Marc Benevento
Industrial Market Insight
B2B sales planning commonly uses estimating techniques that require numerous iterations of sales projections. These processes consume significant time that would otherwise be used for selling. An analytical approach can eliminate the guesswork and speculation that is commonly associated with forecasting business sales and costs. Simple techniques can be used to improve the accuracy of forecasting and planning, while at the same time reducing the time spent on these activities. This allows your sales team to spend less time planning and more time selling!
Take these three steps to start using analytical forecasting models:
Step 1: Understand drivers
The first step in forecasting is understand the forces driving what you are trying to measure. This is clear if you are measuring input material cost, but can be less so if you are trying to forecast sales. To understand what drives B2B demand, start by segmenting your sales by the application or end market in which your products are used.
Step 2: Find & track appropriate indicators
Once the sales segmentation is finished, identify indicators that are published regularly and quantify activity in each segment you’ve identified. Be as specific as possible. For example, it is desirable to separate residential construction from commercial construction, and automobile manufacturing from heavy truck manufacturing. Use the US Industrial Indicators and Global Industrial Indicators to find indicators that may be useful for you.
Step 3: Establish the correlation between indicators and outcomes
Conduct a regression analysis to identify which indicators have the strongest relationship to your costs or sales, and if they are leading or lagging indicators. Most spreadsheets have this capability. Once this is done, simply continue to track the relevant indicators and use the equation to forecast sales.
That’s all there is to it. Don’t worry if it isn’t perfect at the start. Due to the systematic nature of this approach, it will be more accurate and repeatable than simply asking your sales force or customers for estimates. Sources of error can be identified and eliminated over time. If you have questions about segmenting your sales, locating indicators, or establishing a correlation between indicators and outcomes, contact Industrial Market Insight to see how we can help.
Marc Benevento is the founder and managing director of Industrial Market Insight, a consultancy focused on the needs of manufacturing companies seeking performance improvements and organic growth. Industrial Market Insight has tools and resources to help uncover and market needs and translate them into new business opportunities. More information can be found at www.industrial-market-insight.com or by email: info@industrial-market-insight.com