Forecasting: business management tool, or colossal time waster?

As I consult with companies on forecasting and improving forecasting I am amazed by the complex formulas and difficulty that many organizations add into their forecasting methods. This led me to create a webinar series titled “4 ½ Keys to Improving Forecasting.”

While this post will not completely restate what an hour-long webinar will, I am compelled to write it for those that want a quick glimpse into the world of forecasting. There are several types of forecasting (revenue forecasting, sales revenue forecasting, product forecasting, demand forecasting, etc.) and several methods of forecasting (annual client analysis, quota/sales target, quote extrapolation, opportunity pipeline, and historic); however, this article mainly deals with revenue and sales revenue forecasting. SalesVantage.com has a great article on the types of forecasting and the key to accurate sales forecasting.

Let me start by stating my three basic principles on forecasting:

Principle #1: Don’t let perfect get in the way of better.

      Since forecasting is not an exact science, there is not way to have a perfect forecast. The best you can hope for is a better forecast. The key is to constantly improve on your forecast. A great way to do this is to review your forecast data on a regular basis (I recommend monthly) and review areas where your forecast diverges from actual sales data.

Keep in mind, improving forecasting does not happen overnight. A good forecasting methodology takes months of tweaking to stabilize, and will require a lifetime of tweaking as factors like industry trends, product mix, government regulation, and economy change.

Principle #2: Keep it simple.

        While no one forecasting methodology will work for all businesses, I recommend combining data from at least two sources. Since most companies have access to their historic sales, this should be one of the sources, but keep in mind historic sales do not take into account new products and services and how they will affect future sales. The other source I recommend is the sales opportunity pipeline. An enterprise CRM system like 

SalesLogix

         

or 

    SugarCRM

       can be a big help in this area.

        However, whatever you choose, keep it simple! The forecasting process doesn’t have to be a hyper-complicated process that involves complex mathematical equations and hours of man-hours each month. Keep in mind that most business are not that sophisticated and don’t usually have statisticians on staff.

        Any professional sales person knows that their time is their most valuable asset and you don’t want to implement a process that requires hours a day to keep up-to-date. Your process to manage opportunities and forecasts should be simple and reproducible. You should expect to see similar results from all sales people and you should be able to repeat it over and over again.
        If the process is not unbelievably simple for the major contributors to the data, your forecast numbers will be suspect at best.

        Principle #3: Numbers Lie

            Just because you have a system for tracking opportunities, whether a spreadsheet or a contact management system of some sort, and just because each opportunity has a sales potential number with a probability does not mean that you have a forecast.

        Without common definitions and without constant end-user education your forecast results will vary greatly from salesperson to salesperson. Everyone doing their own thing with different beliefs of what an opportunity is and what makes an opportunity have a 75% chance of closing will drive any forecaster insane! Without education, consistency of action and understanding of definitions across the organization you will end up with is a bunch of numbers, not a forecast.

        Even after you have perfected the process your numbers will be inexact. The trick is knowing where they are wrong and using the forecast to draw a picture of how your business is performing.

        The biggest take-away I hope you would get from this post is that forecasting is not like a Ronco oven. You cannot set it and forget it. Maybe I should have made this the first principle, because it is that important: forecasting is NOT as set it and forget it strategy for businesses! Forecasting is the driving factor providing you with information to make intelligent business decisions. Without it businesses have difficulties in managing inventory, cash flow and planning for growth.

        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.

        Luke Russell 

        Resolv, Inc.

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        Lost Customers can Jump Start Your Sales!

        As I am reviewing one of my latest webinars, “Transforming the service Department: 3 Insights into Achieving Happy, Profitable Customers Through Service,” I am reminded that while there are many ways to improve customer service and increase customer retention, one of the best ways is to seek out complaints.

        CRM reduces customer complaints
        I’m not talking about putting a complaint box on your receptionist’s desk either. I’m talking about actively contacting your customers (preferably your best customers) and asking them what your company could do better. I am assuming your customer already likes your product or service, and that’s why they are your customer; I’m thinking you may want to direct them to specific process and communication areas.

        You see, there are several surveys out there that talk about why customers leave and in each survey the results are in the vast majority that customer leave for “service problems”. In multiple articles you will see similar results, usually between 68% and 70% of the time customer service is listed as a reason for customer defection. Here are a few articles that chart this out:

        http://www.customerthink.com/blog/5_steps_to_better_customer_loyalty_cus…

        http://marketingjournal.blogspot.com/2005/12/why-customers-leave-part-1….

        http://www.focusedmarketing.info/customers/why-do-customers-leave.html

        http://clientk.com/2009/01/25/why-your-customers-leave/

        So you get my point. Customers leave based on a feeling. They don’t feel you appreciate them. They don’t feel like they matter. They don’t feel like you pay enough attention to them. The list could go on and on!

        Since about 70% of customer retention is based on a feeling, the best way to find out how to make a customer feel good is to ask them what you can do to improve. Ask in relation to processes like:

        • Order placement
        • Order processing and notification
        • Order fulfillment
        • Order delivery
        • Post delivery communication
        • Overall communication throughout the process

        When they share an idea for improvement, seriously consider it, as they are giving you a way to retain them longer as a customer.

        The good thing is that 90% of customer retention is about communication. Be proactive in your communication (especially about negative communication – price increases, late delivery, back-order) etc. and you will have a customer that “feels” your company.

        One more tidbit. You most likely have lost customers because of them not “feeling the love.” Well, according to “Customer Winback – How To Recapture Lost Customers – and Keep Them Loyal” by Griffin and Lowenstein, you have a 20-40% chance of closing a sale to a lost customer. This twice as good as your odds of closing a sale to a prospect. Therefore, if you want to boost your sales quickly, review the customers you lost over the last couple of years, determine which ones you want to invite back, and call them and ask them what you can do to win their business back. Then it’s simple, make the change and invite them back.

        The better news is a CRM system, implemented in line with your business strategy, can help. Here are a few ways CRM software may help your business:

        • Gives you a single source for all customer related data
        • Allows you to track and manage and respond complaints and service requests
        • Alert you related to your customer
        o Next service due
        o Follow-up calls
        o Change in average order size
        o Change in total sales – rolling 12 months
        • Alert your customer on your behalf
        o Order entered
        o Order status updates
        o Delivery notification
        o Service issue follow-up

        Luke Russell 

        Resolv, Inc.

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        CRM is CRM, right?

        I have been asked the same question several times in the last week or so, so I thought I should blog about it. The question, “What makes Resolv different?”


        So here goes … First, I have been working in the CRM industry since 1998.  That’s right, I have been doing nothing but CRM consulting and CRM implementation for over 13 years.  Over the course of time, I learned a few things, but one thing really stands out.  That one thing is:

        Implementing CRM is not success.

        SalesLogix CRM Success

        What I mean is that when I started in the CRM industry, I started working for a SalesLogix Business partner.  This partner would sell CRM as a need that all companies had.  A company would bite, and the goal was to implement CRM.  We would successfully implement CRM, and we had many successful failures.  We failed because implementing CRM software should never be “the goal;” it is part of the solution.   This means for an implantation to be a success, businesses need to define what need or needs that CRM software will play a role in solving.

        When I started Resolv, I vowed that we would not implement successful failures.  If a company’s goal is simply to implement CRM, Resolv is most likely not the right partner for them.  However, if a company is looking to implement CRM in response to real business needs and goals, we are the CRM company for them. 

        It’s rather simple; our goal is to help our customers to be unbelievably successful! We implement CRM software in alignment with solid business strategies.  We understand that CRM software, process, and culture all must be in alignment with business goals for a CRM implementation to be a success.

        Luke Russell 

        Resolv, Inc.

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        Harnessing the Value of a Consultant

        I have been consulting on CRM (CRM best practices, CRM user adoption, and CRM implementations) for over 13 years.  During this time, I have learned a thing or two about CRM.  I have spoken in over 70 seminars on CRM covering such topics as: Avoiding CRM Pitfalls, Realizing ROI in a CRM implementation, Improving Forecasting, Increasing Customer Retention, etc.  The list is quite long, actually.  So why am I telling you this?  Because, over the past 13 years I have seen many customers successfully harness my knowledge, and the knowledge of my team, to their great profit; I have also witnessed many others who truthfully didn’t gain anything from a relationship with Resolv.  Which brings me to my point, how can you harness the value of a consultant?
         

        First, I believe that a company needs to understand the difference between a "consultant" and a "value added reseller".  According to Webster a consultant is "one who gives professional advice or services : expert"; likewise, according to Wikipedia "A value-added reseller (VAR) is a company that adds features or services to an existing product, then resells it (usually to end-users) as an integrated product or complete ‘turn-key’ solution. This practice occurs commonly in the electronics industry, where, for example, a VAR might bundle a software application with supplied hardware."  Unfortunately these two definitions do not help to draw a difference and there-in lies the inability for some companies to truly harness the knowledge of a consultant.
         
        So, what is the difference?  In my own words (and in relation to CRM) a VAR adds value to their clients by implementing CRM to meet a company’s self-prescribed expectations and guidelines.  Everything they do is related to the product or products they are implementing.  While a consultant may do this, they also do many of the following:
        • Seek to understand the current business and user culture and make recommendations for change related to CRM and CRM system roll-out and integration
        • Review current processes and relay the need to change processes as systems change with recommendations for an improved process
        • Actively seek to avoid known areas of failure and major pitfalls through change management
        • Ultimately, a consultant assesses the weaknesses of an organization (in relation to a CRM implementation) and offers recommendations and solutions to address the weaknesses.  Often a consultant is called upon to assist in implementing the recommendations.
        If you always do what you've always done ...Knowing this, it is easy to see why some companies do not receive value from a consultant.  Many companies are simply looking only for a VAR to implement a list of items developed internally, rather than have someone consult with them as to the viability of their ideas and assist them with best practices.  They do this believing that they know their business better (which they do) and they have a solid understanding of what CRM is (most likely not the case); however, they have a fear of change, so they simply seek to implement a CRM system with as little change to their processes, user experience, and existing methodologies as possible.   Therefore, in their reluctance to change, or their fear of change, companies avoid the process and culture sides of a CRM implementation and simply implement features and functions, basically keeping the Mark Twain adage alive: "If you always do what you’ve always done, you’ll always get what you’ve always got."  The bottom line:  Simply implementing CRM software is not doing something differently.
         
        The goal of a consultant is to ensure that you don’t always do what you’ve always done in relation to CRM.  But change can be frightening, and is therefore avoided by many companies; even change for the better.  So, companies rely on internal resources (who have got them to where they are now) to implement CRM and the change related to CRM, rather than following the advice of an expert who has multiple times more knowledge of the way to successfully implement CRM software for maximum impact.  Ultimately, A CRM consultant understands the roles process and culture play in the overall implementation of a CRM system and recommends the best course of action for a successful implementation.
         
         

        Luke Russell 

        Resolv, Inc.

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        Can CRM Software Improve Efficiency?

        Efficiency:   According to dictionary.reference.com efficiency is “accomplishment of or ability to accomplish a job with a minimum expenditure of time and effort: The assembly line increased industry’s efficiency.  

        With that definition, sure, CRM Software can improve efficiency.  Unfortunately, the efficiency comes with a cost.  However, notice that efficiency is not defined as “doing more with less”.  Let me break it down using the assembly line reference made by dictionary.reference.com.

        CRM can improve efficiency, but not like an assembly line.

        Prior to an assembly line, an automobile could be made by one person.  True that person may only make one auto every 180 days, but a single person could in effect start an auto manufacturing plant and run it himself.  With an assembly line method, while being more efficient according to the dictionary definition, it takes 100 plus people (according to some articles, thousands of people) to make one automobile.  Certainly, the assembly line is creating many more autos per year, and even more than the same number of people could create each working on an individual automobile, but the efficiency did not come without a heavy cost.  Millions of dollars must be spent and thousands of employees must hired and trained before the first car comes off of the line.

        The same is true with CRM Software in relation to sales and customer service.  CRM Software can help you to know more about your customers and remind you to take action on that knowledge.  However, in order for this to happen, processes must be designed and implemented and training given to all users.  Data must be compiled and kept up-to-date.  Users must use the system and complete the action as recommended by the system.  A lot of time and effort will go into the initial implementation and setup of the CRM system before a single benefit is seen. 

        Ultimately, it is my belief that a CRM software system can increase efficiency, but it is also my belief that a CRM system should be implemented because a company desires to improve customer service and the customer experience through a broader understanding of the customer’s needs and purchase patterns.  Remember this when implementing CRM Software:  Superior Customer Service is Inefficient!

        Thousands of companies world-wide are reaping benefits from CRM Software, including increased efficiency.  These companies each understood and committed to:

         

        • The investment of time and money
        • The importance of training
        • The mandatory usage of the software by all involved
        • The commitment to continuous process improvement brought about by a better understanding of their customer

         

        Much like companies implementing assembly lines in the early 1900s, companies with successful CRM implementations focused on the long term gain offered by CRM Software.  These gains include such things as:

         

        • A more thorough understanding of their customer
        • Improved communication with the customer
        • A proactive approach to sales and customer service
        • Automated processes for prospecting and sales 

         

        Luke Russell 

        Resolv, Inc.

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        Knowing what you are selling helps CRM implementation

        Once again, today’s blog post is prompted by a quote.  This time the quote is attributed to Charles Revson, Founder of Revlon.  Here is the quote: “When it leaves the factory, its lipstick.  But when it crosses the counter in the department store, it’s hope.”  

         

        What are you selling?When I read that quote, my thoughts went instantly to “ah ha!, When implementing CRM, you can learn a lot from lipstick!”  This is the golden nugget to CRM implementation, know what it is you are selling.  I’m not talking about what your product or service is, I’m talking about what your product or service “IS”.  It has been called so many things over the years: “your unique selling points”, “your differentiating qualities”, “your distinguishing value proposition”, etc.  However what it comes down to is the value that you provide to your customers.  Charles Revson certainly knew his value: HOPE. 

        Understanding this value is 70% of your CRM business strategy.  The rest is simple; you simply define how you are going to communicate your value throughout every facet of your organization; from marketing and sales to delivery. To help, ask yourself questions similar to these:

         

        1. What is more important, the product/service you provide to your customer, or the value that you provide to your customer? (my hope would be the later)
        2. Does everyone in your organization understand your value?
        3. Is your value clearly communicated through all you do? (what do you need to change?)
        4. Should your sales process be modified as you focus on this value?
        5. Does changing the process and communication from product/service to value require any changes in the way we track our customer data?
        6. Does the way you view the demographics of your customers (and most importantly your top 20% customers) change as you shift to focus on value?
        7. How does your CRM software system need to be modified to support the value sales methodology?

         

         

        Luke Russell 

        Resolv, Inc.

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        Avoiding a CRM Lemon …

        As companies look for CRM systems, they frequently find themselves deluged with so many options and features that it can make one’s head spin. As I said in an earlier blog post (Comparison shopping for CRM software), comparing CRM systems and CRM system quotes is a daunting task.  It is a huge challenge to compare apples to apples.

        For the last couple of years, we have had this quote on our web site.  It is called “The Common Law of Business Balance” and is attributed to John Ruskin (1819-1900).  While it was written over one hundred years ago, it still rings true:

        “It’s unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money – that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot – it can’t be done. If you deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have enough to pay for something better.”

        In some documents the quote continues with:

        “There is hardly anything in the world that someone can’t make a little worse and sell a little cheaper – and people who consider price alone are this man’s lawful prey.”

        Avoid CRM Lemons

        Wow, what can I add to that but to say we at Resolv understand your need for cost-effective CRM solutions.  We pride ourselves in our ability to help our clients work through a cost-benefit analysis and then providing various options that help businesses solve their pressing issues.

        We offer quality consulting, products and services at a fair price, and are not satisfied unless the solution works for you.  As I said, It’s not easy to compare apples to apples, but it is even harder to spot a lemon, until after you purchased one.

        Luke Russell 

        Resolv, Inc.

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        A huge success.

        While Resolv will be celebrating our tenth year anniversary this year, it is kind of fun to look back at what we have accomplished.  We have had many successes over the last 10 years, and it is exciting to see some of them published. 


        Here are three recent success stories that we have had with Sage SalesLogix customers:

         

        “We really appreciated Resolv stepping back and looking at our big picture. Sage CRM SalesLogix is now a usable and vital tool for our business.”

        –Karen Roscoe, Product Manager, Bruker AXS

        To view the whole story:  http://www.resolvcrm.com/images/stories/success/success%20story%20bruker%20axs.pdf

         

        “Our business is based on relationships and Sage SalesLogix is the foundation. We have access to an enormous amount of data that allows us to provide an outstanding experience for our customers. Resolv has been instrumental in getting us where we are today.”

        –Jason Kestler, President and CEO Kestler Financial Group

        To view the whole story:  http://www.resolvcrm.com/images/stories/success/success%20story%20kestler%20financial%20group.pdf

         

        “This was one of the smoothest implementations I have been a part of. The end result was so tailored to our business that everyone took to it quickly.”

        –Ken Deering, Director of Customer Service and Facilities, Bay Tek Games

        To view the whole story:  http://www.resolvcrm.com/images/stories/success/success%20story%20bay%20tek%20games.pdf

         

         Luke Russell 

        Resolv, Inc.

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        One big key to CRM implementation success and usage

        If you desire a high usage of CRM after implementation, this blog post is for you …

         

        Companies invest several thousands even several hundred thousands of dollars in preparation, customization, and implementation of CRM software only to find out that users do not use the system.  This is largely due to the system being a shift in culture for the users.  Users are so engrained in how they used to do it, and the CRM system, whether a change for the better or not, is new and different, and often overwhelming to the new user.  This is especially true for the sales user. 

        By no means do I intend to degrade sales people in this post, and please do not take it as such, but the fact is many sales people (especially from my generation and beyond) are not high-tech computer users.  They use email, Excel (to an extent), and Word.  They do what they have to on the computer to accomplish their daily tasks, and that is pretty much the extent of it. 

        What most companies do after a CRM implementation is to hold a “training” to teach the new users how to use the new system, and then they turn the users loose to go at it alone.  After all, it makes sense, right?  Contacts, accounts, opportunities, and notes are all a logical part of the sales process, so after only one training why would a sales person not take to it like ducks to water?  Because it is a lot to take in!  So, what do companies do when their users feel overwhelmed and confused by the new system?  They send reminders to their people that they are not doing this right, or they are forgetting to put that into CRM.  Rather than send the reminders, think about how you can better educate your users.

        If you want your users to be comfortable using your new CRM system, you need to hold that initial CRM education, and follow it up with another in a few weeks, and another.  In fact CRM education should be a part of all sales meetings (at least quarterly) for the first couple of years.  After all, isn’t your goal to make your CRM system a natural extension of the user?

        Can you imagine what it would be like if a professional athlete were hired by a team, given an introduction training to the teams plays, handed a play book, and left to their own from that point on?  I would not place any bets on that team ever having a winning season!  Whether you are a sports team or a multi-million dollar company, education and repetition is the key to success.

        You have invested a large sum of money in your system and your people, true success can only come through education and repetition.  The success of your CRM implementation is proportional to the amount of education you invest after implementation.

         

        Luke Russell 

        Resolv, Inc.

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        Back to the future … SaaS vs on-premises CRM

        I cannot count the number of times that I have reviewed the pros and cons of SaaS (cloud computing) or on-premise CRM alternatives, so I am going to share my thoughts in this blog post. 

         

        Cost: 

        First let me cover cost.  Many make the argument for SaaS based on cost, stating that SaaS is less expensive.  While that may be true for the initial outlay (usually one year of service for SaaS vs all licensing for on-premises), the actual reality is that after 3 years licensing is roughly equal (see charts one and two and compare the three year costs).  However, the sticker shock comes in year 4 when SaaS is 3 ½ times more expensive each and every year.  My recommendations on cost are as follows:

        Go with the CRM that meets your needs (on-premises or Saas) since 3 year licensing costs are very similar

         

        If you like the idea of spreading your payments out over several years, but on-premises seems to be a better solution, consider leasing the software.

         

        Infrastructure:

        This is where SaaS shines!  If you do not have servers or updated workstations/laptops, an on-premises implementation my be costly in terms of hardware.  All on-premises CRM systems will require at least one server (a database server like Microsoft SQL server), and many require multiple servers. 

        Integration:

        This is where on-premises shines!  If you are looking to implement true enterprise-wide CRM, you will be looking for data integration into your back office at the very least, and quite possibly other sources of customer data as well.  Linking to invoicing, orders, and accounts receivable is not the easiest thing to do in a SaaS environment.  While it is not impossible, it frequently requires more time and resources to set-up the links and build the tunnels to allow access.

        Along the same lines with integration is automation of processes and alerts.  This is a very difficult thing to do with some SaaS models.  If the software does not include an alert engine or process automation you are stuck.  With on-premises you can augment any CRM system with automation and alerts provided by such products as Vineyardsoft’s KnowledgeSync (http://www.vineyardsoft.com/).

        Speed of Implementation:

        This is an “old wives tale.”  SaaS only CRM companies make it sound like SaaS can be fully implemented in 24 hours and on-premises takes years.  The truth is that the time to live is about equal for both.  Just because you can have a database live up in the cloud in 24 hours (which can be done for on-premises as well) doesn’t mean you have CRM.  There are many things that have to happen before CRM is live.  These include, but are not limited to:

        1. Initial discussions of needs and layout of the project plan and goals
        2. Data source cleansing, data import, duplicate removal
        3. Customizations and configurations to match your needs
        4. Testing
        5. User education

        Connectivity:

        SaaS has one draw-back here.  In order to access the data you must be connected to the internet.  The speed of access is based on your internet connection speed and the number of users accessing the web at that time.  Other people using services like Netflix and Amazon movies can cause internet speed issues and actually cause your access to CRM to be less responsive.

        Conclusion:

        As I stated earlier, go with the CRM solution that will best help you meet your Customer Relationship Management strategic goals.  Infotech Research Group (http://www.infotech.com/) gives the following guidelines you may want to consider:

        Choose SaaS CRM if…

        ·         There is no executive support or CRM strategy and you need something in the department right away.

        ·         You need to speed up implementation timeframes.

        ·         You need something right now that can grow with you quickly as needed. A lot of organizations that went through a failed big-bang CRM are trying SaaS, but are doing so cautiously and want to see results before they try to roll it out further.

        ·         You have too few IT staff available to administrate the system in the long term.

        ·         You have no disaster recovery plan for CRM data so keeping it on someone else’s locations seems smart.

        ·         Little offline capability is required.

        Choose On-Premises CRM if…

        ·         There is a legislative/regulatory requirement to host your own data or keep it in a certain jurisdiction.

        ·         Complex data integration with large data volumes is needed. Info-Tech’s survey suggests that customers are still having trouble getting the kind of tight integration mid-large size organizations need. Solving that is key for SaaS products to continue to move up market. Data integration is tricky enough to begin with, but there are many factors that complicate it further, such as large data volumes integrated across the web and firewall configuration issues.

        ·         You want to align CRM with your existing ERP vendor and the on-premises product is different or superior.

        ·         Heavy offline capability is required.

         

        Luke Russell 

        Resolv, Inc.

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