Who are the most accurate sales forecasters, and what separates them from the least reliable? I recently conducted a study of the forecasting habits of more than 350 business-to-business salespeople and sales managers to answer this question.
Forecasting accuracy varies during the year. For example, the accuracy of the forecasts from the first quarter was different when compared to the fourth quarter. Thirty-three percent of forecasts were below the actual revenue number achieved in the first quarter compared to 23% in the fourth quarter. Forty-one percent of forecasts were very close to the actual revenue number achieved in Q1 compared to 44% in Q4. Twenty-six percent of the forecasts were above the actual revenue number achieved in Q1 compared to 33% in Q4.
Forecasting accuracy also varies greatly during the quarter. Study participants were asked to rate how accurate their forecast was at key moments during a quarter on a scale of 1 to 5 with 5 being the highest level of accuracy. At the thirtieth day of the quarter, 22% rated themselves at 1 or 2, 24% at 3, 31% at 4, and 23% at 5. At the sixtieth day of the quarter, 11% rated themselves at 1 or 2, 21% at 3, 59% at 4, and 9% at 5. At the ninetieth day of the quarter, 11% rated themselves at 1 or 2, 23% at 3, 23% at 4, and 43% at 5.
Perhaps the most fascinating part of the study was identifying who are the most accurate forecasters. The participants who rated their accuracy as a 5 or a 1 at day thirty both ended the quarter with the exact same forecast accuracy of 3.3 on average. Those who rated their accuracy as a 4 ended the quarter at 3.7, while those at 3 ended at 4.4 on average. Meanwhile, the highest accuracy forecasters were those who rated their accuracy as a 2 on day thirty: their accuracy level on average was 4.8 at the end of the quarter.
What impact do logic and intuition have on forecasting accuracy? Study participants were asked to explain what percentage their forecast was based upon logic versus intuition. The results indicated that two groups are the most inaccurate forecasters. The least accurate forecasters base their forecasting on 40% or less logic and 60% or more intuition and 80% or more logic and 20% or less intuition. Conversely, the most accurate forecasters base their forecast on 50 to 70% logic and 30 to 50% intuition.
Participants in this range had the highest percentage of respondents who rated their forecast accuracy as a 5 at the end of the quarter. Respectively by group, 61% percent of those who based their forecast on 70% logic and 30% intuition, 60% of those who based their forecast on 60% logic and 40% intuition, and 43% of those who based their forecast on 50% logic and 50% intuition rated their accuracy level as a 5.
Preparing a complete, accurate forecast is more than a chore that comes with being in sales; it’s actually proof that you belong in sales. The best forecasters are Heavy Hitters who use a calculated measure of logic and intuition to predict the future. They spend more time than their counterparts ensuring that their forecast is correct and cautiously approach each quarter being careful not to overcommit and thereby ruining their reputation.