The ability to see a clear view of current and anticipated sales has long befuddled companies who sell through distributor or channel partners.
And for good reason.
The CFO’s Challenge
Unlike traditional B2B or B2C sales models, companies that sell through distributors or channel partners often deal with a host of different systems, processes, and even sales definitions. For large companies that might mean hundreds of disparate methods, which makes accurate and meaningful forecasting an inherently difficult process.
Sure, your channel tools may give you a clear view of the numbers at quarter’s end, but from a business performance perspective this information is too little too late to be meaningful.
And as much as you may want a tighter forecast, your arms-length relationship with your external partners means you have less control. Plus, since your partner likely represents multiple vendors, it doesn’t make sense for them to provide separate forecasts for every vendor they work with.
No company can precisely predict how much revenue they will make in a given month, quarter, or fiscal year, just as a meteorologist can’t precisely predict the weather. There are simply too many variables to consider. Forecasting, rather, isn’t about perfection. It’s about getting close enough to make smart decisions.
The Potential Payoff
Sales forecasting can play a major role in a company’s success. According to research from the Aberdeen Group, companies with accurate sales forecasts are 10 percent more likely to grow their revenue year-over-year and 7.3 percent more likely to hit quota.
“The ability to see a clear, real-time picture of your current and predicted sales has significant benefits to all aspects of your business performance,” says Justin Johnson, CEO of LeadMethod, “including sales, finance and manufacturing teams.”
Accurate financial forecasts are particularly important for publicly traded companies that provide quarterly guidance to investors. Manufacturing benefits from improved alignment between production and sales, preventing stock outs, optimizing inventory, and aligning production schedules with actual market demand.
Meanwhile solid forecasts boost sales performance and promote realistic goal-setting. When you can eliminate weak opportunities from the pipeline, your partners can avoid wasting time and resources on an opportunity that is not likely to close.
Finally, a current view of the opportunity pipeline enables pipeline managers to identify early warning signals and glaring risks that may pop up, giving them a chance to tackle these issues at an early stage before they affect the performance of your partner.
“We are consistently finding that companies that take steps to increase their pipeline visibility gain the insights they need to maximize the potential of every sales lead,” explains Johnson. “If you have at your fingertips the ability to quickly visualize revenue projections and sales rep performance in real time, then you have the information you need to grow your business or make it more efficient.”
How to Take the Guesswork Out of Forecasting
Here are four strategies to fix a broken (or non-existent) forecasting process to gain crystal clear pipeline visibility:
1, Deploy a single, shared platform among your network of distributors for one overall system of record. One connected network of channel partners all communicating and collaborating on the same platform about action items, deal status, and opportunity tracking will give you the pipeline visibility required for accurate forecasting.
2, Single, shared definitions of deal stage and closing probabilities. If you are all speaking the same language — and seeing the same view of opportunities — it’s far easier to see an accurate picture of your overall pipeline across distributors, and react to it.
3, Near-time/real-time updates on deal progress made possible by integrated system and process integrated with how distributor sells. Leveraging data such as conversion metrics, response times, and trend analysis provides an up-to-the-minute view of channel performance.
4, Closed-loop communication across all distributors in network. A real-time tool that enables ongoing feedback between you and your partners creates a “closed loop” around opportunity status, lead quality, and needs — without the hassle or cost of surveys or call centers.
Adopt these strategies and your channel sales forecasting efforts will go from cloudy to abundantly clear in no time.
Philip Gordon is manager of channel engagement for LeadMethod, a channel sales and performance management software company.