Monday, October 1, 2012

Planning Part I: Let's Start with the Questions

The Who, What, Why Sales Budget

In case you haven’t noticed, we distributors are in the sales business.  Now I realize there are a bunch of you who are starting to raise your hand with questions like: What about our inventory department?  And aren’t distributors really involved in the logistical world?

Both of these are valid arguments.  However, without sales, the distributor world comes crashing to a halt.  If sales are not predictable, and budgeted for, all of the good inventory practices in the world will be for naught.

 We believe arriving at a solid estimate of next year’s sales and gross margin is critically important to your plan.  Actually gross margin dollars are more important than sales numbers in the distributor world but, developing both allows for better communication with supply partners who deal only in sales.

Most distributors take a shot at their forecast by pulling out some growth wish – 8, 10, 15 percent are commonly tossed out.  This becomes the number for everyone regardless of territory and situation.  What’s worse, midway through the year, the number loses all meaning as a management tool for the sales team.

Introducing the Who, What, Why Planning Tool

This plan is specific and manageable throughout the year and requires only a minimum of effort to set in place.  Here is a breakdown:

1.      Salespeople are provided with their customer sales for the past year broken into product categories.

2.      Salespeople review each account (who) and estimate future growth or shrinkage (what) by product category.  As they review the numbers they answer the question of why this number will grow or shrink – things like one time projects, new products specified, competitive issues and the customer’s own growth are considered.

3.      The numbers are tallied by salesperson and combined into the final plan.

Management must review the numbers with their salespeople.  Many sales guys prescribe to the old tenant of “Sandbagger or Loser” and submit dismally low projections.  This must be addressed on an individual basis.  It allows for coaching, mentoring and managing.

Distributor Planning Made Easy.  Check out our Distributors Annual Planning Workbook:

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