Estimating what will come in.
WHAT MAKES IT DIFFICULT
It depends on customer behaviour, which is uncertain.
WHAT TO BUILD FROM
Something you can count.
WHAT COUNTABLE THINGS EXIST
Existing customers and what they typically spend Contracted or recurring revenue Enquiries, and the proportion that convert Capacity, where you sell time
WHAT TO AVOID
Starting from a target and working backwards.
WHY
It produces a number with no mechanism.
WHAT A BUILT-UP FORECAST LOOKS LIKE
Existing customers, plus expected new ones, at expected values.
WHAT TO ESTABLISH
How many enquiries you receive What proportion become customers What they are worth How long the cycle takes
WHY THE CYCLE LENGTH
It determines when the revenue actually arrives.
WHAT TO ACCOUNT FOR
Seasonality Customers who leave Payment timing
WHY CUSTOMERS WHO LEAVE
Forecasts routinely assume every existing customer remains.
WHAT TO PRODUCE
A likely case and a conservative case.
WHAT TO PLAN COSTS AGAINST
The conservative case.
WHY
Costs commit immediately; revenue does not.
WHAT TO TRACK
Forecast against actual, monthly.
WHAT TO CALCULATE
Your own optimism factor, over time.
HOW
The average proportion by which you overestimate.
WHAT TO DO WITH IT
Apply it to future forecasts.
