What is Sales Forecasting?
The process of estimating future sales revenue based on pipeline data, historical performance, and market conditions.
Definition
Sales forecasting predicts how much revenue your sales team will close in a given period (month, quarter, year). Methods range from simple (gut feel, weighted pipeline) to complex (multi-variable regression, AI-driven models). Most B2B companies use weighted pipeline forecasting, which multiplies each deal's value by its probability of closing based on deal stage. More advanced approaches layer in historical win rates by rep, deal size, segment, and time-in-stage to produce more accurate predictions.
Why It Matters
Accurate forecasting drives every major business decision: hiring plans, marketing spend, product roadmap priorities, and cash flow management. Companies that consistently miss forecasts either over-hire (burning cash) or under-hire (missing growth). The CFO cares about forecast accuracy more than almost any other sales metric. In public companies, missing quarterly forecasts directly impacts stock price.
Example
A sales team has $2M in pipeline for Q2. Their weighted forecast: $500K in commit (90% close rate = $450K), $800K in best case (50% = $400K), and $700K in pipeline (20% = $140K). Weighted forecast: $990K. The VP of Sales calls $950K to the board. Actual close: $920K. That's a 3% miss, which is excellent forecast accuracy.