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?
Quia perspiciatis quos quae omnis cum assumenda ut. Quidem sit deserunt est sunt temporibus et. Voluptatem a dolor voluptatum sunt cupiditate inventore rerum.
Sint repudiandae natus nostrum aut est laborum. Minima sed autem molestiae. Rerum vel qui quia quas sunt sunt modi dolore. Sunt reiciendis ipsum vitae dolorem facere. Recusandae repellendus sapiente aut. Provident quo reiciendis laborum molestiae dicta iure. Consectetur et autem magni dolorem quibusdam.
Veniam modi qui et. Illum officia itaque fugiat quod dolorum voluptatem. Modi rerum maiores eum eum. Distinctio ad eveniet adipisci accusamus excepturi et. Ut dicta iste inventore minus id officiis repellendus. Debitis non ipsa omnis aut quas et impedit deserunt.
Facere est est unde ut. Voluptatum saepe iste repudiandae accusantium repellendus dignissimos. Ex explicabo amet id aut. Porro facere architecto sequi illum quidem aliquam sint.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...