Last year, as we saw companies pivot and adapt due to the tragic effects of the pandemic, we noticed one thing remained the same: the importance of the sales forecast.
The sales forecast represents the entire operating rhythm of the company. The executive team and board use the forecast to inform decisions about investing and hiring. The forecast establishes how the company can grow and evolve—and at what rate.
“Done right, sales teams perform at their best, and everyone wins. Done wrong, there's finger-pointing and distrust, and everyone loses,” says Clari’s Chief Revenue Officer Kevin Knieriem. “Sales is a team sport, and a great forecasting process can vault team performance to new heights.”
The sales forecast isn’t just for sales anymore. Revenue is a process that requires the entire revenue team to work in sync at all times.
After all, sales forecasting is the heartbeat of the modern revenue operation.
Sales forecasting and revenue operations
What do we mean by the heartbeat of the modern revenue operation?
Revenue Operations is the end-to-end business process of driving predictable revenue, across marketing, sales, renewals, and expansion, all of which keeps the lifeblood of a company flowing. Yes, marketing operations, sales operations, and customer success operations all play a vital part, but it’s bigger than that. Revenue Operations includes all of the sellers and marketers and customer success professionals, working together to power the revenue engine and drive revenue results.
But it’s not just who—it’s also how all these teams work together.
It’s transparency and rigor. It’s understanding what’s going on in your business and aligning to take action. It’s total visibility from every board member to every member of the executive staff, and to the leader of every territory. Revenue Operations is every person on the revenue team taking accountability for their book of business, and calling that number with confidence.
“We had two operating plans,” says Jeff Williams, the former VP of Sales at FireEye, and current Partner at Bain Capital. He led FireEye on the road to IPO. “One was the board plan, and one was the aggressive plan. And the only way you could get to the aggressive plan is to actually exceed your number. And so each of the regional leaders had an incentive to accurately forecast and depict their business because they equally wanted to get ahead of it so they could hire the heads they needed to hire.”
Transparency from the top down, and across regional teams, allowed FireEye to adhere to a strategic growth plan.
Bringing the Entire Revenue Team to the Table
A modern Revenue Operations function requires every team that touches or influences revenue to function in sync. Everyone needs full visibility of all pipeline, deals, and renewals in play, with reliable, real-time data.
Sales must call an accurate forecast to drive predictable revenue so the company can invest and grow with confidence. If they’re forecasting below the operating plan, they have to work with marketing to pull in or accelerate out-quarter deals.
Customer Success must predict and track churn in real time so the business can account for any loss in recurring revenue. Coming in under churn budget means sales may have some wiggle room in landing net new revenue—or stay on pace to exceed the operating plan.
Account Management must forecast cross-sell and upsell opportunities as their contribution to the entire net new revenue picture.
Marketing must forecast pipeline coverage and generation across every segment of the business to align with future revenue targets, while playing their part to accelerate in-flight deals to hit the number.
Finance must have visibility into these individual forecasts, as well as the entire revenue prediction at any given time to ensure they’re making the right investments to achieve company strategic initiatives.
You’ll notice a pattern: Revenue operations relies on accurate sales forecasting at every stage of the customer journey.
How sales forecasting is changing
The sales forecast process remains a challenge. Some 55% of sales leaders and 57% of quota-carrying sellers aren’t confident in their forecast, according to Gartner.
“That number should never be that high,” says Clari’s VP of Sales Strategy Anthony Cessario. “If your forecasts are worse than a flip of a coin, you might as well take your sales budget to Vegas — you might actually get better odds there.”
Historically, accurate forecasting has been attempted with CRM, business intelligence, and spreadsheets, but disparate and stale data living in multiple systems renders this pathwork of a solution dangerously ineffective.
With changing business models, companies are adopting account-based go-to-market motions and shifting to flexible revenue models dependent on consumption forecasting capabilities.
Revenue teams are realizing a need for a set of new requirements.
Full-funnel forecasting: Teams need the ability to forecast based on opportunities, and also accounts in order to track performance against pipeline, net new revenue, renewals. This gives every member of the revenue team not only visibility, but also accountability, for their number, whether it’s pre- or post-sale.
Scenario forecasting: Every sales forecast has a level of variability—best case, most likely, worst case. But there are often even more nuanced scenarios that require what-if analysis. The most sophisticated revenue teams are able to pressure test the forecast by leveraging real-time deal data to inform these scenarios—and the best-in-class teams can do it on the fly.
Segment forecasting: True visibility means being able to slice and dice your forecast by any segment—region, vertical, product, or time period. By accessing this level of granularity across your business, you can invest in the right opportunities by taking action where it matters most.
Whitespace analysis: Equally important is the ability to easily spot opportunities for additional penetration and expansion both for new prospects and within your current customer base. Which accounts lack sales activity? Which accounts have the potential to expand to a new product line?
Consumption forecasting: As consumption revenue models become increasingly common, consumption forecasting has become critical for driving predictable revenue. Clari can now easily mold to fit consumption GTM models with account-based forecasting and engagement insights in a single platform.
The forecast is more than just a number. It’s the most important number for the entire business—and it’s the heartbeat of your revenue operation.
Join us for a special keynote event—The Future of Forecasting is here.