How does a startup forecast sales and revenue?

2 Answers

1. Hi Anousha, It is very hard, some might say virtually impossible to forecast revenue, particularly at the stage you are at and with no market data. You’d be much better off concentrating on forecasting your cashflow and expenses as you a) can know these with a reasonable amount of certainty and b) will find it much more useful information in order for your business to survive and grow. Try taking a look at these articles:

   
   

   http://www.venturenavigator.co.uk/content/cash_flow_projections http://www.venturenavigator.co.uk/content/cash_is_king_collect_with_passion http://www.venturenavigator.co.uk/content/market_analysis

   
   

    Hope this is helpful! Phin

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   Answered by Phineas Wenlock, July 2009   -  Contact this person (Edited on 2010-02-18 11:28:43)

2. As Phin says, there's no 'right' answer!

   
   

   I assume that you're using Excel to do your sales forecasting?? The key thing is to build your Excel model so that your Month-on-Month Growth rate can be simply changed in one cell and all the revenue figures are recalculated. I suggest having one worksheet that is full of these assumptions.

   
   

   Then play with this assumption (eg 5% increase per month = 80% annual increase) and see what happens to your revenue figures.

   
   

   In conclusion, experimenting with figures and thinking about the impact is VERY insightful for your business. This is called 'Scenario Planning' - see this article on Strategic Management of Technology for its importance.

   
   

   Scenario Planning helps you identify which factors in your business are the most sensitive. These factors are obviously the one that you monitor incessantly and where you should invest your time and energy improving.

   
   

   It would be great to learn what you actually used - do give us an update!

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   Answered by Arthur Meadows, February 2010   -  Contact this person