Sales forecast formula: cEFV, calibrated on prior periods
Online version: https://funneleconomics.ai/resources/glossary/cefv
cEFV (Calibrated Economic Funnel Velocity) is the calibrated revenue forecast for the end of a period. cEFV calibrates rEFV with the value growth of existing deals and the inflow of new deals from completed prior periods. cEFV is the best case of the forecast range, not the realistic one. A sales forecast shows cEFV beside worst and realistic case.
How is cEFV calculated?
cEFV = rEFV, calibrated with the value growth of existing deals and the inflow of new deals from completed prior periods
- rEFV – the expected value of the standing stock, weighted by SLA Health
- Value growth of existing deals – in board language, the value growth of deals in progress
- Inflow of new deals – revenue from deals that are newly created and won within a period
Value growth and inflow are measured on the completed prior periods, not set.
cEFV builds on rEFV and is calculated by the optional add-on Funnel Economics Strategist. The dashboards of Funnel Economics Core show a simplified rEFV, not cEFV.
Why does a forecast that values only the standing stock under-forecast in growth phases?
rEFV values the standing stock and assumes neither inflow nor value growth. In growth phases, the part that is newly created or gains in value is therefore missing.
cEFV adds both. cEFV thereby targets this systematic under-forecasting in growth phases and the over-forecasting in downturns.
What separates cEFV Trend from cEFV Momentum?
Funnel Economics Strategist computes two cEFV forecasts in parallel to detect breaks in trend. cEFV Trend shows the longer-term tendency; cEFV Momentum reacts at once to recent changes. cEFV Momentum below cEFV Trend is a sign of a cooling, cEFV Momentum above cEFV Trend a sign of a short-term acceleration.
Why does cEFV not stand alone?
cEFV is one number: the upper edge of the forecast range. The lower edge is rEFV, which assumes neither value growth nor inflow. Both edges are assumptions, not limits.
The three cases of the range are explained in the article forecast range, three cases instead of one number.
A single value also hides which part of the forecast depends on a few large deals. Such concentration does not mean the forecast is too high. Concentration means the forecast is uncertain; a discount is the wrong form for that.
How cEFV differs from bEFV and rEFV
| bEFV | rEFV | cEFV | |
|---|---|---|---|
| Values | stock at the measured stage win rate | stock, weighted by SLA Health | rEFV, calibrated with value growth and inflow |
| Value growth and inflow | left out | left out | calibrated from the completed prior periods |
| Role | potential case | risk-adjusted revenue expectation | best case of the forecast range |
Related terms
FAQ
What is the difference between rEFV and cEFV?
rEFV values the standing stock, weighted by SLA Health, and assumes neither inflow nor value growth. cEFV calibrates rEFV with both: the value growth of existing deals and the inflow of new deals from completed prior periods.
How is cEFV formed?
cEFV starts from rEFV, the risk-adjusted revenue expectation for the standing stock. Two quantities from the completed prior periods come in: the value growth of existing deals and the inflow of new deals that are created and won within a period. Both quantities are measured, not set.
Why does cEFV not stand alone?
cEFV is one number: the best case of the forecast range, not the realistic one. cEFV assumes that value growth and inflow occur as the completed prior periods show them. The worst case and the realistic case therefore stand beside cEFV. The worst case is rEFV, which assumes neither value growth nor inflow.