Forecasting 101

Forecasting 101

Insight from Forecastr

You did it. You raised a round of financing.

The hardest part is over! Now all you have to do is lead the business to a successful outcome.

Piece of cake 🎂

When the check clears, the first thing your new board is going to want to see is a plan for how you’re going to spend that money - a forecast.

Now, there are various camps on the best way to build a forecast, so we thought we’d walk you through the basics.

Let’s look at some common approaches:

• Top-Down Forecasting: This method has us begin with the big picture. You estimate the total market size and then narrow it down to your potential market share based on factors like customer needs and competition. It’s particularly useful if you don't have historical data to rely on.

• Bottom-Up Forecasting: Here, we start at the ground level—estimating revenue based on the number of customers you expect to acquire, the price of your product or service, and customer lifetime value. This method works best if you already have some historical data to factor in.

• Scenario Analysis: As we all know, sometimes things don’t go as planned 😅. Using scenario planning, we create multiple forecasts based on best case, worst case, and most likely case. This will help you evaluate potential outcomes, identify risks and opportunities, and plan accordingly.

• Time-Series Analysis: If you have a couple of years of data to rely on, you might want to factor in some level of time-series analysis. This technique involves analyzing past data to identify trends, patterns, and seasonality. The end result is a more accurate forecast.

Now, because this is the Bottleneck (and we love to make things easy for you), here’s a little decision tree that should make choosing your method more straightforward 👇

Learn more: A guide to rolling forecasts