How do I forecast?

Set a revenue target. You probably already have one in mind. Just go by gut or an increase on past performance – it’s not legally binding.

The usual forecast period is 12 months (although a rolling forecast has no set fiscal year or period. You just drop and add a month each time). Divide your revenue target by 12 and presto, you know your monthly target.

Your three forecasts should outline:

• A business-as-usual scenario.
• A 15 - 20% drop in revenue scenario.
• A disaster scenario where a 50% drop in revenue occurs.

By thoroughly building out each scenario, you can make a plan for what happens in each case. So it’s not a mad scramble when things don’t go your way. Forecasting is the art of eliminating surprises. Bad stuff happens and can’t always be helped. But a forecast can steer you through tricky terrain.

As a final point, think of your forecast as a living thing. You should routinely adjust and adapt it. The variance between actual performance and your forecast is a red flag. If, for example, there’s a difference between actual costs and forecasted costs – why?

Challenge yourself to do some digging.

Have a chat with us if you need help with your forecasting or you'd like to find out more.