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End Of Year Forecasting

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Dylan Zayonc

We have the amazing Erin Gondeck from Pigment for our Slack AMA to discuss end of year forecasting and best practices!

We have some great topic questions that Erin will be discussing at first and then submitted questions from members of the ROC, but please bring your own questions and warm those fingers up because this is a packed event! 

To get everyone warmed up i'm going to ask a question near and dear to my heart: Does pineapple belong on pizza?? Drop your answers in the chat!

Blake Kendrick

Not preferable, but acceptable.

Dylan Zayonc

Alright, i'll take that.

We’re going to kick this topic off with a question that should get everyone's blood flowing!

What are some best practices on forecasting methods & approaches to take that can improve sales forecasts?

Erin Gondeck

Good answer Blake, pineapple on pizza can be a polarizing topic!

Alright, let's do this! This can vary depending on size of team and maturity of business. A few different approaches we typically see:

  • You want to have different eyes / opinions - not just rep vs. first line manager but also potentially getting your SC leadership to opine, or CS if it is an expand opportunity
  • Also, try to leverage data as much as possible. There is a lot of rich historical data that can help to bubble up insights and patterns to help validate or invalidate opportunity forecasts

Dylan Zayonc 

Those are some great insights, Erin.

Does anyone have any questions or experiences to share on this topic? 

Erin Gondeck

If there are any specific areas people are looking for more best practices in let us know in the chat and we can provide more details!

Dylan Zayonc

This is a perfect discussion to lead us into our next question that comes from Taylor Risner: Sales teams are overly optimistic, finance teams are overly cautious. What are the best practices to establish a middle ground so that you don't have 4 different forecasts across the company?

Erin Gondeck

Good question, Taylor! We see this a lot with our customers and prospects; here are some things we think can help bridge the gap between sales and finance teams:

  • Having a single spot for sales and finance to collaborate and provide their inputs to the forecast, working of the same data source instead of pulling data from different systems or at different times and working on two different sets of assumptions
  • Agree on shared KPIs and dashboards to enforce collaboration instead of each group working towards different objectives
  • What if scenarios - plan for a range of outcomes to incorporate a more optimistic best case plan, base case, and worst case
  • Measure forecast accuracy of each group to enforce data driven decisions and encourage inputs to the forecasts that are making the plan more accurate
  • Here's a great article on other strategies to help get finance and sales teams in sync - HBR: Get Sales and Finance in Sync

Dylan Zayonc

That's a great question Taylor! Is there anything further you would like to pick 

Erin’s end of year forecasting brain on?

This brings us to the next question: What types of data or inputs from teams can help the sales forecasting process?

Trevor Greyson

Do you keep renewal forecasting in the same forecast pack you mentioned above? What KPI's are you tracking in there?

Erin Gondeck

Dylan, here are some examples of data and inputs to incorporate:

  • Start off with bringing in opportunities from CRM, then incorporating things like historical win rate by sales reps, segment, industry, pipeline coverage ratio, aging, average time to close or time in stage
  • Commentary from front line sales leads, commit inputs, also incorporating MEDDICC or other sales methodologies to help qualify deals and some key considerations in a sales cycle

Yes, Trevor! We typically see customers including renewals in forecasting and then using deal type to split out new vs expand metrics. Further, some KPIs we see people track are: renewal date, commercial terms (i.e. auto-renewal, renewal uplift), NPS, user activity (e.g. log-ins), subjective traffic lighting by CS organization. I am also slacking a CS team member to see if they have any more to add to that list!

Dylan Zayonc

Erin, what tools/algorithms can consolidate all these data points?

Erin Gondeck

I am biased, but Pigment is a great tool for this. We have native connectors with Salesforce, HubSpot, NetSuite and others so our customers use it as a central platform to consolidate data and model out forecasts with algorithms and what if scenarios. There are a lot of options out there, I think this HubSpot article is a great resource for different sales forecasting methods: 

Dylan Zayonc

Thank you for that input. I know this is a discussion I see all the time in the community so I'm sure people will be checking that out!

One last question in the inbox regarding this topic: How do solutions consultants at pigment positively influence deals that have risk of slippage?

Erin Gondeck

Good question, I think for solutions consultants it's really important to build out relationships with prospects at the champion or influencer level, so if a sales rep is not getting a response or a deal is at risk of slipping the SC can also be someone who reaches out to try and get communication or momentum going again. Our SCs can also really focus on differentiators to show prospects why they need a flexible planning & modeling tool now and help to quantify what the impact is if they wait or do nothing.

Dylan Zayonc

That's a great perspective on that question and coming from a sales background myself, it's something that more companies need to be doing!

Our next question comes from an ROC member: What's the best way to set quotas and incorporate them into the sales forecasting process?

Erin Gondeck

Agreed! Alright, setting quotas - there is a lot I could share here but the short answer is that whatever is communicated to investors / the board. Wall Street is the baseline, and you add X% to the quota on the street to create that buffer. 

But the real answer is that quota is basically the output, and you need to look at the inputs, which would be how many reps you need and the territories you give them. 

By taking a more prescriptive approach to understanding the optimal headcount number and the territories to fill them, you can allow your organization to not look at quota as just a revenue exercise, but a margin exercise as well.

At Pigment we help our customers figure out sales capacity first to better inform the quota setting process, here are some more tips on this topic: 

Dylan Zayonc

I know it’s a hefty topic so thanks for the precise answer. You read my mind - I was just about to ask if you have any references regarding this topic that might help! Thank you for that.

Erin Gondeck

Yes, and happy to chat more about the quota setting process, if anyone wants more info please slack me directly!

Dylan Zayonc

We have time for one more question and this one comes from Jacques Lourens: How to treat enterprise/lumpy deals in FC?

Erin Gondeck

Have multiple drawers! Drawer one is the deals you believe are going to happen. Drawer two are deals where you have strong relationships and need to make an inorganic ask to pull it forward. 

Drawer three is where you need to take a “Hail Mary” approach. You usually don’t want to pull on drawers two and three, but it is important you are at least thinking about them to mitigate the inevitable lumpiness that comes with bigger deals.

Additionally, it becomes incumbent on the highest ranking leader(s) who carry the portfolio to guide the organization to pull one lever if another lever is not going to happen. The more levers you have, the more you can mitigate the risk of lumpiness.

Dylan Zayonc

Before we close this Slack AMA out do you have any useful articles or links that can help some of the members with end of year forecasting?

Erin Gondeck

Yes a few more articles to share to help with sales forecasting & more general revops planning processes:

This one does a great job outlining out technology can improve sales forecasting processes - BCG: Boost Sales and Lower Costs with RevTech

Evolution of Sales Planning & Why Businesses Need to Ace It

More in general for RevOps but Tomasz Tunguz is a go to for me, I really like his post on pipeline review & forecasting and how to structure lands vs expand and key metrics.

Dylan Zayonc

This has been amazing, thank you Erin. Everyone in the community can learn so much from you and we look forward to our next event with you and Pigment!

Please reach out to Erin Gondeck if you have any further questions or want to expand on the topic and we look forward to seeing everyone at the next Slack AMA!

Erin Gondeck

Thanks for all the great questions Dylan & co. Yes, please reach out and can't wait for the next event!

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