A sales forecast is the amount of revenue a sales team expects to earn over a given period of time, usually a year. It’s calculated using a variety of criteria including, previous years’ data, market analysis, and sales reps’ output estimates. Accurate sales forecasts allow businesses to maintain healthy growth.
Many sales organizations use a forecasting framework that doesn’t reflect the way their salespeople sell. Our research shows 85% of B2B companies use a forecasting approach based on a pipeline of opportunities that are given an estimated deal size, slotted into a stage of the company’s sales process, assigned a likelihood of being won, and forecasted at a future close date.
Setting aside the many problems with how this opportunity forecasting method is executed, let’s focus on a more fundamental issue that cripples many sales forecasts: it’s possible you should be using a forecasting framework other than this classic pipeline forecasting approach.
Our study of 62 global sales organizations discovered 74% believe their forecasts should be based on something other than a pipeline of opportunities; however, only 34% of those same companies use alternative approaches.
If your forecasts are based on a model that isn’t relevant for your sales force, it’s easy to see why your forecasts suck. You’re developing forecasts using data and assumptions that don’t reflect what’s actually happening in the field.
It would be like trying to read this article while moving your eyes from right to left rather than left to right. Similarly, many companies try to shoehorn their forecasts into an opportunity-based model with stages and percentages when it just doesn’t make sense to do so. Unsurprisingly, these forecasts don’t make sense either.