One of the hardest things to do in business is forecast sales: precisely. No matter how much effort and research you put into it, you never know for sure if and when your customers will buy your product. However, foresight is critical to running your business. If you forecast too low, you may not be able to respond to your demand and customers can choose another provider. If you forecast too high, you can create unnecessary inventory, potentially becoming outdated. Just as bad, inventory immobilizes your cash.
There are several external factors that affect your sales forecast, including economic conditions, competitor activities, and other priorities that can delay your customers’ purchasing decisions. Many describe sales forecasting as more of an art than a science, as you try to predict when your potential customers will actually place an order. Some industries, especially those with long lead times or complex facilities, have an easier time projecting sales 12 months in advance because orders are placed far in advance. However, most companies operate with much shorter lead times, which makes forecasting sales difficult.
There is an element of psychology in prediction. So make an effort to read between the lines while trying to understand what your salespeople and customers are really telling you. This is difficult, but over time you will learn which of your salespeople or sales channels are overly optimistic and which are overly conservative. Study the trends in your actual purchases compared to your forecasts to better estimate the actual demand for products. Your ability to “crack” a forecast submitted by your team can be a real asset.
When you expand internationally, forecasting sales becomes even more difficult. Due to the distance, their influence and methodologies may not be closely followed. Remote sales organizations may think more independently than groups located at headquarters. Your daily participation is also lower, so the judgment factors you have used for the national forecast cannot be used for the international forecast. At first, you will need to rely more on forecasts presented at face value. Over time, you will have a better idea of how to adjust the submitted data.
The biggest challenges in forecasting international sales are due to culture. Different cultures have different ways of “seeing” things. Sometimes the differences are subtle, but other times they are quite obvious:
Some cultures will rarely disagree with their boss or headquarters. If you are pushing for a higher sales forecast, there will be no pullback. However, when the results come in, you are likely to be disappointed.
Some cultures will always try to provide a lower prognosis than they think they can achieve. This gives them more comfort and a greater sense of success when they reach their sales goals.
Some cultures will always provide you with an optimistic prognosis that can only be achieved if the best case scenario occurs. Unfortunately, the best results don’t happen every month or every quarter.
These cultural challenges are as true for your employees as they are for your channel partners. They all follow similar patterns. The best way to neutralize these challenges is to communicate. The more you visit your overseas sales staff and channel partners, the better you understand their cultural foresight philosophy. In addition, being present and seeing first-hand what is happening in a market will allow you to better judge the real demand. If your only interaction with your sales resources is when you review forecasts, don’t expect to be able to make fine adjustments to the numbers submitted.
Here are some ways to break down these cultural barriers so you can get an accurate forecast. First, use a soft approach when starting the forecasting process. You may have a tendency to push for better results, but it may not work with your international sales teams, depending on the culture. Being a tough ‘field general’ when it comes to forecasting is often not an advantage. If you demand and apply pressure, expect results that fall into the first or third category; Your team will superficially agree with your expectations or provide an overly optimistic forecast so that they are not challenged.
Then set up sessions to review the forecasts after they are submitted. These review sessions should take place within days of receiving the written forecasts so that the thought process is still fresh in everyone’s mind. Ask your international sales teams to present their forecasts to you, followed by a question and answer session. In these sessions, ask questions to find out how your team came up with the forecast. Ask them to explain the process they used to develop the forecast, and not just their numbers. Ask lots of questions. The more you dig, the better the precision of the final product will be.
Then track the accuracy of your forecast over time. This is necessary to make fine adjustments to the initial forecasts. Keep a spreadsheet showing which forecasts were submitted, and then add actual results as they occur. Comparing historical forecasts to actual results serves as a guide for planning adjustments when the team delivers future forecasts. As you follow this process with your international offices, you will begin to see patterns to help you refine your final forecasts.
Just as important, spend time in the field with your international sales teams. You and your team at headquarters should visit them frequently. When you go, go out with them to the field. Don’t spend all your time in the office. You should spend more than 50% of your time in the field visiting clients, resellers, and partners. Get to know as many clients and partners as you can and ask lots of questions about their businesses. The more you know about your business, the better you can assess the sales team’s forecasts and make adjustments.
Finally, apply your own good judgment to the forecasts presented. Do not take the numbers provided at face value. Based on information gathered in meetings, discussions with other members of the organization, and site visits with customers and partners, you should adjust the estimates as appropriate. The more information and questions you have asked, the better the adjustments you can make. Ultimately, you are responsible for the results, so do not hesitate to review the forecasts you receive from your sales teams.