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Your 2018 Sales Forecast: Fact or Fiction?

How does your dealership come up with a number for your monthly or annual sales forecast? Most of the time we start by looking at last year’s numbers. How many units did you sell in January of last year? Say it was 200. Great. Your dealership has an annual growth target of 10 percent, so that means this year in January you’ll sell 220 units. Bada bing, bada boom, forecast done.

If only it were that simple. Of course, other factors such as the economy, seasonality or inventory supply may affect that number.

Let’s One Up Each Other

Some dealerships involve their sales teams with forecasting in an attempt to get them involved and hold them accountable. This is the right idea, but many times the approach isn’t exactly scientific. For example, in a meeting, the GSM may ask every salesperson how many units they can sell that month. John starts off with 12 because he knows that anything below 10 is frowned upon. Betsy tries to one-up John, so she commits to 14. Down the line, each salesperson attempts to outdo the last one, and you end up with commitments to sell 20 cars from individuals who have never sold that many in one month.

This method produces arbitrary numbers that are meaningless. Without guidance and accountability, the salespeople end up where they end up. At the end of the month, excuses arise. The same thing happens when managers tell the sales team that everyone’s goal is 20 units. Right out of the gate some members of the team do not believe they will ever hit that number.

Coming Up with an Accurate Sales Forecast

So what’s the best way to come up with an accurate sales forecast?

Getting your sales team involved in the forecasting process is highly recommended. I’ve always believed that when a salesperson is empowered and takes ownership of their own activities, the results will be much better.

However, coming up with accurate individual forecasts takes some time and planning.

First, sit down with each salesperson individually. Look at last year’s numbers and averages. Did they meet or exceed their goal? What factors were involved in exceeding their goal, if that happened? If they did not meet their goal, what factors were involved? What percent of the product mix did they sell?

You know you want to grow as a company. Similarly, most salespeople want to grow their income. Setting a goal of 10 to 20 percent growth is realistic.

Ask the salesperson what their income goal is. Let’s say it’s $80,000.

Break that figure down to a monthly income goal of $6,700. Then, based on the average commission grossed from each sale, determine how many vehicles they need to sell to make that much.

Let’s say it’s 20 vehicles per month. Now it’s time to come up with a detailed plan on how the salesperson is going to sell that many vehicles. Certainly not by sitting around, waiting for the next “up.”

Run the Numbers

This is where you tap into your CRM and looks at some metrics. For each salesperson, run a report with the following:

  • Average number of conversations with prospects. Example: 100
  • Lead-to-appointment ratio. Example: 30 precent. For every 100 conversations, 30 percent show up for an appointment.
  • Closing ratio. Example: 50 percent. For every 30 appointments, the salesperson sells 15 units.

Fifteen units are less than the desired result. So the manager and salesperson need to figure out where there’s room for improvement. A 30 percent lead-to-appointment ratio is pretty good; not much room for improvement there. A 50 percent close rate is excellent; it would be difficult to improve that percentage.

The only variable that can be altered is the number of prospects. To reach the desired goal of 20 units, the salesperson needs to talk to 120 prospects. Considering there are an average 20 working days in a month, they should be talking to six prospects per day. That means actually talking to the prospects, not just leaving voicemails and sending emails.

The next step is to figure out which lead sources result in the most conversations. Review and tally lead sources for your last 90 days of conversations. Were they internet leads, phone leads, leads from an email campaign, or did they come from giving trade-in appraisals in the service lane?

Identify the lead sources that turn into the most conversations and come up with a strategy to increase those leads.

Of course, salespeople don’t have control over how many showroom ups happen to walk in, or how many incoming phone leads and Internet leads they will receive. But they do have control over how many phone calls they make, how fast they respond to leads and how many emails they send.

Additionally, it may be possible to increase the lead conversion ratio with best practices like a persistent follow-up, calling to confirm appointments and even experimenting with new scripts.

After meeting with your sales team, you should have a pretty realistic number for your sales forecast. If the number doesn’t meet your dealership growth goals, you may want to consider adding a new salesperson.

The advantage of using this method for your sales forecast is that your salespeople know exactly what they have to do to meet the goal. After putting in the effort to come up with their number, they will have a sense of ownership and feel responsible for hitting that goal. As their manager, it’s your job to hold them accountable for their activities on a weekly basis and give them the tools and support they need to succeed.

Bill Wittenmeyer
Bill Wittenmeyer
Bill Wittenmyer serves as VP Sales, Layered Apps & Competitive Accounts at Elead. With over 25 years of experience in automotive retail, he relies on the industry’s most comprehensive technology platform and data-driven strategies to help dealerships enhance customer experiences and grow profits. Highly regarded as a dynamic and motivational speaker, as well as an industry leader with non-traditional views, Wittenmyer speaks at several prominent automotive forums each year and contributes to top news publications and television business shows that influence industry business leaders across the U.S. Before joining Elead, Bill worked in automotive retail in sales and operations management. He earned his degree from Ashland University and took post-graduate courses at Georgia Southern University.

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