Sales Plans & Forecasting

Prior to coming back to school to pursue my MBA in finance, I worked as a Senior Financial Analyst for a division of BNY Mellon that managed six private equity fund of funds.  This group was small and I only had four co-workers, however we managed a portfolio of private equity investments that exceeded $300 million.  The first of these funds was rolled out in 1999 with approximately $50 million in investor commitments and the fifth fund was rolled out with just over $100 million in commitments as of the end of 2006.   

One of the goals my supervisor assigned me at the beginning of 2007 was to help launch Fund VI.  I had a very small role in launching new funds, my responsibilities were somewhat contained to making sure all of the financials and performance data agreed to our records.  However, one of the goals the Chief Investment Officer set for our group was to raise a $150 million fund.  In the middle of 2007, this plan did not seem too ambitious and was probably a realistic goal considering the markets at this point in time.  However, little did our group realize that more than a year later, raising a $150 million fund of fund was very unlikely.

Due to the market gyrations in the past year, this sales plan became increasingly difficult to meet.  After speaking with some former colleagues recently, about 10 months into fundraising, coming down to the last few months, they had raised near $40 million well short of the goal.  Despite the stock market going through what some experts say is a once in a lifetime collapse unseen since the great depression, the sales forecast was done with the best intentions.  

Because of the experience, thinking in the terms of a sales manager leads me to think that sales goals and forecasts are necessary in order to encourage employees to strive to improve upon their previous position.  On the other side, they seem almost completely meaningless.  If my former PE group should raise half of their sales target for their sixth fund of fund, by market measures that should be considered a success.  However, if management were to look at their goal of $150 million, management could say that they failed miserably.  Of course BNY Mellon's management is not aloof to what is going on in the financial markets these days, so I'm sure they will consider the efforts of the group comparative to market gyrations.

With this limited experience in mind, I would lean to a more flexible sales planning process.  If I were in my former bosses shoes, I would have ongoing meeting with management to discuss the movements in the market in relation to the sales plan.  One risk that must be considered when making sales goals over one quarter's period are changes in the sales environment.  With the changes in the market that have recently occurred, sales plans should be revised and new sales targets considered on a monthly basis.  As management and the PE group learn to meet halfway between realistic goals and actual expectations, the sales plan will become accurate and a good possibility of reaching the target.