A ramp along a curved wall in the Kiasma Museu, Helsinki, Finland

See around the corner with leading indicators for your business

No, we can’t see the future or predict the market, but you don’t actually need to do either of those things to have a spectacular preview of what’s driving your business.

Each of the four forecasting types has strengths and weaknesses as we’re trying to show in the chart. These are going to be slightly different for each industry segment, but would rarely move up or down more than one spot from this chart (good, moderate, or bad).

The four types of business forecasting

Consensus forecasting

The annual budgeting and polling process. Getting consensus from the entire org and stakeholders. This is the most popular type of forecasting. Used by ~80% of the companies in the world.

Scenario forecasting

The prospectus and what-if planning. Usually focused on answering a specific problem. Often ad-hoc. This is the second most popular type of forecasting. Used by ~60% of companies in the world.

Sales funnel forecasting

Tracking sales activity to identify whether upcoming business is growing or shrinking and in what ways. This has become more popular because of CRM software like Hubspot and Salesforce. However, the leap from sales tracking to revenue forecast seems to occur in less than 5% of companies.

Trends based forecasting

Historical: Identifying seasonal and long-term historical growth trends and projecting that momentum into the future. This type of forecasting is used by less than 10% of companies.

Leading Indicators: Identifying industry or business-specific leading indicators, often based on modeling the industries that your primary customers operate in. This type of forecasting is very rare.

Forecasting methods are strong in “Preview” when they are dynamically responsive to data which indicates where the company is heading months in the future, whether it be up or down.

See around the corner by focusing on forecasting methods with Preview

Sales funnel forecasting is the most applicable for “seeing around the corner.” We will always look for ways to utilize sales funnel forecasting as the primary way to answer the question: “What’s coming”. It will catch both external and internal drivers for where sales are going in your company.

Market leading indicator trends are the holy grail for long-range preview. It is exceptionally difficult to get beyond the “directionally correct” or “order of magnitude” level of precision, but often this is sufficient for the long-range strategic planning support that companies desire.

Guide your business to clarity about the future

The most accurate way to forecast future revenues of your business is to combine the strengths of several types of forecasts.

  • Start with the accuracy of historical trends momentum and quantify the range of possibilities.
  • Then layer in the upward or downward trends in sales activity, including dynamic win rates and any decay from deal aging.
  • Finally, we look for market indicators that aren’t already explained by trends and sales activity but recognize the highly uncertain nature of this forecast type.

Seem complicated?

Well, it honestly is. Which is why we built our forecasting AI.

It handles this with ease.