Whether you are a young company or a seasoned salt managing the marketing activities of an established corporate division, revenue projections are key.
Revenue projections are the foundation for resource allocation and the future prospects of any enterprise, be it a new start up, or an established division of a Fortune 500 company. There is an art to creating projections that are optimistic enough to keep money flowing, yet realistic enough to keep everyone in your organization firmly focused on reality.
One of the biggest mistakes a new marketer can make is in creating overly optimistic projections in the hopes that management will see them positively. The "positive"effect only lasts until reality is measured against the projections. If the projections that were submitted far exceed what actually happened, then the new marketer has lost credibility, sometimes irrevocably. Worse, your operations department may have built product to these numbers which is now sitting in inventory without a home to go to.
When you receive a forecast from the field, it is important to truth test it in many ways. First of all, keep firmly in mind the fact that sales people make commissions based on exceeding their forecast. If they report future lower numbers, then exceeding these numbers will be easy and they will make more money. This is known industry wide as "sand-bagging". On the other hand, newer sales people always believe that they will conquer the world, and their forecasts tend to reflect ideal conditions of temperature, pressure, and phase of the moon.
As the marketer responsible for bringing truth to the sales forecast, you will have to balance the sand-baggers against the crusaders in order to arrive upon the most likely revenue projections. Be sure to talk to each, and ask them for 1) risk factors 2) basis for the numbers 3) competition and what they are doing and 4) price positioning.
YOU will be the ultimate determiner of what is truth and what is fiction. Your operations people are counting on you to sort all of this out, as they will build product based on your guidance. Building too little and losing business because you cannot move quickly enough is just as bad as building too much and having excess inventory going nowhere.
As another check and balance exercise, take a look at your overall market. Where is it going? If it is expanding, then the optimistics may be more accurate. If your industry is going through a downturn, then it is best to apply a weighting factor reflecting the percentage downturn to the numbers you receive from the field.
Good luck, and remember to always ask the tough questions of everyone in your organization.
