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Revenue-Forecast-Calculation

The Fundamentals of Revenue Forecasting Understand thoroughly how sales channels work and how prospects become customers. On a high level, many companies develop sales forecasts by applying an expected or desired market growth rate to current year revenues. These forecasts are then substantiated using a bottom-up forecasting approach that takes into account inputs such as projected product units sold, price, sales productivity and seasonality, to name a few. Most of the time, the second approach ends up using assumptions designed to meet the end result of the first method.

  • The total number of potential customers with which a company can realistically do business, described sometimes as the “addressable market.”
  • Sales team productivity variables: the number of productive sales reps in the market, the number of calls each can make, the number of calls and average length of time expected to close a sale, average close rate(s) per rep and per product and any ramp-up time required for new products or reps.
  • The incentive structure of the sales team and its potential impact on product sales. For example, if sales reps are rewarded based on gross monthly sales, then one should not be surprised if they spend their time selling products with the highest price tags.
  • Online sales channel productivity variables: the number of products that customers will be comfortable purchasing online, the speed and effectiveness of the fulfillment process, the type of marketing investment required to drive the level of transaction activity sought.
  • Any seasonality associated with buyer behavior

Example of Revenue Forecast


Writing Business Rule For Revenue Forecasting

"4110"(
IF ((@ISMBR(&QRFYr1) AND @ISDESC(&QRFPer1)) OR (@ISMBR(&QRFYr2) AND @ISDESC(&QRFPer2))

OR (@ISMBR(&QRFYr3) AND @ISDESC(&QRFPer3)) OR (@ISMBR(&QRFYr4) AND @ISDESC(&QRFPer4)))

"4110" = @ROUND("Units" * "ASP",2);

ENDIF )

Step#5 Apply FIX on Period Dimension

Variable Reference

"5110"(

IF ((@ISMBR(&QRFYr1) AND @ISDESC(&QRFPer1)) OR (@ISMBR(&QRFYr2) AND @ISDESC(&QRFPer2)) OR (@ISMBR(&QRFYr3) AND @ISDESC(&QRFPer3)) OR (@ISMBR(&QRFYr4) AND @ISDESC(&QRFPer4)))

"5110" = @ROUND("4110" * (1 - "Gross Margin %"),2);
ENDIF
)

 

@IDESCENDANTS("GP");

Step#8 Consilidating Product Dimension

CALC DIM ("Product");

 

FIX (&CurForecast, {Version},{Department})

Step#9 Calculating Revenue Driver Assumption APS and COS Rate

"ASP" = @ROUND("4110" / "Units",2);
"COS Rate" = @ROUND("5110" / "Units",2);

Step#10 Calculating Gross Margin%

"Gross Margin %" = @ROUND("GP" / "4001",2);

FIX (&CurForecast, {Version},{Department})
FIX ( @CHILDREN("P_TP1"),@CHILDREN("P_TP2"))
"4110"(
IF ((@ISMBR(&QRFYr1) AND @ISDESC(&QRFPer1)) OR (@ISMBR(&QRFYr2) AND @ISDESC(&QRFPer2))

OR (@ISMBR(&QRFYr3) AND @ISDESC(&QRFPer3)) OR (@ISMBR(&QRFYr4) AND @ISDESC(&QRFPer4))) "4110" = @ROUND("Units" * "ASP",2);
ENDIF
) "4001";

 

 

 

 

 

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