What is sales forecasting? What is funnel reporting? How do they differ and overlap?

Sales forecasting and funnel reporting are two sides of the same coin – both are essential for understanding your sales process and predicting future revenue. However, they focus on different aspects of the sales process and require different skills and approaches.

• Funnel Reporting helps you understand your sales process – funnel reporting focuses on the stages of the sales process. It provides insights into your sales progress and results at each stage of your sales process.
• Sales Forecasting helps you predict future revenue –  sales forecasting is a forward-looking process that predicts the revenue your business will generate. This prediction is based on the deals that are expected to close and the revenue each sales representative is likely to generate in a given period. This period could be a week, a month, or a quarter. It’s benefits include:

In Funnel Reporting…		So that…	In Forecasting…
You define where an opportunity is in a standardly defined sales process with fixed milestones.		—->	You can predict the future path of opportunities in your funnel.
You understand the historical and probabilistic outcomes by funnel stage		—->	You can look ahead and estimate closing revenue, and factor that indo decision-making.

What are the steps on the journey to get from funnel reporting to sales forecasting?

Step one: establish basic milestones – start by ensuring that you can count each of the milestones in your business process. This includes counting the volume of Marketing Qualified Leads (MQLs), Sales Qualified Leads (SQLs), and other key metrics. 

Step two: instrument your CRM – once you can count these milestones, the next step is to instrument your CRM to track these milestones. This allows you to start calculating conversion rates and other important metrics.

Step three : build and share reports – once you’ve instrumented your CRM and started tracking your milestones, you can start building reports and sharing them with the rest of the company. 

Step five: implement insights from reporting – as you share these reports, you can start learning from them and providing insights back to the business based on what you’re seeing. 

Step six: begin forecasting – once you have a solid understanding of your data and have learned from your reports, you can start forecasting and predicting what’s going to happen next in your business.

Funnel reporting

Before you begin reporting on your funnel, what do you need to understand and set up in your sales organization?

Sales funnel reporting involves tracking and analyzing the performance of your sales funnel – it’s about understanding how many touches per lead are required for conversion to opportunity, the number of calls within the opportunity, and the conversion rates. 

The goal is to understand how you get a customer and every aspect of the funnel – this includes understanding the impact of the messaging, the sources of the lead, and many other factors that you track until it gets to the opportunity stage.

What are common pipeline stages for new sales funnel reporting?

Common Sales Stages
Deal Stage	Exit Criteria
Discovery	• Problem and need are understood • Buying committee has been scoped
Solution Scoping	• Product Demo has taken place • Fully scoped use case and confirmed technical needs • Confirmed budget and buying timeline • “Why change? Why now? Why us?” is understood and documented
Solution Validation	• Achieved technical win and fully validated use case with all relevant stakeholders • We are confirmed vendor of choice for Decision Maker • There is a Documented Mutual Action plan (timeline, legal, procurement, security, etc)
Negotiation	• Legal, Security, and Procurement are all fully signed off • Proposal has been sent for signature
Out for Signature	• Signature Completed!
Closed Won	• Fully executed agreement!
Closed Lost	• No meeting in the last 30 days and nothing scheduled for the next 30 days • There is no longer a problem/pain that we can solve • The opportunity has gone stale and there is no clear timeline for making a decision • Prospect has communicated a different vendor of choice

Once a deal is closed, a different funnel comes into play – different metrics and forecasts will be used. It’s essential to understand that funnel reporting is not just about the opportunity stage but encompasses the entire journey from prospect to customer to expansion.

Not every customer’s journey will not follow a perfect path – while it’s beneficial to have a structured customer journey, it’s essential to understand that it won’t always follow a perfect path. There will be diversions, and it’s nearly impossible to fully capture and instrument every single one, especially in the early stages.

What are the key level-1 funnel metrics that companies should be reporting on? What does each metric tell you?

Metrics around generating leads:

• Sales Rep Activities – the most important metrics to set up initially are those that track the activities of your sales reps that lead to pipeline and closed deals. These are often referred to as sales math or accountability metrics. Each rep should have a goal, preferably on a weekly or monthly basis, and their progress should be monitored regularly, ideally daily or weekly.
• Discovery Process and New Business Pipeline – the discovery process should be monitored to ensure it’s effective in generating new business pipeline. Ultimately, every sales activity a rep undertakes should contribute to building this pipeline.

Metrics around converting leads:

• Sales Activity Conversion Rates – of the sales activities undertaken, you need to track how many resulted in a demo booked, a demo held, and new pipeline built. This allows you to identify any gaps in the process. For instance, if a rep sends out a large number of emails but books very few demos, it may be necessary to review their messaging. Conversely, if a rep sends fewer emails but books more demos, their approach may be worth replicating.
• Demo Conversion Rates – once demos are booked, it’s important to track how many are actually held and their conversion rates. This can help determine whether you’re getting the right leads and having productive conversations.

Segment your data once you have it  – once you’ve established these level 1 metrics, it’s beneficial to break down your data further by factors such as price and geography. This can provide more detailed insights and help identify specific areas for improvement or success.

Take an outcome-oriented approach to your data – when analyzing data, always view it through the lens of outcomes. What action will you take based on this data? What business outcome are you hoping to drive? The first question when someone asks for a new report should be, “What are you going to do with it? And what are you hoping to drive?”

What qualitative insights should your reps be capturing to help with funnel reporting?

Sales reporting is not just about numbers – there’s a wealth of qualitative information captured during the sales process that can provide valuable insights. This includes handoff notes between teams, buying motives, close/loss reasons, and competition.

Identify trends and themes from sales calls – look for trends and themes in your qualitative data. This can be done through call listening or AI summarization of notes in your CRM. Identifying trends can help you understand what’s working and what’s not.

Track closed lost reasons – pay special attention to close/loss reasons to find tweaks that can help you win. For example, if pricing is a common close/loss reason, you might need to review your pricing strategy. 

Capture competitors under consideration – if certain competitors are frequently mentioned during sales, it might indicate a need for a unique selling proposition or a more aggressive sales strategy. 

What tools are helpful for sales funnel reporting?

Your CRM is a window into your current business operations – think of your CRM as a snapshot of what’s happening in your business right now. It’s a core building block of your tech stack that provides a real-time view of your operations.

Beyond the CRM, a tool like Gong is the next tool you should have in your tech stack – it listens to calls and provides valuable insights that can help shape your sales strategy.

A data warehouse is a snapshot of your business history – another core building block of your tech stack is a data warehouse. This provides a comprehensive view of everything that has ever happened in your business, giving you the flexibility to analyze and utilize your data as you see fit.

Consider other tools for automating data collection and reporting – there are numerous tools available that can help automate these processes. It’s worth exploring these options to find what best suits your business needs.

What are the different types of funnels for reporting you might need to create?

New sales are the lifeblood of early-stage companies – it’s essential to focus on acquiring new business in order to grow. This is where most of the time and focus is spent. 

Post-sale journey is key to customer success – once you have a repeatable sales process, it’s time to shift your attention to the post-sale journey. This is crucial to ensure the success of the customers who have signed on the dotted line. Supporting customers throughout their journey is vital. This not only helps in realizing value for them but also uncovers potential opportunities for upgrade, cross-sell, and renewal.

Instrument both sides of the sales funnel – it’s important to look at both the new sales and post-sale sides of the sales funnel. This helps in understanding and improving the entire customer journey, from acquisition to retention. 

What kind of data hygiene practices do you need to institute to get accurate funnel reporting?

Everything needs to be logged – the first and foremost rule is that if it’s not in your CRM, it didn’t happen. This means every activity, meeting, call, or interaction needs to be recorded for future reference and analysis. This should start as soon as you have your first sales rep. This helps avoid bad habits and ensures that there’s historical data to analyze what’s working and what’s not.

Automate as much as possible – from an operations perspective, you want to automate as much of the logging process as possible. This reduces the amount of manual logging and makes the process more efficient and less prone to errors.

Inspect what you care about – as a sales leader, you need to inspect the things that matter to you. If a new process is rolled out, it’s important to ensure that it’s being followed correctly. Any wavering or lack of attention to the process can lead to misalignment and confusion.

Create routines and rhythms – establishing routines and operating rhythms can help instill the habit of accurate logging. This could be a separate guide or book in itself, but the key point is to create a system that encourages regular and consistent logging.

Align expectations across the company – it’s crucial to have alignment across the entire company regarding what the expectations are. This includes not just the sales and ops leaders, but also the customer team, the marketing team, and everyone else. If only some people care about the things that you’re inspecting, then the process is not going to be effective.

Sales Forecasting

What is a forecasting category? What are common forecasting categories?

Establish a common language in reporting and forecasting – the most commonly used language in reporting forecasting was built into the Salesforce CRM and has been widely adopted over time.  Align definitions within your organization. It’s not necessary to perfectly follow every single bullet point definition of each of these categories. What’s important is to get everyone in your organization on the same page about what these terms mean. 

Forecast Category	Definition
Pipeline	• <30% likelihood to close during currently forecasted Close Date period • Criteria to move to Best Case are not yet met
Best Case	• >60% likelihood to close by the forecasted close date • We are confirmed as preferred vendor by a Champion, and you have path to Economic Buyer • Timelines for legal, security, and procurement are not fully confirmed • Business case and success metrics are in place, but not fully confirmed
Commit	• This is you committing this deal and its revenue to the business! • >90% likelihood to close by the close date • We are the confirmed vendor of choice by Economic Buyer • Legal, security, and procurement processes and timelines have all been agreed upon • Success metrics and timeline of implementation are all fully confirmed

Use the definitions that are most practical definitions for your funnel – an exercise to understand and apply these categories might involve putting a deal up on the board and discussing it. Ask questions like, “Where do you think this deal is?”, “How would you forecast this deal today?”, “What stage is it at?”, and “What do you think the close date is?” The purpose of this exercise is to get everyone on the same page about what it means to forecast deals within your company.

Forecast category do’s and don’ts for sales reps
DO			DON’T
• Use the definitions as guidelines for your forecast; discuss the definitions often with your manager • Re-verify or update Forecast Category following each customer call • Align with opportunity team: lean on your Manager, and other teammates involved in the opportunity for help gauging where the deal is at • Use a Sales Methodology**: Implementing a sales methodology, like MEDIC, can provide a structured approach to sales and forecasting. This can help ensure that all necessary elements of a deal are considered and can stand up to scrutiny. • Inspect each deal. Each deal that contributes to a forecast should be thoroughly inspected. This can help identify if all the necessary ingredients for a successful deal are present and if the deal can stand up to the rigor of your sales methodology. • Use data about individual sales reps and their past performance to inform your forecasts. This can help identify patterns and trends that can improve forecast accuracy.			• Overthink them – the definitions are meant to be guidelines. You know your deal better than anyone else. • Be afraid to advance deals • Forecast in a vacuum – your teammates are there to • Forecast based on feelings. Every forecast should be backed up by individual deals or data that indicates these deals will exist by the time they are needed. This can help ensure that forecasts are accurate and reliable. • Trust rep optimism. Sales reps may be overly optimistic about their deals, which can skew forecasts. It’s important to balance optimism with realistic expectations.

Maintain consistency in reporting – you don’t have to have a perfect sales methodology or use the light version of stages and forecast categories. The key is to be on the same page so that when you sit down with one of your reps, you’re not spending half of your conversation grounding yourselves in the details of the deal. Instead, you can quickly discuss the right stuff in the deal, as opposed to the stage definitions.

How can you leverage your historical and current funnel reporting in order to forecast future bookings?

Your CRM data should be your starting point – it’s crucial to use your CRM for your sales forecasting. Your forecast categories should live in the CRM, and you need to define what these categories mean.

Understand the forecasting habits of your team – sales forecasting is both an art and a science. As a sales leader, you should be conducting multiple pipeline reviews or forecast calls with your team and adjusting based on what you learn. Understanding how each team member typically forecasts can help you adjust their numbers accordingly. For example, if a team member consistently underestimates their best case at the beginning of the month, you might add a certain amount to their commit. Conversely, if a team member tends to overcommit, you might need to cut their commit in half. 

Coach your team to be better forecasters – spend time coaching your team on what a committed deal should look like versus a best case deal. This will help ensure that the forecast categories in your CRM are accurate, allowing you to make more accurate predictions. 

Triangulate different forecasting datapoints – the gold standard data-driven version of sales forecasting involves triangulating between different forecasts to land the most likely outcome. In parallel to the sales leader’s exercise of getting the team to roll up their numbers, the ops team should leverage all the data and definitions to make their own predictions.

How much historical data do you need before you can begin to get good forecast insights?

Use whatever data you have – in an ideal world, you would have a wealth of data to draw from. However, many companies, especially newer ones or those without previous data collection methods, may not have this luxury. Regardless of whether you have years of data or just a few months, use what you have as your baseline for forecasting.

Consider the trade-offs of your data’s time window – the time frame of your data can significantly impact the accuracy of your forecasts. For example, if you were forecasting in 2020 using data from 2018 and 2019, your predictions were likely off. Similarly, if you’re forecasting for 2023 using data from 2020 and 2021, your forecasts may also be inaccurate. 

Apply business context to your data – data and models alone cannot provide a complete picture. You must apply your understanding of your business and its context to your forecasts. This might mean choosing a smaller window of time for more accuracy or a larger one, knowing you’ll need to add more interpretation and judgment to the process. 

What processes, meetings, or touch points should you establish with your sales team to inform forecasts?

Regular pipeline reviews – regular one-on-one meetings with your sales leader are crucial. These meetings often involve Operations and are an opportunity to delve into each specific deal. Questions to consider include: Why is the deal a commit? Who is the buyer? What is the decision-making process? What is your next step? What is the close date, and why is it set for then? These meetings are a chance to examine every aspect of the deal in detail.

Key deal reviews with the team – these reviews should follow a structured process. Team members should come prepared with a slide containing all the key information about the deal. This is an opportunity to poke holes in the deal and ensure it is solid. 

Listening to sales calls – reviewing sales calls is another important touchpoint. This is a chance to ensure that the team is following the correct discovery process, whether it’s MEDDIC or another method. You can learn a lot from listening to these calls and they can provide valuable insights into the sales process.

Develop a relationship between sales leadership and the sales operations team – the effectiveness of your forecasting depends on the synergy between these two teams. They need to be on the same page about the importance of logging metrics or activities. 

Routine, focus, disciplines and good habits make for better forecasting – what you focus on in your routines can significantly impact your forecasting accuracy. If you only discuss the current month or quarter’s deals and ignore future quarters, your forecast accuracy for those future quarters will not be strong. You need to put in place routines that address your business needs. For instance, you might alternate discussions of the quarter’s forecast and next quarter’s forecast to force the right types of conversations and maintain focus on accurate forecasting.

What are the ingredients for a strong forecasting meeting?

Leaders should:

• Use sales forecast meetings to unblock team members – a good sales forecast meeting should be a forum where team members can address their problems and leverage the collective intelligence of the organization to find solutions. 
• Prepare by looking at every deal – sales leaders need to be prepared for the forecast meeting. This involves taking the time to look at every deal so that they can inspect appropriately and make the meeting worth everyone’s time. Make the time count. The meeting should not be used to update next steps. Instead, it should be a time to discuss and strategize on how to meet quotas and close deals. 
• Identify true commits (and reclassify deals that aren’t) – sales leaders should be able to identify deals that don’t look like true commits. This involves doing research and helping the team understand why a deal is not a commit.

Reps should:

• Avoid “story time” – the meeting should not devolve into a storytelling session where excuses are made for not hitting numbers. The purpose of the meeting should be clear, and there should be expected benefits that come out of it.
• Know their quota and close – sales leaders should start forecast calls by asking reps about their quotas and how much they have closed so far. If reps don’t know these figures, it indicates a problem that needs to be addressed.
• Know their deal – sales reps should know enough about their deals to answer questions about key stakeholders, such as how long they have been with the company. If they don’t, it indicates a lack of preparation.
• Have logged all their info in the CRM – being prepared means having all the necessary information in the system, not just on a notepad. This includes details about key stakeholders involved in the deal, their titles, and their locations.

What decisions can forecasting future sales help you make? How do you incorporate forecasting data into your strategic decision making?

Sales forecasting helps make decisions around:

• Strategic decision-making – without accurate forecasting, a company cannot effectively measure performance against goals, plan for growth, or set budgets for various teams. 
• Insight into the sales funnel – it helps identify whether there is enough prospecting and leads, what marketing strategies are working or not, and how the sales team is performing in outbound prospecting. 
• When this is not done well, your roadmap is a black box – the ripple effect of a sales forecast is company-wide. When it’s done, the company knows exactly where it should invest, and how much it can invest.

Sales forecasting should not directly impact quotas – quotas are set independently, and simply adding up the team’s quota does not provide an accurate forecast. 

Sales forecasting accuracy should be reviewed regularly – this helps improve operational command and understanding of the business. It’s important to reflect on forecast accuracy, learn from any discrepancies, and adjust forecasting methods accordingly.

What are benchmarks for accurate forecasting? When sales forecasts are missing, what should leaders look at to remedy them?

Aim to be within 10% on the low side or 20% on the high side – accurate forecasting is a delicate balance between under and overestimation. You have more leeway with under-forecasting but it’s still not ideal. The best-in-class standard is accuracy within 5%.

If you’re missing, look at your sales methodology – a sales methodology is a framework for your sales process. It’s important to have a clear and consistent methodology that all members of your sales team can follow. This ensures that everyone is on the same page and working towards the same goals. The MEDIC sales methodology is a popular choice for many businesses. It focuses on identifying and understanding the customer’s Metrics, Economic Buyer, Decision Criteria, Decision Process, and Identifying Pain. By pulling a thread through MEDIC, you can ensure that all aspects of the sales process are covered.

How should your forecasting improve as your company becomes more mature?

The sophistication of your funnel reporting depends on your team’s maturity – if you’re an early-stage company, your reporting can be high-level. However, as your team grows and your company reaches Series B or C, you can start to delve into more granular funnel metrics.