I was talking with our CEO and founder Bill Kantor recently. He reflected on the use of CRM data.
I've spent a lot of time with sales forecasts – probably more than anyone should. And one thing I can tell you is that we all (myself included) focus too much on "forecast accuracy." We become so obsessed with it that we lose track of the goal—to sell more. Accuracy isn’t as important as it’s made out to be.
Bold statement? Sure, but let’s break down why that’s true and how a more honest and informed approach can actually give you better insights and outcomes than aiming to hit a number dead-on.
Pipeline Coverage: The Classic Trap
Pipeline coverage gets a lot of hype. Yes, it’s useful to know your pipeline’s value, but it has it’s limits. Where are those deals in the sales cycle? How long have they been sitting in that stage? Are they likely to close this quarter? Aggregating all deals into one number hides all these factors. Bottom line: pipeline coverage is very weakly correlated with sales. (We’ve measured it many times.) It’s not much better than a coin toss.
There are so many nuances that relying on a single pipeline number to guide forecasting can give you a misleading level of comfort or alarm. And if you’ve got a short sales cycle, you will be closing fresh deals before the quarter’s up, so focusing on existing pipeline ignores your power to add new pipeline. Finally, if you try to manage to a pipeline figure, the metric will become gamed and will be less meaningful.
A better way (if you have enough transactions) to understand what to expect is to build up a weighted pipeline based on human or machine estimates of deal likelihoods.
Watch the discussion here - https://www.benchmarkit.ai/smp24-ondemand/bill-kantor-and-jim-murphy
Win Rate – It’s Not What You Think
Many sales leaders look at their historic win rate and think, “Alright, let’s apply that to this quarter’s forecast.” But here’s the thing: the most common way to compute win rate—wins over wins plus losses (WOWPL)—is a noisy estimate of the long term win rate. That is if you wait forever. It’s biased (high) because (1) losses are not always recorded, and (2) it ignores all those open deals that didn’t yet close. If you are forecasting for the quarter, you want a shorter-term win rate. It’s a bad estimate of something you don’t usually want. So, forecasting using win rate (computed with the WOWPL formula) gives you an optimistic prediction. A better way to assess win rates is to use the time-to-event method.
The Myth of Forecast Accuracy
Now, forecasting accuracy is a fascinating topic. Take the approach proposed by Dave Kellogg: give your board a number you’re 90% sure you can beat. It’s a conservative approach, but if we get too focused on being "right," we risk losing sight of what actually matters—driving growth. Nailing a forecast means that the forecast did nothing to help you sell more. Forecasting should be more about anticipating a range of potential outcomes and aiming to control what’s within our power to produce a noticeable improvement.
Imagine a football team that’s predicted to lose by a field goal. They don’t walk onto the field thinking, “Let’s lose by exactly three points.” They strategize, adjust, and play hard to change the outcome. Your forecast should work similarly. It’s not about hitting an exact number; it’s about exceeding it wherever possible.
Focus on What You Can Control
When it comes to forecasting, the goal isn’t to make flawless predictions. It’s to make a measurable improvement in your favor. This means inspecting your pipeline rigorously, understanding which deals are most likely to close, and prioritizing them. It also means knowing how quickly you’re adding new opportunities, their average size, and how your win rate behaves over time. By focusing on these, you can drive growth rather than just aiming to make accurate guesses.
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Wrapping It Up
Sales forecasting isn’t about nailing it on week one. It’s about continuous attempts to change the outcome in your favor. That means regular pipeline and deal inspection, refining priorities, and empowering your team with the insights they need to win deals. So, let’s let go of the “perfect” forecast and embrace a more dynamic approach. After all, in the fast-paced world of SaaS, being able to adapt and react often matters more than being “right.”
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