Can you predict what your revenue will be three years from now?
Many boomer women starting a business for the first time have a hard time doing just that. Even predicting their revenue for the next twelve months isn t easy.
For some, it is because they have been in business for less than a year and do not have a track record to guide them. For others, it’s because their income fluctuates up one month and down the next – so that predicting its course does not seem realistic.
Even though it may appear to be a leap of faith, there are clear benefits to beginning the process of guesstimating your revenue. You will start to gain confidence in your ability to set financial goals, and you ll be creating a feedback system that tells you what is working and what is not.
To start, write down your monthly revenue guesstimates for the next twelve months based on what you already know. Then, review the numbers each month and mark down the actual revenue you earned. Over time, you’ll start to see how your activities have a direct impact on your earnings.
You’ll start to notice trends, as well. Once you have one year’s worth of guesstimates and “actuals”, you can make projections for the next year which will be more reliable.
There are two ways to guesstimate your revenue. I suggest you choose the one that appeals to you more and stick with it for now.
Bottom Up.
Think of all the sources of income that are available to you. Create a unit price for each and come up with the quantities you will sell each month. Multiply the price by quantity to get a monthly total. Multiply your monthly totals by 12 to get your annual revenue for each source. Then add up these annual figures for your total revenue. That’s Year 1. For Year 2, decide how fast you want to grow your business. If you want to double your business in Year 2, then double your Year 1 projection. Follow the same process for your Year 3 guesstimate.
VISION DOWN.
Think of what you want to be earning in 3 years. Let’s say it s $100,000. List all of your streams of income. Determine the percentage of revenue each will generate, with $100,000 equal to 100 . Then for each revenue stream, convert that to the number of units you want to sell. Finally, decide what price you need to charge to generate the percentage of $100,000 that is your target for that stream. In this way, you can see how you can combine all of your streams of income in order to realistically reach your revenue goal of $100,000.
To be able to see trends in your revenue numbers, use an Excel spreadsheet and graph your projections and actual numbers. Then after the first year, add a third line that shows last year’s numbers.
This will instantly allow you to visually see how your business is performing. It brings the columns of numbers alive and puts the numbers into a context.
You re putting a lot of work into your business. Wouldn t it be nice to know, realistically, what you can expect to earn from it? |
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