in a various number of ways according to the industry, environment of the sales organization and demands by the customer. Most salespersons implement different types of systems for analyzing their current relationships with clients and opportunities for new business. After making efforts for the identification and categorizing of prospects into current business customers and potential new customers, the sales teams need to also put together a combined effort to make sure that they handle all queries of the customers and convince him to go for the sale. 10. Sales Forecasting – Team Selling
- 24. Sales Forecasting 23 What you should focus on is setting the ranking for various customers, as well as various opportunities according to their values while moving forward. In this manner, time, money, and resources can be focused on those prospects that are the most valuable to your organization. You have the privilege to implement anyone of these ranking methodologies to determine the centre of your focus. The crucial question is not how their ranks are being symbolized, but to determine who remains where. You could have anywhere from one client to thousands of clients and/or prospects within your territory. Considering the following factors: The industry that you work for; whether the industry possesses a limited number of larger prospects, numerous smaller ones or a mix of both? The parameters that divide your territory by – geographical regions, lines of product, targeting costumers, channel of sales, etc., and the way in which your competitor’s prospects are covered. The people taking part in the process of sales maybe from your or your customer's team. Some short-term or long-term risks are always taken, depending on the nature of your sales changes with time and other situations. All these are based on the time of the year, climatic conditions, styles, etc. 11. Ranking of Customers
- 25. Sales Forecasting 24 Different companies have their own unique sales strategies and different factors that affect them. So, it is important to find out the relevant ones and the ones to consider. When you have completed performing some of this entry-level analysis, you will realize that such analysis of existing customers and new possibilities is done to identify their overall significance. Now it is time for you to focus on the expenditure of time, so that more time is given to tasks that have the highest overall significance”. Taking this as a reference, it is needed for you to define your own boundaries. For some better understanding, let us divide all prospects into three ranking groups – ‘'Bigger Value'', ''Medium Value'' and ''Smaller Value” as shown in the following table: The above figures are used only for the sake of demonstration and will be variable greatly according to your industry. The value associated with a prospect is not something that can be made up, simply on a random basis. Some more factors we need to take into consideration that can influence new business prospects are: When a new buyer takes over, who is capable of either slowing down or speeding up the process of buying. When the customer has a lag in budget to facilitate your solution within a specific period of time. When the customer has an agreement with a different supplier until a certain stipulated date. When customers are taking part in a merger and/or acquisition and new purchases are being delayed. When there are more than one decision makers in case of the selling or buying of an organization whose approval is needed to make the deal. The managers should be informed whether a salesperson has moved out of the ''discovery'' (assessment of needs) stage, or is going to make a presentation on sales. If he is going through the discovery stage, the buyer may possibly be in the evaluation stage. This may happen if the client asks for a sample of the product, or requests him for a demonstration. 12. Common Territory Strategies Size of The Prospect Value Associated with It Greater than $1,000,000 High From $500,000 to $1,000,000 Medium Less than $500,000 Low
- 26. Sales Forecasting 25 It can be easily seen that a common idea here is that all the factors mentioned are related to the cycle of sales or the structure of the sales, also known as the cycling of prospects. This is crucial to ensure that the opportunities are divided on the basis of their priorities. You, along with your salespeople, as a team can identify where you are in the sales process. You should also keep the following points in mind while setting a territory strategy: Any technique needed to manage prospective customers should to be embraced by the team in such a way that it goes hand-in-hand with the environment of your business. For instance, strategies that regulate sales may not only vary because of the status of the prospective customers versus the customer, but may also vary with the number of existing customers versus that of new customers. The range of the prospects handled by your sales team may vary from thousands to as few as less than 10 prospects. Your sales team, along with your efforts and advice, will need to know how to use time in the best possible ways. It is also needed for you to keep a record of and agree on the course of action of each member of your team. By doing this, you will develop a great idea over the prospects they handle and the territory they work on. It is also equally important to understand how to manage your time in a productive way. You can clearly notice that the management of time is an important attribute because it corresponds to the territory planning and the strategies for prioritization of the prospective customers.