Complete a quarter at a time
Often we do our forecasting for an entire year without reevaluating. 1 month prior to dig deeper into your numbers for the upcoming quarter. Have you added a product or service? Increased pricing? Fired bad clients? These all will have an impact on what kind of growth you can expect year over year.
Analyze the revenue for the same period of time for the previous 3 years
How much did you grow by year over year for the last three years, for the matching quarter your forecasting? Take the average growth for the last three years to give your organization a quality number to forecast. Then review where you are year to date? Are you behind your current forecast for the year? If this is the case, it’s likely this trend will continue. Forecasting is not about optimism, it’s about predicting what will happen.
Forecasting is quite different from setting goals with your team. Your financial forecasts should act as a predictor for you and help you make decisions accordingly. If you put your growth number at a level rarely achieved before, you are setting yourself up to make poor decisions to grow the business. Most often they are expensive decisions, like adding salespeople, products or other risky endeavors