The Ultimate Guide to Forecasting

The Impact of Inaccurate Forecasting

Sales forecasting is a critical input for any organisation, and an inaccurate sales forecast can have a significant impact on the business. It's hard to accurately forecast sales, and both under-forecasting and over-forecasting lead to problems for companies.

Sales forecasting is the methodology behind predicting incoming revenue by anticipating future sales. Sales forecasting can attempt to predict future growth by week, month, quarter, or year. Accurately forecasting sales and expenses is a requisite skill for any sales manager or business owner to make larger business decisions like staffing and allocating resources.

📅 Weekly Forecasting

Aligns prioritisation and focus with your sales team's weekly activities. Helps prepare other teams like customer success for account handovers or fulfilment teams for product delivery. Enables collaborative decisions on emergency resource allocation.

📊 Monthly Forecasting

All about understanding and reallocating resources. Affects staffing and scheduling of existing resources or reprioritisation of initiatives. Reflects performance of go-to-market initiatives and helps ensure goals are hit.

🎯 Quarterly Forecasting

Checks alignment with bigger picture company goals. Important for pivoting strategies like hiring decisions, product development, marketing campaigns, or ordering and fulfilment needs.

🚀 Yearly Forecasting

Understanding what resources you expect to have for big picture goals. Informs company OKRs and larger plans for product development, hiring, and growth. May determine funding needs, profitability path, or investment decisions.

Unless you own a working crystal ball, the challenges of accurate sales forecasting may seem insurmountable. Internal factors like hiring and firing or policy and product changes can affect a sales forecast, as can external factors like competitor changes, seasonality, or even changes in legislation!

There's also debate on who should manage the sales forecasting process: individual sales reps, sales managers, or whether it's a multi-departmental initiative. Each approach brings unique challenges that leave many struggling with forecasting accuracy.

🔍 "Big Picture" vs "In the Weeds"

Sales teams are intimately knowledgeable about what resonates with prospects but may miss market shifts, emerging competitors, economic conditions, industry changes, or legislative changes that affect sales. Being in-the-weeds is their job, making big picture awareness helpful but potentially distracting.

😊 Occupational Optimism

Good forecasting requires realistic assessments based on data, whereas good sales reps succeed based on idealism and optimism. A good sales rep should see aging deals and think creatively about resurrection. These conflicting goals make it challenging for sales reps to forecast realistically.

💰 Performance Tied to Quotas

Tying performance to quotas creates potential for inaccurate forecasting. Fear of consequences keeps sales reps from reporting bad news, or causes "sandbagging" - delaying good deals for later quotas. This paints a distorted picture of potential revenue.

📚 Too Many Details to Stay on Top of

Managers need to track individual deal ages, sales cycle lengths, how these vary by deal type or size, pipeline stage conversion rates, and individual selling styles. It's not possible to keep track of all these details in a spreadsheet or simple CRM.

🔗 No Single Source of Truth

Different sales teams manage different regions with unique conditions like seasonality or regional economics. Without a single source of truth for rolling up data across teams, the story becomes fractured and leads to inaccurate forecasting.

⏮️ Reporting Backwards

Often sales managers only report on what's already happened versus potential future sales. When focus is on deals won to fulfil quotas, reporting naturally centres on closed deals, making future-focused forecasting a lower priority.

🎯 Setting Achievable Sales Targets

Preventing "sandbagging" or pipeline optimism starts with achievable targets. Unrealistic targets lead to bad practices that hurt forecasting accuracy and business decision-making.

📊 Calculate Your Baseline

Historical data helps understand the status quo and what's possible. Consider external influences like seasonality and competitive changes, but understanding current state is instrumental for future goals.

🎯 Use SMART Goals

Specific, Measurable, Achievable, Relevant, Time-bound goals provide a framework for defining achievable targets that align with forecasting capabilities.

🔄 Consistency is Key

Choose a combination of forecasting methodologies and stick to it. Using different methods yields inconsistent results. Once you find an accurate combination, maintain consistency for reliable predictions.

📝 Keep Accurate Records

Start with clean contact data - correct email addresses, phone numbers, and decision-makers. Ensure contacts are at the correct pipeline stage and new leads are consistently captured from all sources.

🔍 Review Stage and Status

Review communications for aging deals sitting longer than average. Identify roadblocks and decide if they're fixable. Clear out deals with unachievable demands to improve both forecasting accuracy and rep focus.

💔 Send Break-up Emails

Assess sentiment of seemingly dead deals with break-up emails. Favourable responses keep prospects in pipeline; otherwise, proceed with the purge. Email templates ensure consistency and enable quick clean-up.

🔧 Leverage Automation

Use tools for pipeline maintenance by deal age, automatically update stages by prospect activity, and create alerts for stagnant deals. Automation reduces workload and guards against human error.

💬 Great Communication = Great Forecasting

Sales is a team sport involving multiple departments. Accurate forecasting requires communication with prospects and across departments to break down information silos.

🎧 Sharpening Communication with Prospects

Build strong communication channels and listen for stage-change cues. Active listening is critical for accurate pipeline information about deal likelihood, timeline, and proper contacts.

🔄 Creating Internal Feedback Loops

Product teams have insights into development, marketing knows upcoming campaigns, and customer experience understands friction points. Cross-departmental communication breaks down silos that cloud accuracy.

🎯 Transparency is the Secret Ingredient

Create a culture of transparency by aggregating data into a single source of truth. When everyone sees how accurate data paints clearer pictures of achievable goals, fear around quotas melts away and sales becomes a team effort.

🚀 How HubSpot Can Help

HubSpot makes tools designed to aggregate data across multiple teams to paint a full picture of each lead or opportunity. Integrating your CRM with robust reporting tools takes the guesswork out of where each prospective customer stands.

💡 Supercharge Your Customer Data

Your CRM should serve as a single source of truth for any prospective customer. HubSpot's Conversation Intelligence removes manual work from documenting call data, and powerful automation keeps your pipeline up to date.

📊 Take a Quick Pulse with Out-of-the-Box Reports

HubSpot's reports identify your most impactful sales activities without building from scratch. Review pipelines with forecasted revenue by deal size or funnel stage. Custom reports provide flexibility for any business niche.

🎯 Evaluate, Inform, and Adapt

Customisable reports uncover performance improvement opportunities like stage probability forecasts, deal pipeline waterfalls, and deal change history. Managers have everything needed to measure, analyse, adjust, and re-evaluate team performance.