Group FP&A Manager at Matrix Pack | Commercial, FMCG, Manufacturing, Pharmaceuticals | Instructor, Strategic Finance Consultant | Results-Driven MBA Professional | Coaching & Mentoring
Forecasting revenue is the BIGGEST area of focus in your financial model and for good reason. It’ll help you make good decisions for your business ➡️ Revenue Sources Framework → E•P•N Your revenue can come from one 3 sources: 1️⃣ E→ Existing Customers Here you analyze your current customer contracts Ask yourself the following questions When will these contracts come up for renewal? What is the likelihood of renewal? Will they expand / contract before the contract is up? 2️⃣ P→ Pipeline customers Here you analyze the customers who are warm in your pipeline Ask yourself the following questions: What is the close likelihood of each contract? When will the contracts close? You then take the contract value * the close likelihood... and forecast the sale on the projected close date 3️⃣ N→ New Customers These are customers you’ve never interacted with… but can expect to in the future Here, you move onto the 2nd Framework, the Revenue Growth Framework ➡️ Revenue Growth Framework → A•R•S•R This is all about how you use your business model to close new customers, resulting in new sales 1️⃣ A→ Acquire Here you measure the channels that you use to acquire customers Common ones can be: Sales reps Digital Marketing Organic Partnerships 2️⃣ R→ Retain Now you measure how long this customer will be with you Are they monthly? Annually? Month to month? Once you have this info, you can understand how much you can generate in sales from them 3️⃣ S→ Sell Now that you know how long your customers are with you, you can analyze how often you’ll generate sales from them This can be sales from your New Customers or sales from your Active Customers 4️⃣ R→ Record Now is when you record all the activity that will hit financial statements Common ones include Revenue Deferred Revenue Cost of Goods Sold Inventory Accounts Receivable Commissions
