How to model company financials 5 years out?
I am trying to pin how should I think about revenue growth and cost structure etc when modelling a business as much as 5 years out.
How would you go about doing this? What factors do I really need to consider to get confidence into my estimates?
I am an Intern but model a lot and work primarily in HC and can tell you the factors that go into a HC model that often goes 10 years into the future. For revenue I usually use a top down model that starts with Total patient population, how many of those patients are identified and looking for treatment, how many patients are in each sub sector, then penetrate based off that to find how many patients a company could potentially treat. Usually penetration rates are based on how many competing therapies are in the space, what the efficacy is like, safety profile, and the route of administration. Once I have the amount of patients penetrated simply just multiply by the expected price. This is how I model revenue and I do not think that it changes too much in other sectors in terms of doing a top down model. Cost structure is easy to figure out once revenue has been modeled.
Do you have access to any industry research? You can consider top-down, and figure out how much the overall market will grow in 5 years, an estimate pretty much any industry research article will give, and then model gaining or losing market share.
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