Forecasting & Model Trains: Lessons From the Rails

Hey there!

Tired of hearing about “training models?” Okay, let’s take a break and talk about model trains instead.?

When I was a kid, I was obsessed with them. Not just running them - I loved figuring out which models worked best for different tracks and setups. The sleek passenger engines weren't always better than the sturdy freight locomotives. It all depended on what you were trying to do.

I think about those trains whenever we help revenue teams choose forecasting models. According to Gartner, less than 50% of sales leaders trust their forecasts - often because they're trying to run their revenue on the wrong track with the wrong engine.

Just like with trains, the "best" forecasting model depends entirely on what you're carrying and where you're headed. A high-growth startup needs different things than a mature enterprise. A sales-led organization needs different mechanisms than a product-led one. So let's line up our models side by side and see what each one does best.

The Four Key Revenue Forecasting Models:

1. ARR Snowball Model
2. Bookings, Billings, and Collections Model
3. Sales Capacity Model
4. Sales Cycle Model

Switching Tracks: The Power of Hybrid Approaches

The most successful companies aren't choosing just one model - they're combining approaches. For example, use bottom-up models (like sales capacity) for near-term forecasting where you need precision, and top-down models for longer-term projections where trends matter more.

Three Questions to Ask When Choosing Your Model:

1. What's your company stage? Early startups need simpler models; mature companies can handle more complexity
2. How do you sell? Sales-led companies need different models than product-led ones
3. How good is your data? The best model in the world won't help if your data isn't reliable

As always, we’ve put together an extensive article for anyone who’s as obsessed with the details as we are. Read it here: Picking a Revenue Forecast Model

Best,

Batu