Businesses rely heavily on accurate sales forecasting to align with projections effectively. However, recent data from revenue intelligence experts Gong sheds light on the hurdles companies encounter in this area. Over the past two years, nearly 80 percent of UK companies have failed to meet their sales forecasts for at least one quarter, largely due to the use of outdated technology and practices in projection development.
A study conducted in 2022 by the Social Science Research Network revealed that public companies’ earnings guidance is inaccurate approximately 70 percent of the time. This trend indicates that the challenge of forecasting extends beyond private companies to publicly traded ones as well. In both spheres, missed forecasts can undermine stakeholders’ confidence, signaling a lack of grasp on business dynamics and market trends. Implementing advanced forecasting tools, including artificial intelligence (AI), can enhance the precision of these forecasts.
Inaccurate forecasting adversely impacts companies and their employees, resulting in pay freezes, deferred promotions, and halted hiring processes.
Amit Bendov, CEO, and co-founder of Gong, emphasized the obsolescence of traditional forecasting methods, saying, “The era of revenue leaders relying on spreadsheets and subjective data to predict sales is over.” He highlighted AI’s role in revolutionizing forecasting by incorporating customer feedback and assessing deal health, thus empowering leaders to make informed strategic decisions.
Encouragingly, businesses acknowledge the shortcomings of current forecasting approaches and are taking steps to address them. Thirty-four percent of respondents reported planning to alter their forecasting methods for the upcoming year, while 64 percent are exploring or have already invested in advanced forecasting technologies and systems.
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.”
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The study surveyed 1,000 business leaders at privately held companies in the UK in January 2024.