Any suggestions on revenue projection practice material?
Have gone through WSO / BIWS modelling courses and I'm pretty confident with the mechanics of modelling.
However, none of the courses (or books) seem to offer a robust explanation on how revenue projection is actually done in real life. Yes I know two frequently used methods (Top-down / bottom-up --> identify P & Q --> identify key drivers --> etc.), but I was curious if there was any material that goes into revenue projection in more detail. I understand that there isn't (and shouldn't be) a standardized "revenue projection template" per se, but there must be a certain framework that professionals have in mind when they go about projecting revenue.
The following list is what I have tried on my end:
1. Go through initiation reports of major companies and see how the analysts projected the revenue
--> Found little success as most of them don't even disclose how the figures were projected
--> For those that do explain their rationale, its either super vague or just based on simple run-rates
- Go through sector reports and see what the key drivers are and how they are linked to the top line
--> Although you get a grasp of how the industry works, it still doesn't let you develop a "framework" for revenue projection
With that being said, would really appreciate it if someone could recommend any materials that really delves into revenue projection methodologies.
Thanks
bump
Think that this going to heavily depend on industry.
For the retail industry.... look at key metrics. Some that come to mind are: transactions, traffic, conversion, average $ spent per sale, $ per selling square foot, $ per total square foot, etc.
From there you should be able to figure out how moving one piece affects each of the KPIs. Traffic for instance is a huge driver that is largely out of the control of the retailer (yes you can use marketing, but if you are in a mall, chances are if mall traffic is down, your traffic will be down).
So that should give you one piece. Another thing to look at would be the amount of stores that have opened and closed throughout the last few years. What is the strategy going forward? Are they adding stores or closing them? Knowing the store fleet size should be able to give you “per store” metrics of all of the above.
If you add stores, build your projection to increase based on that and same with closing. Develop different scenarios for new stores and how they perform for the first few years vs. the time period after losing their “newness”.
The above is a really simplistic example but hopefully gives you some insight into the approach that you can take. Find the key factor that determines the scalability of revenue and then go from there.
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