Why Sales Forecasting is Important

Sales forecasting is critical for companies of all sizes and industries.

Inaccurate forecasting—whether it’s underforecasting or overforecasting—can lead to serious problems, such as:

• Struggling to manage cash flow effectively

• Poor allocation of resources

• Unrealistic and unattainable sales goals

• Missed opportunities for growth and innovation

• Reduced trust from investors and challenges with fundraising

• Lower team morale

Sounds alarming, doesn’t it?

Sure, we live in a turbulent world where market conditions and customer sentiments change rapidly. But that’s no excuse for neglecting sales forecasting. Accurate forecasting is essential to secure predictable and profitable growth.

Every sales leader and revenue manager must sharpen their forecasting skills and adopt technology that ensures reliable revenue projections.

When your sales pipeline is small, manual forecasting with spreadsheets might work. But as your team starts handling 100+ active deals at a time, spreadsheets quickly become a burden—they’re time-consuming and prone to errors.

A successful sales leader needs powerful tools to create accurate sales forecasts and build trust with senior management.

In this article, we’ll explore why HubSpot is a strong platform for sales forecasting and identify the gaps it has when it comes to achieving the highest level of accuracy.

Key Challenges Of Sales Forecasting

No matter which sales forecasting tool you use—HubSpot Forecasting, Forecastio, or others—you might still struggle to achieve accurate results. Several factors can impact your success:

Broken sales process

The foundation of accurate sales forecasting is a structured sales process that aligns with your customers' buying journey.

Your sales pipeline must reflect this process and include clear stages in the correct sequence. It’s also critical to define rules for how and when deals move from one stage to the next.

If your pipeline is disorganized, you can’t expect to create reliable sales forecasts. No tool can fix a messy process.

Dirty and incomplete data

I often speak with sales leaders across different industries and regions.

99% of them say their biggest challenge in sales forecasting is inaccurate or incomplete data. And they’re right.

While achieving 100% data accuracy isn’t realistic, there are steps you can take to maintain high data quality:

• Automate data enrichment and updates wherever possible to reduce human error.

• Regularly clean data and make it a focus during one-on-one meetings with sales reps.

• Use reporting tools to identify data issues and address them efficiently.

• Implement clear rules for data entry at each pipeline stage, and train your team on these rules.

These steps may seem obvious, but you’d be surprised how many companies lack a systematic approach to keeping sales data clean and up-to-date.

Lack of a systematic approach

Sales forecasting isn’t a one-time task—it’s an ongoing process.

Whether you’re using HubSpot Forecasting, Salesforce Forecasting, or specialized tools like Forecastio, you need to develop a clear process.

Your process should answer the following questions:

• Who is the main stakeholder for sales forecasting?

• Who contributes to the forecasting process?

• What type of forecast do I need: short-term or long-term?

• What data do I need to collect?

• When should I prepare forecasts?

• What does the forecasting procedure look like?

• How often should I revisit existing forecasts—daily, weekly, or monthly?

It’s also essential to get buy-in from senior management and other departments that can contribute valuable insights to your forecasts.

Wrong methods

Choosing the right forecasting method depends on your sales model and its parameters.

For instance:

• If your sales cycles are short, pipeline stage probability forecasting may not be effective.

• For enterprise sales with longer cycles, pipeline stage forecasting often works well.

• If your sales experience random spikes, drops, or seasonality, predictive analysis—like time series forecasting—can account for these factors and capture trends.

I recommend combining multiple forecasting methods to create more accurate revenue projections. Using the wrong method can lead to errors and low accuracy.

Wrong tools

Most CRMs include some form of sales forecasting tools. However, these tools often don’t account for your specific business model, sales model, or other critical factors.

Additionally, many CRM forecasting tools rely heavily on human input and manually entered probabilities. And let’s face it—salespeople tend to be overly optimistic, so these probabilities are often inflated.

Sales Forecasting Methods

Let’s quickly go over the key sales forecasting methods and models.

Two approaches to sales forecasting

There are two fundamentally different approaches to sales forecasting:

1. Top-down sales forecasting

This approach relies on your understanding of macroeconomic factors, such as market trends, market size, competition, and potential recessions or drops in demand.

It focuses on predicting sales based on external factors and determining the resources or initiatives needed to achieve those targets.

Top-down forecasting works well in highly volatile environments and is ideal for long-term forecasting, which is often closely tied to sales planning.

2. Bottom-up sales forecasting

Unlike top-down forecasting, bottom-up forecasting is based on historical data, current sales performance, and real deals in the sales pipeline.

This approach is effective for short-term forecasting, such as for a month or a quarter, and heavily relies on accurate and complete data.

Sales forecasting models

Regardless of which approach you use, several sales forecasting models can help:

• Historical Forecasting: Projects future revenue based on past growth rates.

• Pipeline Stage Probability: Estimates future revenue by multiplying the value of deals at each pipeline stage by the probability of closing at that stage.

• Sales Velocity: Measures how quickly revenue is generated daily or monthly. Using this metric, you can forecast future performance.

• Time Series Analysis: Creates accurate forecasts by analyzing historical data, identifying patterns, and factoring in recent trends.

If you want a deeper dive into these methods, download our guide, “13 Sales Forecasting Methods”

Sales Forecasting in HubSpot

There are several ways to create sales forecasts using HubSpot forecasting. In this article, we’ll discuss each method, highlighting its benefits and limitations.

Pipeline stage forecasting or weighted pipeline

How it works

Weighted pipeline forecasting, also known as forecasting by pipeline stage probability, is one of the simplest methods available in HubSpot.

The core idea is to multiply the deal amounts at each pipeline stage by the probability of winning deals at that stage.

Example:

Let’s say you want to create a sales forecast for the next quarter.

Steps:

1. Go to the [Deals] section in HubSpot.

2. Select the relevant sales pipeline.

3. Filter deals by Close Date.

   

   
   

4. Check the [Weighted Deal Amount] field above the pipeline.

(Image Source: HubSpot)

The total shown is your projected revenue for the next quarter.

How to configure

To generate forecasts based on pipeline stage probabilities, you need to configure probabilities for each stage in the pipeline settings.

Pros and Cons

Advantages:

• Simplicity: This method is straightforward and easy to understand.

• Ideal for small teams: If your sales team is small and your pipeline doesn’t contain many open deals, this approach can work well.

Disadvantages:

• Manual probabilities: Stage probabilities are manually set and not based on actual data, which can lead to inaccuracies.

• Inaccurate close dates: Close dates are often unreliable, especially for deals in the early pipeline stages.

• Requires careful review: You must regularly check deals to ensure close dates and amounts are accurate.

Weighted pipeline forecasting can be a quick and simple solution for basic forecasting needs, but its limitations make it less effective for larger teams or more complex pipelines.

To achieve accurate forecasting, HubSpot requires a solid understanding of the probability of winning a deal at each pipeline stage.

Using HubSpot Forecasting Tool

How it works

The HubSpot forecasting tool is excellent for building a sales forecasting process and creating a clear structure.

Essentially, this method involves each sales rep on the team submitting a forecasted amount for a given period. The sales manager then reviews these individual submissions and consolidates them into a total forecasted revenue for the entire team.

(Image Source: HubSpot)

With the HubSpot sales forecasting tool, you have two main options:

1. Create sales forecasts based on deal probabilities (pipeline stage probabilities), which works similarly to the weighted pipeline method described earlier.

2. Create forecasting categories and assign each deal in the sales pipeline to a specific category, representing a particular likelihood of winning the deal (based on your expertise).

A forecasted value can be calculated automatically but can also be adjusted manually by a sales representative before submission.

Additionally, the HubSpot sales forecasting tool allows managers to:

• Set sales goals

• Compare submitted forecasts against goals

• Track progress toward goals

• Estimate whether the current pipeline volume is sufficient to achieve goals (open pipeline coverage).

A more detailed guide on all aspects of using the HubSpot sales forecasting tool can be found here.

How to configure

Here are a few simple steps to set up the HubSpot sales forecasting tool:

1. Set up the deal amount: Specify which amount will be displayed in reports.

Settings -> Objects -> Forecast -> Forecast deal amount

(Image Source: HubSpot)

2. Define the sales forecasting period: Choose between a monthly or quarterly period.

Settings -> Objects -> Forecast -> Select the forecast period for all pipeline settings

3. Enable the submission status indicator: This displays the time since the last forecast submission.

Settings -> Objects -> Forecast -> Forecast submission status indicator

(Image Source: HubSpot)

4. Configure the pipeline’s forecast categories: Select categories and align them with the corresponding pipeline stages.

Settings -> Objects -> Forecast -> Pipelines

(Image Source: HubSpot)

(Image Source: HubSpot)

5. Set team goals: Establish goals for your team for the selected period. The period will match the chosen sales forecasting period (monthly or quarterly).

Reporting -> Goals -> Create goal

You can find more details on setting up the HubSpot sales forecasting tool here.

Pros and Cons

To implement comprehensive sales forecasting, HubSpot requires careful configuration of all settings related to sales forecasts.

This tool comes with both advantages and disadvantages. Let’s explore them.

Advantages

• Enables you to structure the sales forecasting process.

• Provides sales representatives with a degree of freedom and flexibility.

• Helps sales leaders manage forecasts more effectively, especially for large teams, numerous open deals, and multiple pipelines.

• Implements a classic bottom-up approach, where the overall team forecast is based on individual submissions.

• Allows setting goals and tracking progress toward achieving them.

Limitations

• Weighted deal amounts rely on manually set probabilities rather than being calculated from real historical data.

• Assigning deals to specific sales forecasting categories is done by sales reps based on their knowledge, which increases the impact of the human factor on forecast accuracy.

• Submitting and manually editing forecasted revenue requires time and attention from reps. This can sometimes lead to errors, as sales reps may not be highly motivated to update CRM data.

Overall, the HubSpot forecasting tool is an excellent representation of bottom-up forecasting, combining insights from the current pipeline with the knowledge of individual sales reps.

Sales Forecasting in Forecastio

First of all, Forecastio isn’t a replacement for the HubSpot forecasting tool. Instead, it enhances what HubSpot offers by providing advanced forecasting methods.

How it works

Forecastio offers several sales forecasting techniques:

1. Time series forecasting

This method uses predictive analysis, specifically the Autoregressive Integrated Moving Average (ARIMA) model, to create forecasts based on:

• Historical performance

• Data patterns (e.g., unexpected sales spikes or drops)

• Latest trends and seasonality

One key advantage of this method is its ability to learn from past forecasting errors. It uses this information to adjust future revenue predictions, ensuring more accurate sales forecasts. Importantly, this approach doesn’t rely on the current sales pipeline or manually set probabilities.

Time series forecasting enables you to create precise long-term forecasts that adjust in real time based on recent events and the performance of your sales team.

2. Forecasting by opportunity stage

This method is similar to the HubSpot sales forecasting tool but with a significant improvement: stage probabilities (deal probabilities) are calculated automatically based on how won deals have moved through the pipeline in the past.

Key Benefits:

• Eliminates the human factor, increasing forecast accuracy.

• Stage probabilities are updated daily, ensuring that projected revenue always reflects your team’s current performance.

To generate a forecast, Forecastio multiplies the value of each deal at a specific stage by the stage’s probability, then sums the results across all pipeline stages.

3. Forecasting by opportunity creation

This is the simplest and most straightforward method of sales forecasting.

The platform multiplies the total pipeline value expected to close within a specific period by the actual win rate.

How to configure

To set up sales forecasting in Forecastio, follow these simple steps:

1. Connect your HubSpot account to Forecastio.

2. Select the sales pipeline(s) you want to track.

3. Set revenue goals for the given period.

All sales forecasting methods are available on the platform by default.

Pros and Cons 

Advantages

• Uses advanced mathematical models and algorithms to achieve higher accuracy.

• Reduces dependence on the human factor.

• Offers simplicity and the ability to create multiple revenue projections from the same data, allowing you to assess risks and potential outcomes effectively.

Limitations

• The platform is accessible only to sales managers; sales reps don’t have access.

• The default forecasting period is limited to one month.

• Only monthly goals can be set.

HubSpot + Forecastio for Accurate Forecasts

Combining HubSpot sales forecasting with Forecastio unlocks unparalleled forecasting capabilities. Here's why this duo is a game-changer:

• Enhanced Accuracy: HubSpot's structured process combined with Forecastio's advanced algorithms ensures more precise revenue predictions.

• Data-Driven Insights: HubSpot provides a solid foundation with deal-based forecasting, while Forecastio introduces predictive analysis and real-time adjustments.

• Reduced Human Error: Forecastio's automated probability calculations complement HubSpot's forecasting, minimizing the impact of manual input.

• Scalable Solutions: Together, they offer flexibility for small teams using HubSpot and advanced techniques for larger teams with complex pipelines.

• Comprehensive Goals and Tracking: HubSpot helps you set goals and monitor progress, while Forecastio enables risk assessments and scenario analysis.

With HubSpot sales forecasting as the base and Forecastio as the enhancement, you gain the tools needed to achieve accurate, reliable, and actionable sales forecasts.

Ready to transform your sales forecasting? Book a demo today and see how Forecastio enhances HubSpot for accurate, data-driven revenue predictions.