What Makes Sales Forecasting Truly Great?

I was speaking with a friend recently about sales forecasting. As a board member, he expressed frustration at the firm’s unreliable forecasts. I shared some of my past stories with him and we had a good discussion. It made me realize that there are probably others who are facing similar issues in the current uncertain market environment – so I decided to write this. I hope you find it helpful.

1. The Hidden Cost of Weak Forecasts

Many B2B firms tolerate subpar sales forecasting, and it costs them dearly in supply chain issues, weak pricing, poor sales execution, and credibility with the CFO/Board.

2. What Goes Wrong  

·       Why it’s not always the Sales function’s fault:

o   Sometimes there are real market uncertainty and volatility drivers such as we faced in the first half of this year. For long sales cycles, e.g., major semiconductor design wins, forecasting future sales can seem inordinately difficult.

o   Without a robust SIOP process where all key functions sit around the table and discuss monthly forecast to prepare for and deliver the upcoming/current month, operations can fall on its face. Even if aggregate sales come within an earshot of forecast, products with demand spikes experience supply shortages and those with weak demand create inventory problems.  

o   Undermanaged marketing campaigns / promotions can lead to unexpected sales spikes or dips.

o   Of course, unreliable supply chains impact deliveries and sales revenue.

·       But sales probably has a role to play as well:

o   Without post-mortems and root cause identification of why previous forecasts didn’t match reality, issues get pushed under the carpet and the same confusion repeats. Then someone on the forecasting team gets fired and another person is brought in, but the underlying issue goes unfixed.

o   Rolling averages extrapolated without isolating the signal from the noise don’t lead to insights. Instead of investing in good data and demand forecasting capabilities, you hear the excuses, “it’s always been like this” or “our forecasting tool is worthless – what’s the point?” 

o   If the sales leader doesn’t hold the team accountable for regularly inputting data into CRM, few account executives bother to input their updates. Then the Sales Ops function is left to fend for itself before forecast reviews.

o   Sometimes there are specific salespeople who are underperforming and delay the bad news about weak sales, just to buy time. They have a “hope and prayer” strategy that somehow their numbers will end higher. If bad behavior is condoned, it can create a mediocre performance culture.

3. What Great Forecasting Looks Like

In addition to addressing the issues mentioned above:

• Clear ownership and cross-functional rhythm

• Well-understood definitions (what “forecast” means to Sales vs. Operations vs. Finance)

• Use of lead indicators and triangulation. Predictive forecasting with AI.

• Continuous learning loop

4. How We’ve Helped

“In one case, we helped a Fortune 500 reduce forecast variance by 50+%, leading to better decision-making, improved supply reliability, and stronger margins.”

We leveraged predictive forecasting, instituted a cross-functional post-mortem process for monthly sales forecast variance, improved monthly SIOP process execution, and drove change in sales team’s CRM input behavior.

5. Closing: Forecasting Is Strategy, Not Admin

“When done well, forecasting becomes a source of competitive advantage — not just a monthly ritual.”