Forecast
FOR-kast
A prediction of how much revenue the sales team will close in a given period. The number the CEO gives to the board.
A sales forecast is the predicted revenue for a period, usually a quarter. The CRO builds it from individual deal probabilities, pipeline data, historical conversion rates, and gut judgment.
Forecasting is part math, part art. The math: multiply each deal's value by its probability of closing. Sum the totals. The art: adjusting for factors the math cannot capture. A large deal where the champion just left. A quarter where the macro environment shifted. A new competitor entering three key accounts.
Forecast accuracy is a measure of organizational maturity. Early-stage companies forecast within 30-50% accuracy. Mature organizations hit within 5-10%. Consistent misses in one direction reveal systemic problems. Always over-forecasting means reps are sandbagging or the team is too optimistic about deal stage. Always under-forecasting means pipeline quality is better than assumed.
Examples
A weekly forecast call.
Every Monday, the CRO reviews the forecast with regional VPs. Total pipeline: $18M. Weighted forecast: $5.2M. Commit (high confidence): $3.8M. Best case: $6.5M. The board expects $5M. The CRO feels cautiously confident.
A deal changes the forecast mid-quarter.
A $800k deal was in commit. The prospect's CEO announces a hiring freeze. The deal moves to next quarter. The forecast drops from $5.2M to $4.4M. The CRO scrambles to pull other deals forward.
Forecast accuracy improves with MEDDIC.
Before implementing MEDDIC, forecast accuracy was plus or minus 25%. After requiring MEDDIC scoring on all deals above $50k, accuracy improved to plus or minus 8%. Better qualification meant the team knew which deals were real.
In practice
Weekly forecast template
FORECAST SUMMARY - Week of [DATE] Commit: $__ Best case: $__ Pipeline (weighted): $__ DEALS IN COMMIT | Deal | ACV | Stage | Close date | Next step | |------|-----|-------|------------|----------| | [Co] | $__ | _____ | __________ | ________ | RISKS TO COMMIT - [Deal]: [Risk and mitigation plan] UPSIDE DEALS (not in commit) | Deal | ACV | Stage | What needs to happen | |------|-----|-------|---------------------| | [Co] | $__ | _____ | ___________________ |
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Frequently asked questions
What is good forecast accuracy?
Within 10% of actual results is strong. Within 5% is excellent. Consistently missing by more than 20% indicates problems with deal qualification, pipeline data, or the forecasting methodology itself.
What is the difference between forecast and pipeline?
Pipeline is every open opportunity. Forecast is the subset the team expects to close in the current period, weighted by probability. A $20M pipeline might produce a $5M forecast if the average win rate is 25%.
Related terms
A deal the sales rep is confident will close this period. The highest-confidence category in a sales forecast.
The total dollar value of deals your sales team is actively working. The most important leading indicator in any sales organization.
The ratio of total pipeline value to quota. Tells you whether you have enough opportunities to hit your number.
The percentage of quota a salesperson or team actually achieved. The scorecard for sales performance.
The revenue target assigned to a salesperson for a specific period. The number they must hit to earn full commission.
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