Revenue forecasting, creating a potential sales funnel
Posted: Sun Dec 22, 2024 10:53 am
Revenue is understood as the amount of goods sold/services rendered in monetary terms. It is calculated separately for each month. The financial model should display the entire sales funnel, which includes coverage, number of views, conversion of applications and sales, average check and other values.
For a business that has been on the market for more than a month, it is most convenient to rely on last year's figures. While a recently opened enterprise is recommended to consider philippine country code the average data for the market (segment) or desired levels.
Let's say you need to build a financial model for an online store. Any potential client performs the following set of actions:
Arrives at the site via a link from an advertisement or through organic search results.
Looks through the offers and chooses the appropriate one.
Adds the product you like to the cart / closes the tab.
Buys a product/keeps it in the cart to think about it and compare with others.
Step-by-step development of a financial model
Let's imagine that this store has enough visitors, product views, but the conversion to purchase suffers. The owner assumes that it is necessary to improve the descriptions and replace the photos with better ones, and then 2% more products will end up in the basket. If the conversion to payment remains the same, the business will be able to receive an additional profit of 17,500 rubles. Having assessed all aspects, the owner decides whether it makes sense to spend money on this task or whether it is more rational to pay attention to other indicators.
Thanks to the formulas in the financial model, you can consider various situations and plan to increase conversions. When these percentages of target actions are changed in the table, the revenue is recalculated automatically.
Step 2. Calculating expenses
This block includes all the company's expenses for the year. It is advisable to divide them into fixed and variable, you can also separately calculate indirect and direct costs, taxes and deductions. This will allow you to see business processes more deeply and influence their efficiency.
Variable costs
These are expense items determined directly by the volumes of manufactured products. This includes investments in the purchase and delivery of materials, sales bonuses, etc. They are calculated in rubles or as a percentage of revenue - a specific approach depends on your business scheme.
At this stage of creating a financial model of the enterprise, you can understand what will happen if you refuse the previous supplier in favor of another one, ready to offer materials cheaper. Or what results will be achieved by introducing motivation for sales managers, what will be the result of revising logistics while maintaining sales at the current level, etc.
Calculate the marginal profit by subtracting variable costs from revenue. This will give you an intermediate income that does not include office rent, salaries, taxes, etc. It can be used to assess how effective the business is and what results you get from selling your products.
Fixed costs
Expenses of this type can be direct and indirect. The former are related to renting a workshop, paying wages, etc. Even if production is worthwhile, such items result in losses.
For this section of the financial model, you need to calculate the gross profit: subtract fixed direct costs from the marginal profit. This indicator indicates the level of production efficiency. If there is a negative trend, you need to abandon the direction that is not able to provide the necessary profit.
For a business that has been on the market for more than a month, it is most convenient to rely on last year's figures. While a recently opened enterprise is recommended to consider philippine country code the average data for the market (segment) or desired levels.
Let's say you need to build a financial model for an online store. Any potential client performs the following set of actions:
Arrives at the site via a link from an advertisement or through organic search results.
Looks through the offers and chooses the appropriate one.
Adds the product you like to the cart / closes the tab.
Buys a product/keeps it in the cart to think about it and compare with others.
Step-by-step development of a financial model
Let's imagine that this store has enough visitors, product views, but the conversion to purchase suffers. The owner assumes that it is necessary to improve the descriptions and replace the photos with better ones, and then 2% more products will end up in the basket. If the conversion to payment remains the same, the business will be able to receive an additional profit of 17,500 rubles. Having assessed all aspects, the owner decides whether it makes sense to spend money on this task or whether it is more rational to pay attention to other indicators.
Thanks to the formulas in the financial model, you can consider various situations and plan to increase conversions. When these percentages of target actions are changed in the table, the revenue is recalculated automatically.
Step 2. Calculating expenses
This block includes all the company's expenses for the year. It is advisable to divide them into fixed and variable, you can also separately calculate indirect and direct costs, taxes and deductions. This will allow you to see business processes more deeply and influence their efficiency.
Variable costs
These are expense items determined directly by the volumes of manufactured products. This includes investments in the purchase and delivery of materials, sales bonuses, etc. They are calculated in rubles or as a percentage of revenue - a specific approach depends on your business scheme.
At this stage of creating a financial model of the enterprise, you can understand what will happen if you refuse the previous supplier in favor of another one, ready to offer materials cheaper. Or what results will be achieved by introducing motivation for sales managers, what will be the result of revising logistics while maintaining sales at the current level, etc.
Calculate the marginal profit by subtracting variable costs from revenue. This will give you an intermediate income that does not include office rent, salaries, taxes, etc. It can be used to assess how effective the business is and what results you get from selling your products.
Fixed costs
Expenses of this type can be direct and indirect. The former are related to renting a workshop, paying wages, etc. Even if production is worthwhile, such items result in losses.
For this section of the financial model, you need to calculate the gross profit: subtract fixed direct costs from the marginal profit. This indicator indicates the level of production efficiency. If there is a negative trend, you need to abandon the direction that is not able to provide the necessary profit.