Getting the most out of forecasting

Ostensibly straightforward, the forecasting process is important for charting course and spurring company morale. If done right, forecasting can be a lighthouse to success; done wrong, it can be a red herring that leads to misaligned expectations and results.

Further adding to its complexity is the fact that forecasting can also change based on a company’s size and goals, as well as external or market factors.

While there’s no one-shoe-fits-all approach, there are similar steps to forecasting success. Revenue Brew spoke with the Zoltars of ShipMonk, Google, and Sage to learn how each approaches forecasting to fit their specific needs.

Balancing hope and reality

Aras Kolya, CRO at the e-commerce fulfillment and logistics company ShipMonk, said that nailing a forecast comes down to being sober in the face of desired growth. This means relying less on emotion and more on data.

“You move to a signal-based forecasting model,” Kolya said. “Going from the bottom up, everything from pipe health, channel velocity, what kind of onboarding bandwidth do we have, and then overlaying that with the data that you categorize as important to your business.”

Kolya suggests approaching forecasting as if it were a product that needs to be altered according to market or scale to allow for flexibility. If you’re forecasting on something static, then you won’t be ready for market changes.

He added how RevOps is important, suggesting bringing the team in early to empower them in the forecasting process. “Great RevOps leaders can turn forecasting from a spreadsheet, to a weapon for you and the business to build that accuracy,” he said.

The importance of data hygiene

“It’s also important to make sure that there’s enough data hygiene before you start any forecasting,” Zhu told Revenue Brew. “Even some very basic business terms or business context or definitions, if they are defined differently across teams, [can] be a major roadblock for establishing any confidence in the forecast because people have wildly different expectations on what certain things should look like.”

To solve for this, Zhu and his team have framed forecasts as living documents subject to change as data starts to outline realities for the forecasting period. This allows sales leaders to use the forecast as a tool instead of just as a concept.

“A forecast is not always a done deal. It’s not just you provide a number and be done with it,” he said. “With multiple iterations, [you need to be] clearly laying out in this iteration what’s included, what’s not included, and also providing a roadmap for people as for what’s coming in future iterations, so they can proactively set up any of their processes and decisions.”

Using forecasts to look back and align

Eduardo Rosini, chief growth officer at software company Sage, has a slightly different perspective. He toldRevenue Brew that while a forecast is important, it is less of a tool that leads to the right outcome and more of a tool that leads to the right process. That is why Sage uses past forecasts to leverage historical data to make future decisions. You can’t know where you’re going if you don’t know where you’ve been.

“You need to track historically. Have you been within a certain range of forecasts or not,” Rosini said, “And if you haven’t, then you need to revisit what you’re doing.”

Rosini also explained that Sage uses forecasts as a means of aligning different parts of the company, especially between finance and the rest of the organization. Doing this allows Sage to create a document that can stoke confidence and unlock potential revenue-generating opportunities from top to bottom.

“Is it [the forecast] accurate Not only at the top level, but also its components? Because the top level certainly helps finance in terms of how we plan the macro, but it is the components that matter,” Rosini said. “You want to understand, across the organization, how things are going,and it’s also the confidence that it conveys to others, that it’s a forecast close to the budget or not.It’s not just a number, but it’s the confidence interval of that number.”