The Big Lie about Forecasting

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I was with a customer last week that is using CRM for “accurate forecasting.” Let me say, before I go any further, that I believe that CRM can help with forecasting. In fact I believe it can “greatly improve” forecasting. However, I do not believe there is any such thing as “accurate forecasting.” Let me explain:

First, for those of you who know me, I believe words mean things. Therefore , my first approach to understanding is to look up definitions. So a simple Google search for the definition of the word “Accurate,” and you receive the following:

ac·cu·rate
/ˈakyərit/
1. (of information, measurements, statistics, etc.) correct in all details; exact.

The definition of accurate is “correct in all details; exact.” What? Tell me it’s not so! So your saying that an “accurate forecast” is a forecast that is correct in all details; exact? Right! Anyone that has been around the forecasting world for more than a week knows that’s impossible. Why? Well, let’s look at the definition of the word “Forecast.” Once again a simple search reveals the following:

fore·cast
/ˈfôrˌkast/
1. a prediction or estimate of future events, especially coming weather or a financial trend.

So, a forecast is a prediction or estimate? Now you’re seeing it, my customer wanted CRM do deliver a “prediction regarding their future sales that was correct in all details; exact.” I don’t care if you spend one billion dollars per user per month on your CRM, it cannot do that! Accurate forecasting is an oxymoron!

The good news is that this is an area in which CRM software implementation, along with a solid customer-centric business strategy can be of great use. Here’s what you should expect CRM to help you with forecasting:

1) CRM can help you to obtain a more consistent forecast. When everyone measures and tracks potential sales in the same manner, it leads to a more consistent forecast.

2) CRM will allow you to constantly improve upon your forecast by allowing the tweaking of the process that drives the forecast.

3) CRM helps you to keep the forecasting process simple. Your sales person knows that their time is their most valuable asset and you don’t want to implement a forecasting process that requires hours a day to keep up-to-date. Managing forecasts should be simple and reproducible. Keeping it simple will ensure you see similar results from all sales people and you should be able to repeat it over and over again.

Don’t strive for an accurate forecast, because you will always be disappointed. However, don’t let the fact that an accurate forecast is not possible stop you from improving your forecasting.

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