Ed Soehnel

We created a 2009 sales forecast by month for our main product. This forecast took about 4 weeks to complete, as we had many discussions and iterations before arriving at a plan that we felt was aggressive, but attainable and realistic. The Plan rolls up each retail account that we have or expect to attain.  At a granular level, each account has weekly sales plotted out for the year.  After adding up all accounts, one monthly sales figure is plotted out in one row, with each column representing the month, and an end-column that sums up the months to reveal our goal for the year. We save the Plan spreadsheet and it is set in stone and does not change.  It represents our goals for the year.

We copy The Plan spreadsheet and name it “Forecast”.   It changes weekly, if not daily, based on new information that we learn on each retail account.  Since we created the spreadsheet to track weekly by retail account, we can make very detailed changes as needed.  Like the Plan spreadsheet, it adds up all accounts and plots one monthly sales figure in one row, with each column representing the month, and an end-column that sums up the months to reveal the year-end number.

Next, we compare in real-time the variance between our Plan and Forecast. For example, if January Plan was 100,000, but forecast is only 80,000 (which changed based on new information that has come in since the Plan was set), we have a deficit of 20,000 for the month. The importance of knowing this is not necessarily that we have a deficit in January, because often we cannot make changes in a month to make up for the deficit. We see a deficit of 20,000 against our year-end number. Knowing this now allows us to figure out how to make up for the 20,000 deficit as the year rolls on.

We also have a third row, “Actual”, which is real sales numbers that happened. Our Forecast and Actual should be fairly close because forecast is being adjusted constantly based on new information, including past sales.

The Plan and Forecast are sales and revenue focused, not profitability focused.  Therefore, all sales/revenue functions of the organization affect the Plan and Forecast, so if we are not meeting goals set forth in the Plan, as indicated in the Forecast and Actual, we analyze our activities to determine what the problem may be and what we need to do about it.  A few basic examples:

• Is the sales team to retail accounts being proactive and aggressive in facilitating the placement of our products onto retail shelves?
• Is marketing maximizing the brand awareness of the products through effective use of media channels so that the product sells at retail?
• Is R&D on schedule to produce the next product that marketing and sales can use to continue growth.
• Is operations meeting production quotas as required to ensure that there is available product to sell and retail accounts do not fall into back-order situations?

The Plan and Forecast and the analysis from the variances guide us into doing the things to help keep us on plan and meet our year-end sales and revenue goals.