Forecasting Enterprise Sales with the Banana Chart (with sample template)
The Banana Chart is a tool for determining as early as possible whether you should responsibly call a “Miss” on the quarter.
If you run an enterprise software company, it’s likely that at least 50% of your bookings arrive in the last month of the quarter. For some companies this number is closer to 60% or 70%.
The main issue with having a strongly backloaded quarter (besides stress, uncertainty, and panic) is that in-quarter forecasting becomes nearly impossible. You don’t have enough information to call a hit or miss (and formulate the appropriate action & communication plans) until the period is nearly done. Habitually thinking “well, we’ll just have to see how the sales team closes it out” crushes your ability to be nimble and adaptive. Wouldn’t it be better to call a miss in Week 8, rather than Week 12, if you had the information to do so? Wouldn’t it help to have a full extra month to make adjustments to improve next quarter?
The Banana Chart is a tool for determining as early as possible whether you should responsibly call a “Miss” on the quarter. It’s an extremely simple method for CEOs and Boards to use as a quantitative counterweight to the VP Sales’ tendency to be optimistic about a late-quarter “surge” or “push”.
Each week the Banana Chart is updated with the QTD attainment against forecast (the blue bars), and the entire purpose of the chart is to compare these numbers to the red line, which is based on your company’s historical performance over prior quarters and shows the most back-loaded your company has ever been in each particular week of the quarter. Put another way, it’s the minimum weekly performance your company can put up to have a realistic shot at beating your number, based on your company’s proven ability to come-from-behind in prior quarters.
At every point in the quarter the Banana Chart clearly answers the question, “Are we predicting a larger catch-up performance than we have ever successfully executed before?”
If no (blue bars are higher than the red line), then that’s good news — you’re operating within feasible historical performance.
If yes (blue bars dip below the red line), it’s time to consider calling a “Miss.” Although it’s possible that “this time is different” (e.g. your pipeline is unusually large, you have a massive deal on the verge of close, etc.), you must keep in mind that any prediction of a late-quarter “Make” would be ahistorical. The Banana Chart forces management to question the sanity of the forecast (and the sales leader to defend or modify it accordingly).
The Banana Chart is also a fantastic tool for reporting in-quarter performance against plan to your Board on a weekly basis (several of our portfolio companies at Toba send the chart out on Monday mornings). It highlights QTD performance, new sales over the past week, and forecast validity, all in one view.
To create your own Banana Chart, I’ve uploaded an Excel template which you can access here. In there you’ll find an area to enter bookings from prior quarters with which to generate the red line (along with some suggestions on which datasets to use).
If you successfully apply the Banana Chart to your own business, please drop me a line to let me know how it’s going! And feel free to reach out with any questions or feedback.
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