Never Make Forecasts, Especially About the Future

"Never make forecasts, especially about the future"

-Samuel Goldwyn

While the quote in the title is tongue-in-cheek, in Sales, forecasting is a fact of life.  And many members lament that the quality of their sales forecasting is lacking.  Information isn't always entered by the sales force – and if it is, it might not be accurate – and even then our ability to analyze the information may not be up to par.

So to help us out, I went to the definitive source on financial tracking and analysis – the CFO suite.  I sat down with Myles Vander Weele, Executive Advisor with our Corporate Finance practice, to talk about sales forecasting from Finance's perspective.

According to Myles, forecasting is a critical responsibility of Corporate Finance.  They work to figure out what the organization is capable of and then set targets to track actual performance against those expectations throughout the year.   "Since forecasts are assumptions," says Myles, "Finance continuously checks to determine how the business is performing relative to those assumptions."

And, getting sales forecasting as accurate as possible is critical to a well run business.  As Myles explains, "Sales forecasts help the company make better decisions on how to manage spending and what expectations they should be setting with investors."

However, relatively speaking, forecasting Sales is difficult. Whereas Finance is reasonably confident in their ability to forecast and track costs and cash flow, they have greater difficulty with sales.  According to Myles, "While costs, and to some extent cash flow, are in our direct control, sales is much more complex.  There are many ways to grow business with customers, and ultimately, while we can influence customer decision making, we can't control our customers' decisions."

So how can Sales improve sales forecasting?  While companies typically have focused on making the information we have more predictive, our experience researching this topic suggests that companies should instead get access to more predictive information.

There are two areas in which we've seen companies innovate to improve our ability to better predict customer/market outcomes:

Use Customer-Generated (rather than Sales-Generated) Information – instead of relying upon our internal assumptions (e.g., reps telling us which deals will be closing), best practice companies confirm with the customer their true intentions to better predict ultimate outcomes.  The SEC has profiled how Business Objects and ADP have refashioned their sales process to more effectively gather and confirm their customers' true buying intentions.


Prediction Markets – The SEC has also profiled companies that have begun to leverage the collective knowledge of their organizations to influence their forecasts.  Best Buy for example has created an internal prediction market – a fake stock market where outcomes are bought and sold to determine the probability of an event happening (the delivery time of a major project, for example).

Ultimately, sales is harder to forecast and than other line items in your company's financial statements.  But by including more effective sources of information (like those above), you can improve your organization's forecasting abilities.

SEC Members, for more information on forecasting, see our research on predicting customer buying behaviors, including our deal verification toolkit.