Judgmental amounts and probabilities

amounts x probabilities = traditional sales forecasts

A lot of B2B companies base their sales forecasts on the amount of their live opportunities multiplied by the closing probability of these opportunities. SalesClic lets you use this simple and traditional method.

The trap

There are, however, two significant dangers in basing sales forecasts on amounts x probabilities:

  • Such forecasts rest entirely on human, hence fallible judgments. A sales manager’s ability to overwrite the input of his sales reps does not change this problem.
  • The closing probability is continuous (from 0% to 100%) but the event it represents is binary (winning or losing the deal). A single lost opportunity affects the entire forecast.

Indeed, these “simple” forecasts are often wrong.

The opportunity

Nonetheless, we believe that sales forecasts based on amounts x probabilities offer an interesting opportunity: identifying the psychological biases (e.g. optimism or pessimism) potentially affecting the judgment of sales reps. Taking advantage of that opportunity while improving sales forecasts supposes two things:

  • Closely monitoring the variations of an opportunity’s amount and closing probability during the sales cycle.
  • Using multiple sales forecasting methodologies.

SalesClic helps you do both.