Josh (Your CFO Guy)
Josh (Your CFO Guy)

@YourCFOGuy

11 Tweets 7 reads Oct 06, 2023
Preparing a forecast may seem like a daunting task…

but it’s actually fairly simple once you do it a few times.
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Here are 9 ways to forecast:
1️⃣ 6 mo. historical average
🤔 How it works → take the last 6 months value. Can take it one step further by adding a buffer (like a 5% increase)
💡 Why it’s useful → The future often times blends well with the past, especially in the first few months of projections
2️⃣ Prior mo. balance
🤔 How it works → Set your projection to last months value
💡 Why it’s useful → extra helpful when forecasting the balance sheet for accounts with minimal movements
3️⃣ % of revenue
🤔 How it works → Set your projection to take a % of revenue
💡 Why it’s useful → As revenue scales, expenses tend to scale as well
4️⃣ $ per hire
🤔 How it works → Set a $ figure for each hire
Why it’s useful → Expenses / capex often times scale with each new hire
5️⃣ Fixed Assumption
🤔 How it works → enter in any values or schedules you have on hand
💡 Why it’s useful → for items like insurance or rent where you have a fixed schedule, you can plug them right into your forecast
6️⃣ YoY Growth
🤔 How it works → take the value from 12 months prior and add a growth factor
💡 Why it’s useful → for companies with seasonality, you can match the schedule from the prior year, and add a buffer if need be
7️⃣ Annual inputs
🤔 How it works → Enter in assumptions for the entire year, then divide by 12 for monthly projections
💡 Why it’s useful → simple and quick way to forecast for an entire year
8️⃣ Departmental Intake
🤔 How it works → sit down with each department head, and come up with a bottoms-up budget for each one
💡 Why it’s useful → collect valuable information that you may not have insight into, hold each department head accountable to results & performance
9️⃣ Zeroed out
🤔 How it works → forecast 0 going forward
💡 Why it’s useful → can be useful if you don’t expect any future values in this account, or if you project values in another account that relates to this account
These are the 9 most common ways that I forecast across the 40+ startups that I work with…
What have you seen?
Let me know in the comment below
𝗜𝗳 𝘆𝗼𝘂 𝗲𝗻𝗷𝗼𝘆𝗲𝗱 𝘁𝗵𝗶𝘀, 𝗰𝗼𝗻𝘀𝗶𝗱𝗲𝗿 j𝗼𝗶𝗻𝗶𝗻𝗴 𝗺𝘆 𝗻𝗲𝘄𝘀𝗹𝗲𝘁𝘁𝗲𝗿 yourcfoguy.com

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