Modelling Quarterly or Monthly Growth Rate to Get a Certain Annual Growth Rate
Let's say I have a quarterly model that starts from a year of actuals that is stagnant (no quarterly growth): Q1-Y1: 250 Q2-Y1: 250 Q3-Y1: 250 Q4-Y1: 250 Y1 total: 1000
Now if I want the revenue to grow by 10% annually, but with a quarterly model, that's 2.4% quarterly, so for year 2: Q1-Y2: 256 (Q4 250 x 1.024) Q2-Y2: 262 Q3-Y2: 269 Q4-Y2: 275 Y2 total: 1062 (so only 6.2% annual growth)
While this makes sense from a quarterly growth concept (if you're flat one year and grow at a rate of 10% annually but on a quarterly basis, you're total annual growth is not gonna be 10%, which makes real world sense), but if the company wants the growth to be 10% on an annual basis but with quarterly growth in this case, I'm having trouble figuring out how to do it.
The only way I can get this to work is if I forecast growth seasonally (so Q over Q of 10% growth rate).
Alternatively, if I start Q1-Y2 at a higher rate, and then go back to my normal 2.4% quarterly growth rate, I could get it to work. But haven't been able to find a formula that does this in a justifiable way.
I'm curious how you guys would tackle a problem like this?
Hey B2Banking, I swear if I had a silver banana for every lonely thread I posted too I'd be richer than @compbanker ...
More suggestions...
I hope those threads give you a bit more insight.
Did you ever get an answer?
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