The money the organization is expecting to come in from sales and “previous” contracts. These “previous” Contracts are already written so the the revenue is “assured”.  But the revenue from sales may be unpredictable.

Some of the factors to be taken into account are sales rep history, product maturity, product market fit, competition, previous customer buying patterns, sales rep selling patterns, discounting behavior by the reps , average selling price (asp).

When the forecasts are too low or too high - It is a ding against the CEO for not knowing its business. The organization depends on the Revenue Forecast to plan its expenditures and investments.

If the actual revenue comes is too low (than the forecast), the organization goes into crisis mode and may need to have layoffs, freeze growth / hiring / plans for the future and may even have to borrow to fund current plans and payroll.

If the actual revenue comes is too high (than the forecast), the organization is in a better position but still scrambles to  find places to “use” the money.

In the back of the business leader’s mind, this mismatch erodes confidence in the Revenue Forecast consequently which in turn holds the organization back.