Sales forecasting is useless
Sales forecasting is useless
Stop relying on them and avoid the tunnel vision
Hey, Toni from Growblocks here! Welcome to another Revenue Letter!
This weekly email is my way to share knowledge and build a community of people who love to learn more about growing revenue in a data-driven and scientific way.
Anything in particular you want to hear my thoughts on? Drop me an email, and I might use it in my next article.
Everyone on the planet runs a Sales forecast.
It’s the #1 job for anyone in RevOps or Sales Ops.
It’s what most people rely on to predict where they’re going to be at the end of the quarter.
It’s what companies rely on to track growth and close gaps.
And more often than not, it’s the only thing you do all year that is forward-looking and tries to predict a future number.
It will get tons of scrutiny.
You can buy software for it - or run it in a spreadsheet.
Or, like most people, just do both.
It’s what you will be presenting in Board Meetings.
And you will get grilled on it by your VP Sales, CRO, CFO, CEO, etc.
So there is a crazy amount of focus on it.
All of them are really interested in the future.
They want predictability, and sales forecasting is what they turn to.
But… the thing is, most Sales forecasts are useless at helping you navigate the future.
And if you rely only on them, there is no chance you will get it right.
So what is so bad about Sales Forecasts, Toni?
1. In the beginning of the Quarter, you have nothing
Ask yourself or check it with your RevOps.
At what day in the quarter will your sales forecast actually spit out the number that you will hit?
In most of the businesses I ran, I got there 2 weeks before the end of the Q. Maybe 3.
Why is that?
Well, the pipe you have at the start of the quarter is not all there is.
You will add more deals, some will push out, and some will push in.
There is so much movement.
Only very late in the game will the forecast really add up.
So, all this work to only look 2 weeks ahead?
2. Sales Forecasts are subjective
The next thing is obviously the sales rep herself.
You can buy all the fancy AI tech you want.
Filling in the CRM for you. Or doing the forecasting for you.
But all of the tech has one major drawback.
It still relies on the rep adding deals, putting in expected deal size and timeline.
Sure, the AI makes the input a bit more reliable, and makes the forecast a bit more accurate.
But the bulk of the input is still the Rep.
I have customers that use Clari - and love it because it’s great for pipeline management and coaching.
But despite all the AI, it still lives and dies with Reps putting in the right info.
3. It doesn’t account for all the Opps that will be created
And let’s just say you could overcome all of that.
And reps give you 100% accurate info.
What they cannot give you is info on deals that haven't even been created yet.
And depending on your sales cycles, this might be 50-80% of closing deals in the quarter.
So, how do you make sure those non-deals get accounted for in those forecasts?
Ok, I am getting all worked up at this point.
There is one more issue though:
4. Focussing on newbiz gives you tunnel vision
Who came up with the idea that Forecasting is a thing only “Sales” should do?
Why is marketing not doing a forecast?
It would help them a lot to get a seat at the $$$-table instead of talking fluff-metrics.
Or for CS beyond the “we did 88% GRR last year, we will try and do the same again.”
It’s not like Sales says “we closed 2M ARR last Q3, we will do the same again this year.”
No.
They look at the deals they have and the reality they are faced with today to give the most accurate answer.
So you need to stop doing only NewBiz Sales forecasting and change the paradigm away from rep-based inputs.
Because your Marketing team can’t sit there and debate each MQL and its likelihood to close.
Same with the CS team, they can’t do a forecast on the individual customer level.
The solution
You need Go-to-Market wide Forecasting.
Use the intelligence that is already buried in your data to help you predict the revenue outcome of all stages of your funnel.
And I don’t mean “pipeline” stages. I mean full-funnel stages.
Theoretically - if you have followed me for more than a week - it’s all simple.
But every team that has grown up just a little bit, is faced with a simple reality:
Data chaos.
In 100% of cases, taming in a spreadsheet only adds to the mayhem.
It’s like building a CRM in a spreadsheet.
It theoretically works.
But it doesn't solve the actual data chaos problem.
If you want to know how Growblocks helps with that, ping me on Linkedin or go to Growblocks.com
So, what are Sales forecasts are actually good for?
Rant over.
Does all of this mean you should stop sales forecasting?
No.
I think it’s a super important process to run.
But you just need to be aware of what their real purpose is.
And the real purpose is coaching.
That’s it.
Powerful. Important. And costly if you don’t do it.
But don’t make the mistake of thinking that just because it has the term “forecasting” in it, that it can actually give you insights about the future.