As the UK continues its tentative move towards easing lock down conditions and society starts to turn its collective mind to getting back to some form of normality, businesses are starting to consider how they will approach the recovery.
In a three part series of articles we will discuss the following key focuses that we believe will be critical for business owners to manage effectively in order to be able to navigate the return of economic activity successfully:
In this article, we discuss the first of these three priorities – revenue projections.
As a Financial Advisory practitioner, when undertaking a review of revenue projections I will typically seek to review the underlying assumptions around revenue trends with reference to macro data points such as industry / sector anticipated growth rate; forecast GDP (e.g. if a cyclical business); as well as company specific data points such as past revenue performance.
The unprecedented disruption to commerce and wider society makes the task of preparing revenue projections or forecasts incredibly difficult. Nonetheless, it is absolutely essential that businesses start turning their attentions to doing just that.
We have sought to set out further below some key steps that business owners and their Finance functions should consider now to help them begin the process of modelling future revenue. It is worth making the point that given the level of uncertainty about how quickly demand will return for different sectors, any revenue projections are almost likely to be wrong! Nevertheless, it is about trying to make revenue projections as realistic as possible by using the right data points.
Key considerations to preparing realistic revenue projections following COVID-19
The above considerations are not meant to be exhaustive but should hopefully provide some useful guidance to business owners, CFOs and FDs as businesses try to plot their own routes back to some kind of business as usual.