{"id":9742,"date":"2019-06-11T09:24:00","date_gmt":"2019-06-11T13:24:00","guid":{"rendered":"https:\/\/www.method.me\/?p=9742"},"modified":"2023-12-15T09:01:20","modified_gmt":"2023-12-15T14:01:20","slug":"how-to-forecast-your-small-business-revenue","status":"publish","type":"post","link":"https:\/\/www.method.me\/blog\/how-to-forecast-your-small-business-revenue\/","title":{"rendered":"How to Forecast Your Small Business Revenue"},"content":{"rendered":"\n

Anyone who watches business pitch tv shows like Dragons\u2019 Den or Shark Tank knows the importance of creating a revenue forecast. It seems like every business is always ready to whip out an upward-sloping chart displaying predicted revenue over the next 3, 5, or 10 years.
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Indeed, those revenue forecasts are extremely valuable. They\u2019re useful both for securing partners externally and for developing your growth strategy<\/a> internally.
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In your external relationships, revenue forecasts let your investors and lenders see where the whole endeavor is headed. On the inside, they help your leaders plan your growth trajectory and make key decisions as you move ahead.
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But how did those businesses determine the numbers? And if you\u2019re trying to develop your own revenue forecast, where should you start?
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Of course, there are many different approaches, but the underlying principles are the same. Some of the key steps you can use to forecast your future revenue are described below.
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Start with your business plan <\/strong>
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Start with the basics \u2014 your business plan. With your overarching strategy in mind, take a close look at your industry, your place within it, and your business model.
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Then, use that strategy to create a calendar that walks through the next several years quarter by quarter, displaying how your company\u2019s priorities, activities, and tactics will change.
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Just looking at this high-level overview will give you a good sense of where your periods of growth may occur, and what it will take to get there.
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Ask questions about your future business activities <\/strong>
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With that detailed calendar in front of you, it\u2019s time to start asking some key questions about the ups and downs of your future business activities. You\u2019re starting to forecast now! Consider the following points.  
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What are your initial expenses in the early years? <\/em><\/strong>
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Your first consideration should be whether the early stages of running your business will include a lot of capital costs, like equipment. If so, then you should assume it will be a few years before your revenue stream makes it into the black zone.
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Luckily, costs for equipment and supplies can be predicted pretty accurately. Payroll is equally predictable. It\u2019s the other, less-obvious costs such as insurance, legal fees, regulatory fees and rent that somehow grow far beyond what you ever expected. It\u2019s a good idea to take your original estimates and double them.
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What are your sources of revenue? <\/em><\/strong>
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Your second question should tackle the money coming in. How much money should you expect to make from your products or services?
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Investors love businesses with recurring revenue, such as monthly software subscriptions or phone payment plans. This type of revenue offers a certain amount of stability when creating financial forecasts.
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Of course, the most successful businesses have several revenue streams. While recurring revenue is ideal, generating other revenue at predictable intervals is pretty great, too.
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Are there quarters or certain periods when you can drive more revenue? <\/em><\/strong>
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Depending on your business, perhaps you know that you can bump up your sales in a particular season, or in association with a major industry event or conference. But if this isn’t the case, focus on maintaining consistent demand throughout the year. Seek out clients who require work on a regular basis \u2014 every quarter, or even every month. And take care not to rely too much on one big client or even one sector for your business; strategic diversification will help you get through industry downturns or unexpected payment delays.
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Get the industry data <\/strong>
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The business landscape changes constantly<\/a> according to factors beyond your control. As such, your path forward also depends on what the competition is doing.
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Now that you have your own path mapped out, it\u2019s time to look around and add data from outside your organization. While small businesses generally don’t publicize their revenue, there are other ways to get your hands on valuable industry data. Start by checking:
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