In the prior article in this series, What's The Value Of That Prospect?,I talked about establishing a current "expected value" for eachprospect based upon the potential value of the sale and the probability of closeat a stage in the sales cycle.
The next step is to combine the values of all of your prospects to create atotal sales forecast. This involves three steps:
1. Total the expected values of all prospects
The chart below shows a forecast based upon four prospects:
|Probability of Close||Expected Value|
Note that the total forecast is considerably less than the $155,000 in salesthat would be achieved if all of these prospects closed, but it gives a muchmore realistic view of what is likely to happen.
Create this same chart on a weekly basis, and you'll quickly see whether:
- Your total sales forecast is sufficient to meet your plan
- Your projection of sales is growing or declining -- your sales pipeline is becoming more or less full
2. Add a closing time frame to each prospect
This is the most challenging part of any sales forecast. In general, prospectsbuy much later than they say they will, so you have to take their projections,and those of your salespeople, with a grain of salt.
As with the closing percentages you assign to each sales step, it is best touse historical data to determine how long the typical prospect takes to movefrom each step to the buying decision: A prospect who receives your proposaltakes X weeks, on average, to reach a decision.
Here is a table for the same four prospects as above, with their expectedvalues spread over three months, reflecting projected closing dates:
Adding time frames to the forecast gives you a clearer view of sales peaksand valleys. This may indicate a need to pour extra effort into certainprospects to close them sooner.
3. Extrapolate from the known to the unknown
The preceding steps give you a month-by-month forecast of business to be sold.But since it is based solely on known prospects, it results in a forecastshowing a steady decline in sales over future periods. For your long-termforecast, you need to project from the near-term periods:
- Are you seeing a pattern of rising, declining or flat sales?
- What changes must you make to your team's sales activity to refill the prospect pipeline for future periods?
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