What is Revenue Forecasting?

Definition

Revenue forecasting is a high-level business process used to predict the total revenue a company will generate from all sources over a specific period. It is broader than sales forecasting (which focuses on the sales pipeline) and incorporates data from sales, marketing, finance, and customer success. This includes projections for new sales, renewals, upgrades, and other income streams, providing a complete financial picture to guide strategic decisions.

Examples

• Company-Wide Forecast: A finance team combines the sales team’s $2M pipeline forecast, the customer success team’s $1.5M renewal forecast, and a $500k upsell projection to create a $4M total quarterly revenue forecast.
• SaaS Business: Forecasting Annual Recurring Revenue (ARR) by modeling new bookings, churn (cancellations), and expansion (upsells).
• Strategic Planning: Using a revenue forecast to determine the hiring budget for the next year or to secure a line of credit from a bank.
• E-commerce: Forecasting revenue based on projected marketing spend, historical website traffic, and seasonal conversion rates.

Advantages/Benefits

• Strategic Business Planning: It is the foundation for all major business decisions, including budgeting, hiring, and setting growth targets.
• Holistic Financial Health: Provides a complete picture of the company’s expected income, not just the sales team’s contribution.
• Manages Stakeholder Expectations: Gives investors, executives, and the board a clear and reliable prediction of company performance.
• Resource Allocation: Helps leaders decide where to invest resources (e.g., « Our renewal forecast is low, we need to invest more in customer success »).

Related terms

• Sales Forecasting
• Revenue Target
• ARR (Annual Recurring Revenue)
• MRR (Monthly Recurring Revenue)
• Financial Planning
• Budgeting