Highly organized and successful cabinet dealers live and die by their sales team’s ability to forecast accurately. They use business software specific to the Cabinet Industry to better predict upcoming months. A highly competent sales team with consistent, accurate forecasts is absolutely essential to driving increased sales for a cabinet operation.
There’s a proven technique already in place that you can simply adopt for your operation. It’s called the waterfall. It is very simple, yet very powerful. It holds everyone accountable because there’s no place to hide. I like it because it delivers better forecasts without all the verbal abuse, bad feelings and stress of older forecasting approaches. I also like it because it can be implemented in under 15 minutes. There are two parts to this approach. The first part is simply a rolling six month forecast. Six months forward and six months backwards like in the chart below:
In essence, we’re going to track 6 months of historical data and ask the sales team to forecast 6 months into the future. Everything on the left is Actual (so the current month in this forecast is October). Everything on the right is forecast. I like six months for starters because if the team is new to forecasting, 12 months is pretty much worthless data because it isn’t based on anything that we would call reality. Besides, once you get this rolling you can always expand it into 12 months later.
So part 1 is pretty easy. On the first of the month, the sales team submits a revised forecast for the next six months. No exceptions. No complicated Excel spreadsheets. Again, keep it simple. You can always add more metrics later. Each new month, imagine everything shifting one column to the left. So, when November comes around, the November column will actually appear where October column is now (under This Three Months). And where April is in the forecast (far right under Following Three Months), we’ll see a new month: May.
Part 2: Where the Rubber Meets the Road
The waterfall is a simple tracking method which allows us to see how forecasts change from month to month. Each month you fall down to another row and enter the numbers from the sales team’s forecast. You can do a waterfall for each individual on the team, or one for the team as a whole. You pick. The end result is that your team get six swings at forecasting each month, and each swing is tracked on the waterfall chart like below:
The most interesting thing for sales management is how the forecast changes over time. Patterns and problems in forecasting rapidly become obvious and sharing this data can help your team tremendously. For example, take a look at the showroom sales waterfall chart below:
Think about these questions:
- What do you think happened in November when the team re-forecasted for the first time?
- What about in February’s re-forecast – do you see anything concerning?
- Is the team getting better or worse at forecasting?