The sales forecasting framework you’ll actually use

If you want to get better at sales forecasting, a good first step is to challenge the conventional wisdom on the purpose. Gartner defines sales forecasting as a “formal revenue estimation process used to project how much revenue will close in future periods.”

Similarly, Salesforce states, “a sales forecast is an expression of expected sales revenue.

A sales forecast estimates how much your company plans to sell within a certain time period (like quarter or year).” But most sales leaders looking to improve the forecast aren’t really after accuracy.

Consider your last sales forecast

Consider this, dear reader: Is your problem that your reps massively outsold their forecast last period? I didn’t think so. The actual problem, 99% of the time, is that reps and managers need to forecast more revenue, and more often than not, they miss their calls.  Would you be satisfied if you could buy a software solution that accurately predicted the last time you missed your number by a wide margin?

So, while a strong forecast does result in more predictable revenue, it’s critical to clarify the focus on the actual goal, which is to close more deals.

This shift will save your organization from a massive investment in time, money, and change management related to systems, processes, and expensive software purchases that typically fail to improve forecast accuracy and have no impact on win rate. So, with this clarity of purpose in mind, what do you do next?

Excellence in sales forecasting stems from a combination of fundamental sales process principles and strategic implementation of modern sales technology, especially generative AI, to scale opportunity inspection and next-best-action deal coaching.

What follows is a step-by-step guide that is guaranteed to help your team win more deals and deliver a more reliable forecast along the way.

Step 1: Clearly define your Opportunity Stages and Exit Criteria.

“But I already have this,” you say.

Yes – most sales teams define sales stages in CRM. But, too many deals are in the wrong stage. And almost every leader I talk to confirms they’re wasting thousands of hours a year in ineffective interviews that fail to fix the problem. Therefore, we must first revisit, re-document, and re-enable each stage’s exit criteria.

Exit Criteria are too often misunderstood or ignored by reps.

There are two golden rules for solid Exit Criteria.

1. The exit criteria should read like a to-do list to advance the deal. The rep should see the Exit Criteria like a simple deal coach. If they cannot discuss their next steps with their manager, they can refer to the Exit Criteria to guide their approach.
2. The current stage of the deal is aligned with the incomplete exit criteria. So, if you’re in Stage 2, it should mean that the Opportunity meets the Stage 1 Exit Criteria but not the Stage 2 Exit Criteria.

Example B2B Exit Stage Criteria

Here’s an example of initial three Sales Stages and Exit Criteria for an Enterprise, B2B Sales Team. Note that each exit criteria is like a To-Do-List

This is typically where savvy sales leaders will call out that few enterprise deals don’t follow a perfectly linear path. This is, of course, true. But, it’s also often the creaky defense for why too many sales organizations fail to revisit, re-document, and re-train on a baseline process, and why most reps are failing to execute on basic steps that do in fact improve conversion.

There’s a reason most of the world’s published sales methodologies are 80% the same – much of this process is proven through research. The problem is scaled execution, not that the process can’t support non-linear buyer journeys.

Step 2: Ensure you have the necessary sales technology to scale the execution and management of the process.

Two critical technology solutions are needed for this to work, in addition to a CRM to manage the Opportunity itself.

1. Robust, multi-channel automatic activity capture. It is a massive waste of time for reps and managers to argue over whether a step in the process in fact occurred. To avoid this, all sales conversations (phone, video, text message, email) must be logged automatically to Salesforce, and reliably linked to the Opportunity. If you haven’t solved this, forecasting and sales process management will be a low ROI effort for managers and reps.
2. Generative AI opportunity inspection and next best action guidance. With clarity in sales process and exit criteria, reps and managers now need an efficient way to inspect their opportunities against the process. Today, generative AI can do this work, automatically, at scale. For example, Revenue.io automatically generates a summary of each opportunity and provides the next best actions that are contextually aware of your sales process. Typically, a rep needs to know what to do next, and they waste days waiting for their manager to suggest next steps – instead, they can simply view the Opportunity, and see a list of recommended actions based on what the process dictates. Additionally, the rep can use Revenue AI to generate strategic sales collateral like narrative business cases, presentation outlines, and meeting agendas in seconds all based on the collective history of deal conversations. Reps now have deal guidance on every single deal.

Step 3: Establish a weekly deal review ritual

Every week, conduct a team deal review following the same process, which is simply to review the most important deals, by rep, against the sales process. If a rep’s deal is in stage 3, start by reviewing and validating that the deal meets Stage 1 Exit Criteria. The generative AI deal analysis will already suggest if there is a gap, but the human review is critical to validate, and because it functions as a powerful way to reinforce the sales process, ultimately improving the rep’s execution in their earlier stage and future deals.

These deal reviews should be rep-led. Great reps know the process best, and show up ready to present how and why the deal is in the correct stage, and to articulate how their next step actions are aligned to the process. Again, great reps will often take actions that take liberty with the process – but great reps only break the rules, once they’ve demonstrated that they’ve mastered them.

Step 4: Track the right conversion metrics to forecast sales

With these improvements in process and technology, in a matter of weeks, each deal in the pipeline will be dramatically more likely to be in the correct stage.  The CRM can easily report on deal conversion by stage, but it’s important to set this up correctly. Specifically, ensure your reporting is set up to track the following metrics:

The key sales metrics to measure

• Stage conversion: The % of opportunities that advance from one stage to the next.
• Win Rate by Stage: Win rate from stage (the % of deals that are won, from each stage)
• Time Spent in Stage by Closed Won: For Won deals, how many days on average is spent, per stage
• Trending Win Rate: Win rate over at least the previous two quarters. It’s important you don’t capture too much history in this metric, or it won’t reflect your improved execution. It’s also important you don’t have too short of a window, because it will have too small a sample size. A rule of thumb is to capture your trending win rate over a period equivalent to your average sales cycle.

Sales Metric Goals by Stage

Set specific goals to improve each of these metrics. The highest priority goal should be to improve conversion from the Stage where most of your pipeline is going stale, or where you have the weakest Stage Conversion.  Typically, your Win Rate goes up from each later stage – a deal in Stage 4 is statistically more likely to close than a deal in Stage 1.

So, pick a Stage where most of your pipeline is stuck, and your Stage conversion is too low (for most teams, this is an early Stage – usually the Stage that corresponds to deals that meet your minimum criteria for being qualified).  I’ve seen our overall Win Rate improve by as much as 33% in just one quarter as a result of this Sales Process initiative, where the team in question focused on enabling, deal review, and inspection on only one Stage in the process.  Because each deal now accurately reflects what stage it’s actually in, you can apply your improved conversion metrics to the pipeline.

For example, if you have a $10 million qualified pipeline in period, and a Trending Win Rate of 20%, you can forecast $2 million. Of course, this is a simple forecast, and it will take several cycles to continue improving for the accuracy to get as close as possible to reality.  But with each cycle, your Stage Conversion, Win Rate/s, and Deal Velocity will all improve. This will mean more deals, and also the need to recalibrate your Trending Win Rate. If your sales cycle shortens from 9 months to 6 months, your benchmark for Win Rate for example will shift.

Final Tips

Don’t let perfect be the enemy of the good in defining your Stages and Exit Criteria, and don’t be too precious or stubborn to evolve them with experience.

Get started, and commit to discipline for a quarter. Schedule time to review suggested modifications at the end of the quarter. Establish a weekly ritual for reps to update their deals, with special attention and discipline on close dates. Consider a short-term SPIFF that rewards reps for closing deals that never “push” in the forecast.

Implement automation for new Opportunities that sets a default close date consistent with the average sales cycle. This alone will avoid an inflated “in-period” pipeline, which will in turn inflate the forecast. Plan to celebrate wins. Now that managers no longer waste time interviewing reps on “what happened” in their deal conversations, they can spend more time highlighting key moments where reps execute the process.

For example, great managers will use Revenue.io to share conversation highlights in team meetings or assign the whole team to review certain sales calls. This highlights where a rep nailed a key aspect of the process that most reps struggled with.  Bring your team in on the goals. Is your win rate too low?

Tell your whole team, and energize everyone by being transparent about why you’re investing time and energy into new technology and process definitions.

Keep the right end goal in mind. Predictable revenue is an excellent outcome of great forecasting.

But the goal is clear – Win. More. Deals.

Ryan outlines the entire framework in the eBook Mastering Sales Forecasting.

This edition was curated by Chase Schardt, Marketing Manager at Revenue.io, and written by Ryan Vaillancourt, VP of Sales at Revenue.io.

You can find Ryan Vaillancourt on LinkedIn here!

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