Accurate sales forecasting is a crucial aspect for ensuring businesses are on track to meet projections. But new data from revenue intelligence experts Gong, highlights the challenges companies face when developing them. Nearly 80 percent of UK companies missed their sales forecast in at least one quarter over the last two years. A key contributing factor being outdated tech and practices being used to develop projections.
A 2022 study in Social Science Research Network found that public companies’ earnings guidance is wrong about 70 percent of the time, suggesting that this problem doesn’t only affect private companies, but publicly traded ones as well. In both public and privately listed organisations, missed forecasts can signal to stakeholders and shareholders a lack of understanding about the business and markets companies operate in, and cause them to lose confidence. Advanced forecasting tools that incorporate technology like artificial intelligence (AI) can help increase the accuracy of these projections.
Inaccurate forecasting is hitting companies and staff where it hurts: with pay freezes, promotions and hiring on hold. Despite missing forecasts, companies are optimistic for the year ahead, with 70% saying they’re increasing revenue projections for the year ahead. When asked for the biggest hindrance to accurate forecasting, a third said their technology is out of date.
“The days of revenue leaders relying on spreadsheets and subjective and partial data to predict sales are over,” said Amit Bendov, Gong CEO and co-founder. “Companies struggle to forecast accurately in good times, and the problem is compounded when economic headwinds hit. AI’s ability to bring the voice of the customer and ‘deal health’ to forecasting is changing the game to help leaders better understand and strategically plan their businesses.”
The good news is that businesses recognise the issues with the current approach and are tackling their forecasting process differently this year than last year. 34 percent of respondents said that they are or plan to forecast differently for the upcoming year. And 64 percent said that they are investigating or have invested in new, more advanced technology and systems to forecast more accurately.
Work marketplace Upwork is one company that has increased its forecasting accuracy as it has grown, with its community of independent talent earning more than $3.8 billion in 2022 across more than 10,000 skills.
“At Upwork, our sales forecasting process wasn’t providing the level of precision we needed as we entered a period of organizational change and growth amid an uncertain economy,” said Drew Korab, director of sales operations at Upwork. “We implemented a new, AI-powered solution that gives us the data, process, and insights to more accurately predict how our Enterprise business will perform in new logo acquisition. In the first three quarters we’ve used this solution, we reached 95 percent forecast accuracy, allowing us to deliver a stronger sense of confidence to our stakeholders.”
About the study
This survey was commissioned by Gong. To develop this report, CensusWide surveyed 2,015 business leaders at privately held companies in the US (1,015) and UK (1,000) between January 3, 2024 and January 9, 2024.