In the summer, our analysis of 152 companies indicated that best in class companies had a 5% variation whereas the median was 25%. You might be wondering how many firms saw 25% more channel sales than forecast – two of them. The rest received forecasts for sales that never materialized.
As much as your CEO or CFO may want a tighter forecast, you are in an arms-length relationship and have less control over external partners. Put yourself in their shoes.
A typical partner:
- Represents hundreds of products that range from simple items to solutions that require complex sales expertise
- Has no fixed sales cycle length
- Serves many masters (Customers, internal executives, vendors)
The payoff just is not there for them to allow you to impose more control over their forecasting. They can’t forecast differently for every vendor they work with today.
The traditional approach to handling this dilemma with partners is to give the whole channel forecast a hair cut of about 10-15%. Some will come in over their original forecast and that will make up for many misses from the rest of the partners. This simply addresses a symptom rather than address root cause.
The core issue is that your sales processes are different and thus the forecasts will be as well. Your process is designed specifically for what you sell. Your partner’s process is likely less robust given the variety of things they sell. The diagram below illustrates how they can differ.
If your partner is giving you a weighted forecast across all stage of their sales process, it may vary substantially to how you would forecast the same business.
Let’s focus on the things we can control. Take the following steps to improve your overall channel forecast accuracy:
- Sit down with your partner to understand their sales process, close percentages and sales forecasting methodology
- Map their process to your process and note the 2 or 3 points where the two processes match up best
- Agree on a transformation formula that you will apply to their forecasts going forward
- Ask for the detailed data for future forecasts and perform the transformation
- Share the resulting forecast with the partner for comment
- Leverage your new forecast and monitor its accuracy
This may seem like more work but once you have it in place, it is much better in the long run. Several of our clients have moved to this methodology and have eliminated 100’s of hours from the monthly forecasting exercise.
- Your partner’s deal with too many vendors and products to have a sales process that is specific to each one
- Forecasts are the direct result of a meaningful sales process
- Work with your partners to map their sales process to yours
- Devise your own modified version of your partner’s forecast based on how your sales processes align
To learn more about effective sales process, view our recorded webinar on “The Truth About Sales Methodologies“. What have you changed recently from a channel management perspective to improve partner forecast accuracy?