Bottoms-Up Forecasting

A top-down forecast says "we want to grow 50% next year." A bottoms-up forecast says "given our pipeline, conversion rates, average deal size, sales capacity, and ramp time, we can close $X." The top-down number is a target. The bottoms-up number is a constraint. When the target exceeds the constraint, something has to change — more pipeline, higher conversion, bigger deals, or more reps. If nothing changes, the forecast is a wish.

1. Step 1: Sales Capacity Model How many fully ramped reps do you have? Multiply by quota attainment rate (typically 60-70% of plan). A team of 8 reps at $800K quota with 65% attainment produces $4.16M, not $6.4M. The gap between theoretical capacity and realistic output is where most forecasts fail.
2. Step 2: Pipeline Coverage How much qualified pipeline do you need to hit the number? If your win rate is 25%, you need 4x pipeline coverage. For $4M in target bookings, you need $16M in qualified pipeline entering the period. If you have $10M, your forecast already has a $1.5M gap before the quarter starts.
3. Step 3: Conversion Assumptions Stage-by-stage conversion rates: lead to MQL, MQL to SQL, SQL to opportunity, opportunity to close. Each conversion is a filter. A 30% lead-to-MQL rate, 40% MQL-to-SQL rate, 50% SQL-to-opp rate, and 25% close rate means you convert 1.5% of leads to customers. Small changes at the top of the funnel cascade dramatically.