The Problem with Traditional Sales Forecasting Methods

Your CEO comes to you asking whether you’re going to hit your number this quarter. If you’re the type of sales manager who doesn’t rely on a sales forecast, you’re probably in a lot of trouble right now. What can you say? “Maybe”? “I certainly hope so”? More than likely, you’ll just hem and haw until your CEO loses patience and walks away.

But what if you are the type of sales manager who regularly uses a forecast? Are you in a much better position?

Unfortunately not.

Sales forecasts, when used correctly, are a hugely powerful weapon for sales managers. But even then they have some serious shortcomings for anyone trying to determine if they’ll hit their number.

1. First of all, a typical sales forecast doesn’t give you the whole picture. At their best, forecasts take your current pipeline and track a few key metrics to give you an idea of how those opportunities are likely to convert into revenue. But, unfortunately, that only accounts for opportunities that are already in the pipeline. What about the opportunities that your marketing department and outbound prospectors are working on now? These as-of-yet-uncreated opportunities are difficult to account for, but they could play a crucial role in your end-of-quarter bookings total. Especially if you’re closer to the beginning of the quarter.

2. Most sales forecasts ignore some critical factors, which typically leads to an overly optimistic bookings projection. Even forecasts that weight opportunities based on their current stages can still produce projections that are skewed high. Sales managers that rely too much on forecasts without accounting for other factors — like rep-specific Win Rates, stagnating opportunities, and suspiciously large deals — are likely to overestimate their end-of-quarter bookings total.

3. Finally, most forecasts are overly general. What if your company sells multiple products or has a wide range of potential customers? These distinctions are likely to have a significant impact on how different opportunities progress down the sales funnel, and not accounting for these business segments will likely screw up your forecast. Before you rely on a forecast for an even rudimentary prediction of your bookings total, you must thoroughly understand the different segments, divisions and target markets of your company.

Are you feeling less confident in your ability to use a forecast to predict your quarterly bookings total? That’s ok: you’re not alone. That’s why we’ve put together a simple 4-step guide to help you fill in the blanks and come up with a clear answer — on any day of the quarter — of whether you’ll hit your number.