A question I often get from people outside of sales is “what’s the difference between a sales pipeline and a forecast?” Sometimes people incorrectly use the terms interchangeably.
A sales pipeline is the set of all current opportunities that the sales team is working on. Typically they are stored and managed in an SFA/CRM system such as Salesforce.com, A pipeline opportunity follows company-defined stages as a way to gauge progress along the sales and buying process. Stages such as Discovery -Technical Fit – Justification – Contracting – Win/Loss are common The farther along an opportunity is in the stage progression, the more likely they will become a customer.
A sales forecast is the subset of the pipeline that will close within the forecast window – usually this month or this quarter. The sales team will classify pipeline opportunities as either in or out of the current forecast. Often items in the forecast are further refined such as committed, likely, or stretch – with sales leadership making final calls on the overall forecast.
There is always a relationship between pipeline and forecast. The type of sale makes a big difference in how closely they are related in the short term. If you have a highly transactional sale – lower price, short sales cycle, single decision maker – then the late stage pipeline and the forecast will likely be very similar. If you have a highly complex sale – higher price, long sales cycle, committee decisions and senior executive approvals – then the late stage pipeline and the forecast will likely vary a lot.
Excellence in both the pipeline and forecast management are core strengths for sales people and especially for sales leaders. It is one of the traits of excellent sales teams to predictably deliver on the forecast while maintaining a healthy flow of early stage pipeline for future business.
For an accurate understanding of sales status via dashboards and reports, it is important to make sure non-sales executives understand the definitions and differences between the pipeline and the forecast. Better discussions, and decisions, will result.