A sign of a mature sales organization is its ability to accurately forecast anticipated sales for an upcoming period.
A sales forecast is a metric relied on by many departments, including marketing (to scale and optimize demand generation), finance (to determine budgets and operating plans), HR (to create hiring plans), and support/customer success (to anticipate incoming customers).
But a forecast is not just a number, it is the outcome of a well-followed sales process.
"A sales forecast is a projection of what your sales team’s performance will be at the end of a given measurement period (typically monthly or quarterly) or how much business you can expect to close this period. For future planning, resource allocation....and setting expectations, this is absolutely critical." -InsightSquared
A sales forecast is not created by asking sales reps which deals will close within a certain time period. It should not be subjective at all, but instead, it should be based on historical win rates and deal size.
In order to accurately forecast, certain data needs to be maintained in a consistent manner in your CRM so that you have certainty in underlying metrics such as:
In order to achieve accurate forecasting, a sales process with a defined opportunity stage and exit criteria must be followed & enforced rigorously. In addition to following a documented process for opportunity management, sales reps need to be held accountable for accurate deal size and expected close dates.
In a simple example of the most basic type of sales forecasting, if you historically close 25% of all deals, your sales cycle is 30 days, and you currently have a pipeline of $100,000, then your monthly forecast is $25,000.
An unofficial rule of thumb on forecasting cadence is: