What Is a Sales Forecast?
TL;DR
A sales forecast is an estimate of the revenue a team expects to close in a defined period, usually a month or a quarter. It is built from the open pipeline, either by weighting every deal by the probability attached to its stage, or by asking reps to name the deals they will commit to.
How is a sales forecast built?
Two methods, usually side by side. A weighted forecast multiplies each open deal value by the probability attached to its stage and sums the result. A commit forecast asks each rep which named deals will close in the period, and counts only those.
The weighted number is stable and impersonal, and the commit number is accountable and optimistic. Teams that run both read the gap between them as the interesting signal rather than choosing one and discarding the other.
Why do sales forecasts miss?
Stage probabilities that were never recalculated. A probability per stage is nothing more than a historical win rate from that stage, so numbers set when the price, product or segment was different bake in an error that is invisible in the total.
Stale stages are the other cause. A forecast reads the pipeline as it is recorded, so deals sitting in a stage they left weeks ago produce a confident answer about a pipeline that no longer exists.
Frequently asked questions
A forecast predicts what will happen and a quota states what somebody committed to. They are set by different people for different purposes, and a forecast quietly adjusted upward to match a quota has stopped being either one.