There’s a big difference between your pipeline and your forecast.
To be sure, your forecast is important — but it’s not really something you can manage. Your pipeline, on the other hand is.
Forecasting is all about predicting the next period’s revenue — whether that period is a week, a month, or a quarter depends on what business you’re in, and what your sales cycle is like, but regardless, it’s always about late stage deals. When can you recognize revenue? How much business is already booked from previous contracts? How many deals are already closed but not starting until the next period? And how much “extra” are you going to be able to squeeze in by closing business in the last stage of the pipeline?
Those are all important questions that a sales manager needs to be asking. But unless you want to run off a fiscal cliff, you need to spend way more time focusing on the pipeline, or funnel.
Pipeline is focused on the future development of sales, which ultimately impacts later forecasts. The steps in your funnel/pipeline may also vary by business, but you’ll certainly have some, and they’ll probably look something like this: lead, prospect, in process, in negotiation, getting final approvals, contract, closed.
Most managers don’t differentiate or understand the difference between the pipeline and the forecast, but good managers do — and good managers keep the difference in mind when setting new team coals, or coaching for performance. If you have enough data, you can get really specific about how many opportunities each rep needs at each stage of the funnel to get the necessary number of deals out the end. But even without data, you should be looking at these metrics. You should be looking at how quickly each member of your team advances opportunities from one stage to the next, what percentage of opportunities get moved up vs. moved out, and how many leads you need at the beginning of the pipeline, so you can go yell at your marketing team.