How to forecast pipeline from marketing without lying to the board
A simple model, built from your own conversion history, that produces a number you can defend and revise in public.
Marketing forecasts fail for a boring reason: they start from the budget and work forwards. A defensible forecast starts from the revenue target and works backwards, using conversion rates the company has actually observed.
The four numbers
- New revenue required from marketing-sourced deals this year.
- Average contract value for those deals over the last four quarters.
- Opportunity-to-close rate over the same period.
- Qualified lead-to-opportunity rate, by channel if you have it.
Divide the first by the second to get opportunities needed. Divide by the third to get opportunities to create. Divide by the fourth to get qualified leads. That is the whole model. Everything else is decoration.
Where it goes wrong
The temptation is to improve the conversion rates in the spreadsheet because the number of leads required looks frightening. Resist it. Present the frightening number, then present the plan to improve one rate at a time, with the evidence for why it is possible.
How to present it
Show the model, the assumptions and the range. Say which assumption you are least sure about. Boards forgive a miss on a forecast they understood. They do not forgive a confident number that turned out to be invented.
The forecast is not the number. The forecast is the argument for the number.
