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Defining Sales Forecast Categories to Drive Reliable Revenue

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Blair Stokes
Content Marketing Manager



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Stylized illustration of bullseye overlapping a line graph

We all know communication is important. But when it comes to sales, it’s critical. Ensuring that everyone on your team shares the same forecasting terminology means the difference between strong, predictable growth and unreliable revenue.

Let’s look at the importance of forecast terms in practice: One sales rep believes a deal is likely to close in the current quarter because a champion at the prospect’s company is pushing your product. Meanwhile, another rep believes their deal will close because they got a verbal agreement. Both of these reps put their deals in the “commit” sales category, and both forecasts are based on two very different interpretations. But are these deals equally likely to close? Probably not. And that discrepancy will cost you: Over 50% of respondents to a recent Forrester Consulting survey said they regularly miss their monthly B2B sales forecast by more than 10%, while a whopping 85% miss it by more than 5%.

The takeaway is this: Defining your sales categories plays a huge role in creating a standardized lexicon for your team. In turn, this lexicon aligns your go-to-market teams and keeps forecast conversations focused on taking strategic action rather than giving status updates or finger-pointing.

As Phillip Jones, Vice President of Sales Operations at Alteryx, puts it, “Forecast meetings should be less about making sure we agree on the numbers, and more about what actions we should be taking in response to the numbers.”

What is a forecast category?

Forecast categories are the buckets that sales reps use to organize the opportunities they currently have in the pipeline. They’re based on where an opportunity currently resides in the sales cycle. Typical forecast categories include:

  • Pipeline: These types of opportunities are early in the sales cycle, and sales reps are still actively working on them. They’re moving along well so far, but they’re unlikely to close within the time period being assessed.
  • Best case: These opportunities are fully qualified, and they have a contract and closing plan, but the rep still needs to do work to move them forward.
  • Commit: These types of opportunities are expected to close within the current period. Reps should expect to close about 90% of the deals in the commit category. Before moving deals into this category, reps should ask themselves questions such as:
    • Does your primary contact or product champion have the authority to make the purchase decision?
    • Have you confirmed a timeline for getting started?
    • Have you started creating a mutual action plan with the would-be customer?
    • Does your client understand the purchase process?
    • Does the client organization have a compelling reason to purchase now?

Read more about how to define the commit stage.

  • Closed: These are deals that have been designated as either closed-lost, or ideally, closed-won during the current time period.
  • Omitted: These are deals that have been lost or dropped due to being unqualified and therefore are not included in forecasts.

It’s important to define each term, and also describe exactly how to apply each term in the field to ensure your sales reps are on the same page when it comes to using the same forecast categories. A great way to do this: Create a sales process playbook by collaborating with your team. Bring in the entire revenue team for the drafting session. That way, everyone generating revenue understands how these definitions were created, and they feel a sense of ownership, making adoption easier.

Sales forecast categories vs. sales stages

Note that sales forecast categories are distinct from sales stages. While sales reps use forecast categories to mark the likelihood of deals closing with the current timeframe, sales stages are the series of phases that every closed deal goes through to get to the finish line.

In other words, forecast categories are used to determine when—and how much—revenue you can expect during the current time period, while sales stages refer to the path that a prospect takes to ideally transform into a paying customer. There are typically seven stages: contact, engagement, prospect, marketing qualified lead (MQL), sales qualified lead (SQL), opportunity, and customer.

Download the Forecast Category Worksheet

You can better align your team today. Define your forecast categories and standardize your sales terminology with a ready-to-use worksheet:

>> Download the forecast category and terminology worksheet

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