Revenue platforms abound. But are these applications just automating outdated methods or delivering innovation? These two quotes come to mind.
If I would have asked people what they wanted, they would have said faster horses. ~ Anonymous, often misattributed to Henry Ford.
The <better> buggy whip analogy is “an obscurity sitting on an anachronism. ~ Daniel M. G. Raff
Have recent innovations in RevTech and AI forecasts improved on the traditional approaches? They offer many more summary reports, streamlined data entry, and claim better accuracy. But they don't fundamentally improve the sales forecasting process, or help you sell more.
These applications may be the faster horses and better buggy whips of sales/revenue operations. There’s a better alternative.
Classification forecasts, the time-honored way
For years, salespeople forecasted using bottom-up classifications of active deals. CRM systems provide a Forecast Category field for this—employing terms like Commit and Best Case to describe the likelihood of a deal closing. Deals are classified, and summarized in rollup reports. Then management makes a “call”—a made up number—based on this information.
The raw rollup forecasts have their limits. A Commit list can be a very good predictor, but with short lead times—often only a few days. The Best Case provides more lead time but has very high variance. Neither of these includes forecasts for new pipeline that will be created and closed in the forecast period. These things are supposedly addressed by management's made-up number.
Businesses have forecasted this way for years. It started on paper. Then moved to spreadsheets. And, more recently, it has moved to web applications. But that process is unchanged. Admittedly, RevTech vendors have made it easier. And they have added lots of summary reports to satisfy the question, “What happened?”
The innovation of the web applications is facilitating hierarchical management opinions about what their teams will deliver. A more formal approach to incorporate prospective new pipeline; and to adjust for inconsistencies in how individuals make forecast category calls.
It is more streamlined, but is this any better than what we had before? That depends on what you hope to get out of it. Here are the possibilities:
Accurate forecasts
Resource allocation priority lists
Accountability
Accurate forecasts
We’ve looked at the raw rollups of Commit and Best Case to assess their accuracy. The results are very unattractive. Here’s a very good example [1]: 75% average Commit accuracy by amount (60% – 85% range), with a few days advance notice, for a list that covers 85% of the closed sales during the quarter. Best Case rollups are less reliable and highly volatile.
Before we dismiss this approach, I have to acknowledge that we have no visibility into the judgment calls. They may be great. But that’s hard to do. People are really bad at assessing probabilities. And sales outcomes and timing are inherently volatile. So I would venture that these are similarly unattractive. Although people’s recollections may be different.
Resource allocation priority lists
This may be the most effective use of classification forecasts. They inform the business about the important deals. And this affects how management allocates resources.
Accountability
Having people make forecast classification calls does add accountability for delivering the number. But there are limitations to how volatile these results will be.
A manager with dozens of deals in the Commit, benefits from averaging of all deals in their forecast. Deals that arise during the quarter can make up for slips. And managers can adjust their forecast “calls” to allow for that. But an individual contributor may have only a handful of deals. Accuracy at the individual contributor level is much more volatile.
But ignoring these issues, it would take many quarters of forecasts to know if the observed accuracy differences are real or due to chance. This negates your ability to use accuracy accountability—at least for individual contributors and possibly even for sales managers—depending upon how many transactions they are forecasting.
RevTech to the rescue?
To address the accuracy, RevTech vendors offer hyper-accurate AI forecasts. While these sound attractive, they miss the point. Accurate forecasts don’t help you sell more. You need to beat your goal, not meet your forecast.
So where does that leave us? RevTech has streamlined the process but not changed it. These applications offer summary stats to show you what happened but not how to sell more. AI forecasts may be an improvement over the classification rollups or made-up forecast calls. And accurate AI forecasts definitely don't help you sell more.
The biggest value to the forecast submission process is to inform resource allocation.
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A new and simpler way
To make good forecasts and maximize sales, get back to basics.
A sales process with well defined stages
Diligent maintenance of CRM opportunity data for Stage, Amount, Close Date
Note that these are the minimum requirements for using a CRM to track deals. Everything else (for instance activity metrics, notes, next steps, industry classification, ICP scores, lead scores…) is secondary. Maintain them too if you can instill that discipline. And use them in your model—if they have predictive power. But make sure you get the basics first.
With this minimal data, you can make realistic forecasts for open pipeline and prospective new pipeline. Current month to next year. Yes. It’s that simple and robust.
More important, the same data can provide ranked deal priorities for you. This ranking will have a higher expected return for the assumed risk level than your ad hoc prioritization (by Forecast Category, deal size, or whatever). Instead of spending time submitting and overriding forecasts with opinions, you can be coaching and selling more.
Faster Horses or Real Innovation?
RevTech and AI forecasts may offer incremental improvements, but they haven’t fundamentally changed the way we forecast or how we sell. These are faster horses and better buggy whips—refinements of outdated methods that don’t address the real challenge of selling more.
Your call. Faster horses and better buggy whips. Or real innovation. Give us a call when you are ready.
Computed as: the value of all won deals in the quarter that were classified as “Commit” during the quarter/the value of all deals that were classified as “Commit” during the quarter.
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