Three Tips for Perfecting Your 2024 Projections, with Bill McDermott, Host of ProfitSense
In this commentary from a recent episode of ProfitSense, Bill McDermott offers three quick tips on perfecting your 2024 projections for your business.
Bill’s commentary was taken from this episode of ProfitSense.
Bill McDermott: Whether you’ve finished your 2024 projections or not, I’d like to share three tips you need to know to put the finishing touches on your forecast.
Projections are critical to knowing whether your financial forecasts are realistic, especially if you will use these to obtain financing or attract investors.
First, look for tendencies in your forecasting to gain insights on things you can do to improve next year. This could be things like: did you overestimate revenue and profits? Did you accurately forecast the timing of collections from clients and payments to vendors?, etc.
Second, compare your assumptions on revenue and expense growth compared to your historical performance and industry norms/standards. It’s possible you’re outperforming your peers in some areas but underperforming in others. Know your tendencies.
Third, forecast from the bottom up, not the top down. It’s not how much you bill, but how much you keep. Plan profit first, then expenses, then revenue. Compare your forecasted revenue number based on what you discovered in your historical performance. If your revenue number is too high, then consider either adjusting your profit number or cutting expenses.
Many business owners will have several rounds of assumptions before they end up with a forecast they’re comfortable with. Remember, it’s important to forecast not only your income statement but also your balance sheet and cash flow statement to get a complete picture of your business.
Here’s to a great 2024 for all of us!