Cash Flow Forecast for Revenue Growth Prediction

May 23, 2014

I just released a new feature in WiseCash ideal to help forecast revenue for your ebook or SaaS product for example: the ability to simulate growth (e.g.: 8% growth per month).

To ship this feature faster, I had to make quite a bit of tradeoffs, so technical limitations apply.

Click on the chart below to see a full screenshot:


Month-to-month cash flow forecast


You can set an initial percentage, and then later modify the growth at any point in time in the future, to cover for adjustments.

What are the practical use-cases of growth forecasting methods?

This new feature helps handling the following scenarios:

  • Determine the required growth to completely replace a consulting income by a growing product.
  • Determine at which point you’ll get enough income to outsource some development.
  • Figure out when your product income will cover the product burn rate.
  • Figure out the extra revenue that your product will give you in one year.

Obviously you’ll want to apply a realistic percentage, preferably based on historical data, otherwise your forecasting will be plain wrong and bad things will happen! Optimism is of course healthy, but figures employed by financial forecasting still need to confirm to some semblance of reality!

Current implementation limitations

Here are the tradeoffs I accepted to be able to ship this feature much faster:

  • Only a % growth is supported (no linear increase).
  • Growth is only applied for 2 years (after what the amount will remain constant).
  • Applied growth is not memorized anywhere (you can use the description area to remember it).
  • If compound growth exceed $21,474,836.47 in less than 2 years, an error will be raised.

The feature works as if you edited 2 years of entries manually, modifying the amount gradually yourself, then applying the max amount forever afterwards.

A future iteration may remove the two year limit - but then extrapolating numbers on forever lasting recurring series, while allowing local exceptions, is an interesting challenge!

Happy forecasting!

Thibaut Barrère (WiseCash founder)

@thibaut_barrere

thibaut@wisecashhq.com

Thanks for sharing this article around!


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