SALES EFFORT

Agenda

Sales Planning

Pitfalls to avoid in planning sales

Sales forecasting techniques

Managing the sales budget

Sales Quota

Sales Territory

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Agenda

Sales Planning

Pitfalls to avoid in planning sales

Sales forecasting techniques

Managing the sales budget

Sales Quota

Sales Territory

3
Sales Planning

 The sales planning process is very important for an organization as success

cannot be achieved by haphazard actions. Sales planning process is usually
done in the second stage of planning and can be carried out only when the
company has a strategic marketing plan in place.
 The first thing that an organization does is make a strategic marketing plan.
Once the strategic marketing plan is made, the organization knows the segment
that has to be targeted, and also, the consumer buying behaviour for that
segment. Accordingly sales planning is done.
 The 6-steps to successful sales planning is outlined in the upcoming slides

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1)Setting Sales Process objectives

 Your sales planning is going to start only when you have defined the objectives
for the sales team. For example – The objective of an air conditioning company
might be to increase the market share of the company. For this, it will have to
penetrate a new geographic market. Thus the objective of sales planning is to
penetrate a new market to increase market share.
 Both Internal and External Analysis is needed
a) Internal Analysis
*SWOT Analysis of Sales Force
*Who will sell, what selling methods, what sales tools, what are available
b) External Environment Audit
*PEST Analysis
*Competition

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2) Determine the actions necessary

 Once you know the objectives of your sales plan, you have to forecast what
actions you need to take and the operations which are needed in effect before
you implement the sales planning. This is a crucial step in the sales plan
process because if you do not forecast the correct operations strategy, then in
future you will face operational difficulties which will hamper you in meeting your
sales objectives and plan.
 For example – An air conditioning company needs to penetrate a new
geographic territory to increase market share. Thus it needs Sales as well as
service operation backup in this territory. The marketing department should also
know the new territory so that they can come up with aggressive marketing
tactics to target that territory.

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3) Organize your actions

 Coming back to the first point – haphazard actions will never bring results. Once
you know the operations that are necessary, you need to organize
your sale planning. For example – The first priority of the air conditioning
company in new territory will be to have a service setup. Than to have a sales
plan with setup and the necessary channel in place. Once that happens, they
will have to bombard the new territory with aggressive marketing tactics. Thus
an organized action plan needs to be made during the sale planning process.

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4) Implement the Plan

 Once you have your actions planned and organized, implementing them is the
next step. Although it may sound easy, there are many real time and real world
problems you may face while implementing a sales plan. For example – The
customers of the new territory might not respond to the new air conditioners
entering the market. On the other hand, the product might be picked up readily
by the customers and you might not be able to adapt with the
unexpected demand which can make your brand lose face from the start.

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5) Measure results from your sales plan

 As in any planning process, the fifth and very important step in the sales
planning process is to measure the results. Unlike advertising, sales results are
very easy to measure because everything is documented and recorded. For
example – the air conditioning company will measure the total sales plan of the
geographic territory in study. At the same time it will find out the competitors
sales as well for record keeping

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 6) Revaluate Plan

 When you have the sales records in hand, ensure that you analyse the sales
records to know whether or not the sales planning process has succeeded. The
analysis will tell you what you did right and what went wrong. Thus, based on
the analysis you can know the good work that has to be repeated as well as the
bad work which has to be avoided.
 For example – Your sales report shows that you have succeeded in penetrating
the new geographic territory. This stage will help you set your objectives for the
next year and you will plan increasing your brand equity through quality of sales
and service. If on the other hand, you have failed to penetrate the market, then
you need to study the reasons which caused the failure and in the next year,
sales planning should be done taking these negative results into account and
the sales objectives should be re planned.
 Remember that sales is a dynamic process and your competitors are
themselves watching you all the time. In the above example, the air conditioning
segment is one of the vigorously growing segments across the world and it
comes with its own share of challenges. Thus your sales planning will go a long
way in implementing your organizations visions as well as in implementing the
strategic marketing plan
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Agenda

Sales Planning

Pitfalls to avoid in planning sales

Sales forecasting techniques

Managing the sales budget

Sales Quota

Sales Territory

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Pitfalls to avoid while planning sales

 Wishful thinking: You want your business to grow, so it’s understandable that
you might be over-optimistic in developing your sales plan. Start by looking at
last year’s forecast and results. Were you being realistic? For new businesses,
avoid working out the level of sales you need to be viable and putting this as
your figure. In psychology, we’d call this the confirmation bias, but it’s also just
straight up bad business.
 Ignoring your own assumptions: Make sure your forecast is based on your
assumptions about the market. If you assume the market’s going to decline and
you’re going to lose some market share, it just doesn’t make sense to forecast
increased sales

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Pitfalls to avoid while planning sales

 Moving goalposts: For the most part, you want your forecast to be finalized
and agreed within your sales plan template on a set timeframe so you can get
onto the business of, well, business. Avoid making adjustments to the goals
outlined in your sales plan—even if you discover you’ve been overly optimistic
or pessimistic in your sales planning. This document should be a benchmark to
judge your success or failure.
 Not asking for consultation: Your sales team are in the trenches with you and
probably have the best knowledge about your customers. So, why wouldn’t you
ask their opinions, give them time to talk to their customers, and come to an
agreement about the targets that go into your sales plan?

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Pitfalls to avoid while planning sales

 Not setting aside time for feedback: Having set your sales goals, you need
someone to come in and challenge it. Get an experienced person—an
accountant, senior salesperson, or qualified friend—to review the entire
document before taking it company wide and solidifying your sales plan

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Agenda

Sales Planning

Pitfalls to avoid in planning sales

Sales forecasting techniques

Managing the sales budget

Sales Quota

Sales Territory

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Sales Forecasting Techniques

 Sales forecasting is a key component of any business. It helps companies make

better business decisions and affects many areas such as the sales process,
operations, marketing planning, and budget allocations. Unfortunately, many
sales leaders struggle with implementing effective sales forecasting techniques.
In fact, just 31% of businesses consider their forecasts to be effective in terms
of accuracy and helping guide pipeline management.
 Inaccurate sales forecasts can have serious business-wide repercussions. If
you overestimate sales, you start to spend money that won’t be coming in.
Underestimating sales leaves you ill prepared for an influx of orders.
 It’s crucial to get your sales forecasting methods right early on. Correct sales
forecasting has numerous benefits including:
1. Spotting problematic issues in advance
2. Evaluating sales opportunities
3. Tracking sales rep progress
4. Preparing post-sales support such as implementation, materials, support, and
infrastructure
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Opportunity stages forecasting

 Opportunity stages forecasting allows you to calculate the chances of a deal closing in
the pipeline. It is best to use when you want an objective understanding of your pipeline
stages (your sales reps’ opinion on deals, while possibly accurate, are subjective). Also
use when you want to assess your sales team performance and check where they need
improvement moving a prospect down the pipeline.
 Most businesses can break their pipeline down into a general set of stages:
1. Prospecting
2. Qualified
3. Quote
4. Closing
5. Won or lost

 The farther along a deal gets through this chain of stages, the better chance it has of
making it all the way to ―Won.‖
 To adopt this forecasting technique, you’ll need to analyze and understand your sales
team’s past performance. It requires extrapolating, so a solid understanding on the rates
of success from each stage is necessary to get a good estimate on future results.
 If about half of your deals that reach the quote stage end up as won, then you know
you’ve got a 50/50 shot for all the deals in that stage during a given quarter.
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Example

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Example

 Multiply a deal’s potential by the win likelihood (this can be determined in most
CRMs). Say that you have a $1,500 deal opportunity with a 10% likelihood to be
won. Your opportunity forecast would, therefore, be $150. Complete this
exercise for each deal in your pipeline and add for the overall forecast amount.
 Based on the image above, let’s review three deals in the pipeline. Deal 1 is in
the incoming stage. Deal 2 is in the qualified stage and is a $2000 opportunity
and Deal 3 is in the negotiation stage and is a $1000 opportunity. Multiple Win
Likelihood by each deal amount:
1. Deal 1: 10% x $1,500 = $150
2. Deal 2: 25% x $2,000 = $500
3. Deal 3: 75% x $1,000 = $750
 The overall forecast amount for these three deals is $1,400.

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Advantages

 This basic calculation allows you to quickly estimate incoming revenue.

 You also have a better understanding of future opportunities based on past
information.

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Disadvantages

 Although it does make a numbers-based prediction, forecasting based on

opportunity stages is an imperfect calculation:
 It can’t account for individual characteristics of a given deal, such as a repeat
client versus a new one.
 The deal value and close date have to be accurate and up-to-date in your CRM.
 In most cases, success will be binary.
 Opportunity stage forecasting is a good technique for assessing deals in your
pipeline and understanding incoming revenue and sales rep performance. Just
remember to take your sales reps’ opinions into consideration for each deal to
effectively combine objective and subjective elements and get a more accurate
forecast.

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Length of Sales Cycle

 Forecasting by the length f your sales cycle is a quantitative method that helps
you predict when a deal is likely to close. Rather than analyzing success rates
based on stage, this approach makes assessments based on the age of the
deal. It requires your team to crunch how long your average sales cycle is. Use
this technique to objectively learn about different types of deals in your pipeline.
 The basic formula for average sales cycle is
Total no. of Days to Close Deals / No. of Closed Deals

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Example

 To provide a more in-depth illustration, let’s say you have five deals you recently
closed. Calculate the amount of days it took to close each one:
1. Deal 1: 62 days
2. Deal 2: 60 days
3. Deal 3: 59 days
4. Deal 4: 55 days
5. Deal 5: 60 days
 Total: 296 days
 Divide this number by the number of deals (which is five) and you get your
average sales cycle of 59.2 days or roughly two months.
 Now that you know your average sales cycle, you can apply to individual
opportunities in your pipeline. Maybe one of your sales reps has reached the
proposal stage with a lead after one month. Based on your average sales cycle
length of two months, you might forecast that the rep has a 50% chance of
closing the deal.

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Advantages

 Since it’s not tied to strictly defined categories, using the length of sales cycle
approach can open up the option for creating algorithms based on different
types of deals. So you could have a separate set of numbers for the average
repeat customer, or the average lead who comes from a website query.

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Disadvantages

 Like the opportunity stages approach, this method still requires that accurate
data finds its way into your CRM. Especially if you have multiple equations in
the works, you’ll need to make sure that deals are being tagged and categorized
correctly so that the math gives you a reliable prediction.
 This technique allows you to objectively answer questions about when a deal
starts, when it will end, where your sales team is in the process, and what skills
they need to be applying to close the deal.

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Regression Analysis

 One of the most mathematically focused choices for forecasting is regression

analysis. Use this technique if you want an in-depth quantitative review of
factors that might be affecting your sales and to make changes, if needed, to
your sales process. Success with this method requires a good grasp on
statistics as well as on the factors influencing your company’s sales
performance. It involves calculating the relationships between variables that
impact sales. Traditional steps with a regression analysis include:
1. Determine the reasons for forecasting (what you want to learn and why).
2. Determine the factor that is being affected such as sales (your dependent
variable).
3. Determine factors that might be affecting your sales (your independent
variables).
4. Determine the time period you want to review.
5. Collect the data for both dependent and independent variables.
6. Choose a regression model and run.
7. Look for correlation between variables.
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Example

 You want to forecast sales for the next year to help you plan for budget
allocations and to determine if more sales reps need to be hired. Sales will be
your constant, dependent variable — the factor that you are trying to
understand.
 To complete a single variable analysis, let’s say you determine that the variable
impacting sales include sales calls. This is your independent variable.
 Dependent Variable (y): Sales (SALES)
 Independent Variables (x): Sales Calls (SALESCALLS)
 You collect data for both your dependent and independent variables over an
eight-year time frame: your annual sales for 2010-2018 and the number of sales
calls during that time period.

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Regression Analysis: Example

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Regression Analysis: Example

 The simple regression model equation is Y = a + bX. Your equation could

therefore be: SALES = a + b * (SALESCALLS) with a representing the intercept
and b representing the slope respectively. Use a regression software (Excel has
this capability) to run the analysis. Note that you will not have to compute a or b
yourself — this will be generated by the regression software.
 You are looking for the ―line of best fit‖ to approximate the relationship between
the variables. Your plot might look something like in the next slide:

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Regression Modelling

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Regression Example

 b, the slope, is 0.907 and a, the intercept is -313.

 Based on this model, sales calls do look closely correlated to sales and may be
causing better sales. However, just because a variable is correlated does not
mean it is the cause. You have to consider a variety of factors too in-depth for
this exercise. This is also a simple linear example. You will normally have a
multiple linear regression with multiple independent variables such as number of
emails sent, number of demos given, number of meetings held, etc.

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One more example
Names of the Sales No.of Sales No.of Copiers
Representative Call sold
Aishik Mitra 20 30
Raivaath Dey 40 60
Aarna Paul 20 40
Avijit Halder 30 60
Debosmit Jana 10 30
Onkar Kar 10 40
Rayan Mallick 20 40
Sarthak Mitra 20 50
Srijani Ghosh 20 30
Resh Banerjee 30 70
220 450
Use the Least Square method to determine a linear equation to express the
relationship between 2 variables. What is the expected no. of copiers sold by a
representative who made 20 calls? 32
Least Square Method: the Line

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The Steps

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Calculation

Names of the Sales Representative x y x^2 xy

Aishik Mitra 20 30 400 600
Raivaath Dey 40 60 1600 2400
Aarna Paul 20 40 400 800
Avijit Halder 30 60 900 1800
Debosmit Jana 10 30 100 300
Onkar Kar 10 40 100 400
Rayan Mallick 20 40 400 800
Sarthak Mitra 20 50 400 1000
Srijani Ghosh 20 30 400 600
Resh Banerjee 30 70 900 2100
Summation 220 450 5600 10800
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As per the formula

 m (slope) comes to 1.18

 b (y-intercept) comes to 19.04

 Therefore for 20 calls made by a sales rep, the figure comes to 42.64

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Advantages

 Regression analysis helps you determine which variables actually have an

impact on your sales.

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Should you use Regression Analysis for
Forecasting?

 Regression Analysis is a highly data driven method which is why it takes skill
and regular practice to do it well. Not only will you need to refine your ability to
execute it, but to understand the results generated therein.
 However, if you are able to properly run your regressions, soon your company
will be able to uncover valuable information about the company that can be
used to drive growth in the future.
 Much like the other methods of sales forecasting, regression analysis may not
necessarily be the optimum solution for your business. To that end, it is
imperative to know how each method works and when it works best in order to
determine if/when it is most suitable for your company.
 Moreover, this does not have to function as a standalone tool; your business
might very well benefit from integrating more than one method particularly if one
is a quantitative method designed to counterbalance and complement a
qualitative method.

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Disadvantages

 While this approach can yield very accurate forecasts, it’s one of the most
advanced levels of forecasting. For some companies, being able to account for
many variables that go into a successful sale may require a PhD in
mathematics. In addition, a large quantity of clean and accurate data is required
for meaningful results.
 Regression analysis takes skill and practice to execute and understand results
properly. However, running regressions correctly can reveal valuable
information about your business that will help with future growth.

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Forecast stages

 This qualitative approach is best used if you want an individual sales rep
assessment technique and/or if you want to determine the expected value of
deals. It relies on the insights and intuition of the sales reps rather than on a
deal moving through pre-determined stages. With forecast stages, reps make a
personal projection about the outcome of any given sales opportunity. For
instance, they may be certain that a customer is ready and willing to make a
purchase, or the opportunity may need several things to come together for
success.
 The exact terminology may vary from one business to another, but the key here
is that the reps are making a judgment call on how likely each of their deals is to
close. When this information comes at the beginning of a deal’s lifespan, it can
help managers and execs to get a long-range view of results. The sooner they
have that intel, the better their financial predictions will be.

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Forecast Stages

 Your sales reps make predictions on opportunities in the sales pipeline and sort
into categories. These categories typically include:
 Best Case
 Commit
 Pipeline
 Closed/Won

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Example

Your sales rep might record something like the following for two deals:
 Deal 1 – Best Case: ―I’m not sure about this opportunity, the lead seems
hesitant and has mentioned a competitor several times. I think the only way he’s
going to buy is if Rob contacts him with a customized proposal on Monday.‖
 Deal 2 – Commit: ―I just started on this profile, but given certain indications in
our phone calls and emails, I believe that this customer is going to buy. I’m on it
with the demo and dedicated to closing this one!‖

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Advantages

 Since this technique is not subject to waiting until an opportunity makes it to a

later stage, you can forecast in advance. Your sales reps also know the
opportunities/deals best and should be able to make closer predictions.

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Disadvantages

 The downside to this approach is that it’s not a hard science. It’s subjective. It
requires that your whole team of reps is able to make honest assessments of
their potential clients and their own skills. If you don’t have confidence in your
reps, then this approach will lead to lots of disappointment for your business.
 This technique gives you an inside look at your sales team’s opinions on deals
and helps you determine if additional steps need to be taken to close them.

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Scenario writing

 Our final technique is another qualitative approach, which is excellent to use for
long-term planning and for possible extremes that data may not always be able
to account for. Just like forecast stages, it also is dependent on a subjective
understanding of business and sales. In this approach, you project the likely
outcomes based on a specific set of assumptions. You draft several different
pictures that could unfold based on the different sets of assumptions, say best-
and worst-case scenarios for the deals in progress

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The 8-Step scenario planning process

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Example

 Scenario writing is based on storytelling. Say that your focal issue is your yearly
sales. You then move to key internal factors that you believe are affecting your
sales such as sales calls, or inquiries received, or demo meetings held. Some of
the external factors that might have an impact are competitors or government
restrictions.
 For critical uncertainties, examine what difficulties might arise over the next
year. Will the customer start leaning more towards new technology? Will
possible government policies affect the nature of your business? Based on this
information, you can begin to develop specific scenarios and understand how
you would go about handling each one.

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Advantages:

 This approach helps you think strategically about what could happen with your
sales and helps you make plans accordingly. Think of it as a type of contingency
plan.

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Disadvantages:

 As with forecast stages, this strategy involves at least one person having a keen
eye for both business activity and psychology. Both of these subjective
strategies are more an art than a strict science, so they’re best used as a
complement to a more numbers-driven method. Combining the strengths of
both approaches will be more likely to create a full picture of what the future
holds for your company.
 For scenario writing to be effective, plan your scenarios around uncertainties
with your business and have a clear action plan if one of the scenarios were to
occur.

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Projection of Past Sales

 The projection of past sales method of sales forecasting takes a variety to

forms. The simplest is to set the sales forecast for the coming year at the same
figure as the current year’s actual sales, or the forecast may be made by adding
a set percentage to last year’s sales, or to a moving average of the sales figure
for several past years. For instance, if it is assumed that there will be the
 same percentage sales increase next year as this year, the forecaster
 might utilize a naïve model projection such as

•This year’s sales are inevitably related to last year’s. Similarly, next
year’s sales are related to this year’s and to those of all preceding
years.

Projecting present sales levels is a simple and inexpensive

forecasting method and may be appropriate for companies in
more or less stable or ―mature‖ industries — it is rare in such
industries for a company’s sales to vary more than 15 percent
plus or minus from the preceding year. 50
Time-Series Analysis

 Not greatly different in principle from the simple projection of past sales in time-
series analysis, a statistical procedure for studying historical sales data. This
procedure involves isolating and measuring four chief types of sales variations:
long-term trends, cyclical changes, seasonal variations, and irregular
fluctuations. Then a mathematical model describing the past behavior of the
series is selected, assumed values for each type of sales variation are inserted,
and the sales forecast is ―cranked out.‖
 For most companies, time-series analysis finds practical application mainly in
making long-range forecasts. Predictions on a year-to-year basis, such as are
necessary for an operating sales forecast, generally are little more than
approximations.
 Only where sales patterns are clearly defined and relatively stable from year to
year is time-series analysis appropriately used for short-term operating sales
forecasts.

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Drawback of the Time Series Method

 One drawback of time-series analysis is that it is difficult to ―call the turns‖.

Trend and cycle analysis helps in explaining why a trend, once under way,
continues, but predicting the turns often is more important. When turns for the
better are called correctly, management can capitalize upon sales opportunities;
when turns for the worst are called correctly, management can cut losses.

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Moving Average Method

 Are used to allow for market place factor changing at different rates and at
different times . With this method both distant past and distant future have little
value in forecasting . The moving average is a technique that attempts to
―smooth out ―
 The different rates of change for the immediate past , usually past three to five
years. The forecast is the mean of these past periods and is only valid for one
period in future. The forecast is updated by eliminating the data for the earliest
period and adding the most recent data.

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Moving Average: Example

 Take for Example in the following table 7.1 .The sales volumes for periods 3 , 4,
5 are totalled and divided by 3 to derive the mean of 366.6 which is the period 6
forecast. If the company
 operates in the stable environment a short 2 or 3 years average
 will be most useful . For a firm in an industry with cyclical
 variation , the moving average should use data equal to length
 of cycle.

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Thank you
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Bibliography

 https://blog.getbase.com/5-essential-sales-forecasting-techniques
 https://www.mathsisfun.com/data/least-squares-regression.html

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