How to Forecast within 5% with Paul Shea and Chris Lowry
Apr 5, 2024
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Paul Shea, an expert in operational strategies, teams up with Chris Lowry, a seasoned professional in sales forecasting, to unpack the intricacies of accurate forecasting. They discuss the crawl-walk-run approach to building effective forecasting models and tackle the often tricky conversations between Sales and Operations. The duo also reflects on the vital balance of qualitative insights and quantitative data in dynamic markets, emphasizing the importance of clean data management and collaboration to achieve forecasts within 5% accuracy.
Sales forecasting is essential for a company's operating rhythm, significantly impacting investment confidence and operational effectiveness.
Building an effective forecasting model requires balancing data integrity with qualitative insights, fostering collaboration between sales and operations teams.
Deep dives
The Importance of Sales Forecasting
Sales forecasting is not merely about predicting numbers but is critical to the overall operating rhythm of a company. A well-structured forecasting process allows businesses to invest and grow confidently, whereas poor forecasting leads to mistrust and failure. The episode highlights how consistent achievement of sales numbers enhances a company's credibility and operational effectiveness. Insights from industry professionals emphasize that accurate forecasting increases confidence among founders and revenue leaders, contributing to better decision-making.
Building a Forecasting Model
Constructing an effective forecasting model involves a strategic blend of data analysis and human insights. The initial steps involve thorough understanding of the business, including market segments and sales cycles, as well as a deep dive into data patterns. Early-stage models often rely heavily on basic spreadsheets capturing sales leaders’ input, which can be refined and expanded over time. A crucial aspect of model building is striking a balance between data integrity and the qualitative insights from sales teams to ensure forecasts are rooted in reality.
Navigating Change and Data Quality
Adjusting to changes in business dynamics, such as moving upmarket or responding to crises like COVID-19, requires flexibility in forecasting methods. As sales cycles lengthen and relationships with customers become more complex, operators need to adapt their approaches to accurately reflect these conditions. One key takeaway is the significance of data quality, as inaccurate data leads to flawed forecasts. Analyzing historical data for trends while adjusting to current operational realities is essential for maintaining an effective forecasting model.
Collaboration Between Sales and Operations
Successful forecasting hinges on building strong collaborative relationships between sales and operations teams. Open communication allows for better understanding of differing forecasts and encourages trust between sales leaders and operations. Techniques such as walking sales managers through key inputs help them grasp how forecasts are formulated, fostering collaborative problem-solving. This partnership not only enhances the accuracy of forecasts but also contributes to a culture of accountability and shared goals within the organization.
Kevin Knieriem, President of Strategic GTM at Clari, wrote, "The sales forecasting process is so much more than just calling a number. It represents the entire operating rhythm of the whole company."
On today’s episode, we’re going deep into forecasting, specifically how Operators can contribute to the forecasting motion at their companies. And to do that, I’m bringing in two people who I know understand the ins and outs of forecasting because I built it alongside them: Paul Shea and Chris Lowry.
Paul and Chris were the architects of our Operations team’s forecasting model that regularly forecasted within 5% of actual results.
In our conversation, we talk about the crawl-walk-run approach you can follow to building your own model at your company, the tough conversations between Sales and Ops when your forecasts are different, and ultimately, whether all of this work is actually worth it.
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