The 4 Stages of Forecasting

 

The 4 Stages of Forecasting from BEGINNER to ADVANCED

Which stage is your business at🪜?

Every month, I meet with founders who are looking for help around their financial model.

I rarely see a company working with a level 4 forecast…

and oftentimes, founders don’t realize how much more value can be unlocked with just a few tweaks.

Let’s go over each stage, and what to think about as your company scales

🪜 LEVEL 1 - CREATE A REVENUE BUILD (Beginner)

This is where most founders start with a forecast.

This will oftentimes suffice for an early-stage company, as the focus here is simply on the business model and the details behind the blueprint for how the company plans to scale

The key here is to think about these 2 things:

1️⃣ How will INPUTS result in OUTPUTS (eg: an investment in sales reps results in more sales)

2️⃣ What are the SOURCES of your revenue (eg: existing customers vs customers in your pipeline vs new customers)

🪜 LEVEL 2 - ATTACH A PROFIT & LOSS (Beginner / Intermediate)

Your revenue build is important, but it's not the only area of your business you need to think about.

At this stage, you start to introduce other costs.

It's here where you'll also want to attach a dynamic headcount build, showcasing the details behind who is on your team, and who you will hire in the near future.

🪜 LEVEL 3 - INCLUDE A BALANCE SHEET & CASH FLOWS (Intermediate / Advanced)

Most companies report on the accrual basis, especially as they scale.

Under the accrual basis, the amounts reported on your profit & loss won't equate with your cash flows.

It's here where you'll want to implement a 3 statement model showcasing the movements in your Balance Sheet, allowing you to dynamically showcase cash.

🪜 LEVEL 4 - INCLUDE HISTORICAL DATA AND DASHBOARDS (advanced)

This stage involves you importing your existing data around your financial statements, allowing you to understand where you have been, and where you are going, all in one view.

With this data in place, you can refresh your forecast each month, allowing you to tap into limitless dashboards for any business case.

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