Building Business Forecasts - Part 2: Basic Principles For More Robust Forecasts

In Part 1, we discussed some rookie mistakes we've seen businesses make while creating financial forecasts. New businesses are especially prone to making errors when they create forecasts for the first time. Apart from building business forecasts that are error-free, how do you also make them robust and reliable? We explore a few basic principles for good business forecasts in this post.

(Read Part 1 here.)

Start from scratch

Last year's forecast is a helpful guide, but it's not a basis for this year's forecast. Consider the macro aspects – the economy, your sector, your competitors, foreign exchange and monetary policies. Is someone developing a competing product that launches next year? What if all your customers are overseas, you invoice customers in Euros and the rupee is expected to strengthen over the next six months?