Preparing a forecast may seem like a daunting task…
but it’s actually fairly simple once you do it a few times.
Here are 9 ways to forecast:
but it’s actually fairly simple once you do it a few times.
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
🤔 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
🤔 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
🤔 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
🤔 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
🤔 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
🤔 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
🤔 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
🤔 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
🤔 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
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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