How to Create a Revenue and Growth Forecast for your Company
Running a company is all about making decisions – deciding what to do next and how to drive your company is the top priority for every CEO and CFO, which is where revenue and growth forecasting comes in.
As market volatility increases --- with the COVID-19 pandemic as a prime example of economic distress affecting market volatility --- companies now have to assess every step they make before they make it, including anticipating the revenue they stand to make in the long run.
By attempting to forecast your revenues, you can apply what you learned from the data available both from your internal operations along with the data that the previous and current market presents to make strategic decisions that would optimize your revenue.
The question now is, how can you create a revenue forecast for your company?
How to forecast revenue and growth
Check other business models
Different business models offer diverse revenue opportunities. Make sure you are well acquainted with the opportunities that are offered in the industry you belong to. Take the trend in online transactions, for example. If your business offers online sales, it would be easier to adapt revenue forecasting methods that are more inclined towards online sale revenue projections. On the other hand, following business models with traditional sales methods might be easier if that is what your business offers.
Examine your marketing strategy
The marketing strategy that you are using will have a direct impact on your expected revenues. In this sense, it would be a good practice to be mindful of your marketing strategy and zero in on how your customers’ response to these strategies. This way, you can project both your conservative and optimistic opinions more cohesively than if you brushed off the role of marketing strategies in determining revenue projections.
Consider previous records
When was the last time you took a look at your books? If you’re uncertain, this might be a good time to review them again. Your previous financial records will give you valuable insights into the status of your revenues in the past. Through your financial history, you can make better comparisons from your previous records to your current financial data. Likewise, it will help you anticipate possible setbacks in your cash flow – way before these setbacks strike a major blow in your direction.
Keep your books up to date
Revenue projections revolve around your critical business numbers. As such, the best way to keep on track of your business finances is to make sure that you have a good reference for your projections: a complete and updated set of books. Having updated books gives you the upper hand in knowing that the revenue projections you will generate for your business are vital and sound.
Revenue projections can be tricky. But by starting with the things you already know; you can be well on your way to creating useful and accurate projections.
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This post was first published on 10 November 2014 and edited 22 September 2023. Edited by: Aly Tagamolila