Velocity-Based Forecasting

Traditional forecasting asks reps to estimate deal-by-deal outcomes. Velocity-based forecasting uses the observed rate of revenue movement to project future results. If pipeline velocity has been $22,000/day for the trailing 30 days and the quarter has 45 selling days remaining, the expected revenue is approximately $990,000. This projection is independent of individual deal predictions — it is based on the system's throughput rate.

Velocity-Based Forecast vs Deal-Level Forecast

                         Velocity Forecast    Deal-Level Forecast
─────────────────────    ─────────────────    ───────────────────
Method                   System throughput     Rep-by-rep roll-up
Input                    Trailing velocity     Deal-level estimates
Bias                     Mean-reverting        Optimistic
Accuracy (typical)       +/- 12%              +/- 22%
Best for                 Quarterly planning    Weekly commit calls

Recommended: Use BOTH. The gap between them is diagnostic.
  If velocity forecast > deal forecast: reps are sandbagging
  If deal forecast > velocity forecast: reps are inflating
  If they agree within 10%: high confidence in the number

Segment the velocity forecast by pipeline: enterprise pipeline velocity of $12,000/day plus SMB velocity of $8,000/day plus expansion velocity of $5,000/day produces a total forecast of $25,000/day. Segmented velocity forecasting is more accurate because each pipeline has its own conversion physics — and their aggregate is more precise than a single pipeline average.