A revenue forecast is an estimate of how many deals a company will close in a given period and at what value. It is built on the deals in the pipeline, their value, and the probability of closing according to the stage they are in. Accuracy depends on two things: discipline in updating records, and whether the probabilities are derived from actual history rather than estimated. If a company knows what share of deals in a given stage has historically closed, it gets a far more realistic figure than from a salesperson's estimate, which tends to be systematically optimistic. The forecast needs to be compared with actual results and the deviations evaluated, otherwise accuracy will not improve. It serves not only for revenue planning but also for decisions on capacity, purchasing materials, and hiring people.
See also: Sales pipeline hygiene, Sales process stages, Sales Cycle Length.
