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Learn how to forecast your business’s revenue.
Your business revenue forecast is a very important aspect of future business planning. You must have a solid estimate of how much you can make during the year, your expected cash flow, and how much growth your business may experience. While revenue forecasting won’t give you exact figures, it does allow you to get an accurate forecast of your revenue. Continue reading for three ways to forecast your business’s revenue.
Research
Revenue forecasting can only be accurate if you put in the necessary research. Look at your regular expenses and recurring payments as well as data from competitors in similar growth stages as your company. You should also research predicted seasonal trends and any increased revenue periods. Lastly, compile data from your analytics and financial reports, industry case studies, and other data sources.
Breakdown Of Expenses
Next, you should obtain a full accounting of your yearly expenses. Figuring out your revenue is more difficult than anticipating your fixed costs, so be sure to look past your regular expenditures and estimate the number of occasional expense costs. When estimating variable costs, it’s best to plan for a little higher costs rather than estimate too low. Then you have a better chance of being pleasantly surprised with a budget surplus!
Review Cash Flow History
While you can’t predict sudden growth phases, you can make an educated guess on future revenue based on your performance during the last few years. If your business is planning on making big changes soon, such as a new product line, it’s essential to look at revenue trends from similar events to guide you in the right direction.
When looking at revenue forecasting, try taking an optimistic approach as well as a conservative estimate. The optimistic mindset allows you to have positive hopes for your business and provides a best-case scenario estimation, while the conservative approach is a more measured approach that takes all factors into account.
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