Risk Is Everything You Don’t Know.

Playing ostrich won’t help you here. Popular lore has it that an ostrich buries its head in the sand in an effort to avoid danger. In a sense, it’s the classic reaction to ‘what you don’t know won’t hurt you’. So maybe putting your head in the sand might not be such a bad idea after all when it comes to sales forecasting.  When it comes to forecasting we equate risks. If there’s any correlation between to risk, it’s knowledge, or more pointedly, a lack of knowledge. So to manage the risk of what I don’t know, which in my case is considerable, I deploy techniques that at least minimize risks: qualified pipeline accounts.

Regarding risk, there’s a boatload we don’t know.

The entire insurance industry is founded on a single principal: risk. Their success or failure is based on their ability to assess their exposure versus how much you will pay them to alleviate some or all of the potential for loss.

Insurance is by no means even the tip of the iceberg of businesses offering you shelter from risk. Banks provide a safe haven against someone stealing your money. Casinos have an interesting twist on risk: they paint a picture of risk being less than what you can gain. We spend untold billions of dollars every year on the global risk of war, famine, and flood and crime protection. Everything has some element of risk including sales.

Key to understanding sales risks: compare and prioritize sales.

The key to minimizing sales risks is the understanding of how to interpret the make up of pipeline or funnel information. Through the aid of CRM, we can view reams of pipeline data suggesting who will buy what and when, but we seemingly have little ability to manage the risks associated with achieving the sales projections.

It’s common to manage on a rep-to-rep basis with close attention to the risks associated with each potential sale. Now, more than ever, the concentration on cost of sales and deployment of personnel means managing risks on an Account by Account basis. The risk is not just getting the sale or not, but also the terms or profitability of the transaction and the timing versus resources needed to implement the order.

This is where comparison analysis is needed most.

Just like an insurance actuary, there is a comparative analysis conducted to determine the odds. In sales these comparison items can include timeliness, profitability, suitability and long-term market potential. If you want to keep it simple, comparing the account to profitable ones provides you with a range of just how good a deal it is/is not, or what factors work in your favor. Comparison Analysis can affect how you negotiate and reduce your risks.

The ability of both the rep and the company to manage the deal process without taxing it to death is a valid management and financial concern. Sometimes it makes sense not to do a deal if it breaks the back of the staff along the way and you have no reserve for more appropriate deals.

The ability to keep the account on a multiple sale basis has a huge worth in terms of equity and profitability. If you got the deal on the lowest cost basis and provided no value added component, you can project the long-term viability of the account is probably limited to how long you will tolerate the situation (and not how long you can grow together). There is no risk in these cases because it is now a simple time issue, not a business development/retention issue.

Sales Forecasting: Prioritizing potential sales.

Forecasting to be of any value must contain a level of reasonable certainty. To gain any sense of reasonableness one needs a definite level of confidence in not just the numbers but what went into creating the projections. Simple probability guesswork has proven to be useless because it has no objectivity. When guessed right it’s a response to what our casino friends refer to as luck rather than objectivity.

One of the best methods is to forecast what is going to close first and not what the biggest deal is. What is closing first is the transaction where you have the highest probability of not losing or in other words the fewest minuses and the most pluses.

Just like being at a casino, your best odds are playing games you know best and those with the lowest loss equations.  Take the deals with the most plusses and ignore their size for a moment. Focus what it’s going to take to bring these in, allocate dedicated resources and expect what you projected. The certainty level of projections will sky rocket, the allocation of resources more definite and the need for sales at any cost should diminish.

MosaicCRM Experts Tips

• Qualify: Each sales stage/gate should be well defined and include client directed activity

• Comparison Analysis: Set up any number of comparative analysis fields in your Opportunity console e.g. value analysis, key solution/problem, competitive forces, road blocks, hot points, promotion, source etc.

• Account Focus: Monitor buying cycles, life terms, simple account comparisons with Rating analytics, industry, geography, channel

• Prioritize: Apply a strategic and weighted list of pluses and minuses to each opportunity and focus on the most pluses
  

______________________________________________________________________________________________

About the ostrich and the sand thing and the early bird gets the worm.
In a study of over 200,000 ostriches spanning a period of 80 years, no one reported a single case of an ostrich burying its head in the sand or for that matter, even attempting to do so. That’s almost the same odds as making money owning a breeding pair of ostriches. The over 2 million ostriches worldwide can’t fly and they don’t have to fear going extinct either, they’re the second fastest land animal in the world at 40+ mph.

Even though there are over 1700 commercial applications of ostrich body parts, have you ever wondered why they haven’t commercialized to the point where Denny’s offers Ham and Ostrich Eggs? Well, there’s a good reason why not. An average nest consists of ten or more eggs. Apparently, some ostrich chicks hatch earlier than their brethren do. When they do, the mother breaks the remaining eggs and uses these to feed the early birds. Gives a whole new meaning to the early bird get the worm theory, doesn’t it?

______________________________________________________________________________________________

Written by Bill Noonan, Founder & CEO MosaicCRM

______________________________________________________________________________________________