How Do You Forecast Revenue for a New Technology? Three Ideas

Situation: The Board of a company has asked the CEO to generate to forecast of revenue for this year. Their primary technology is new and the company has just started receiving orders. An achievable revenue forecast my not please the Board. However, the company may lack manufacturing capacity to meet a higher level of demand. How do you forecast revenue for a new technology?

  • Be realistic in your forecast. While the Board may not like your number, the impact of setting the goal too far out of reach is potentially significant, including discouraging the team, and impairing credibility with the Board. However, if you aim realistically and significantly exceed the target you will be heroes.
  • How is it best to approach this in discussions with the leadership team?
    • Create a set of objectives and revenue targets and put probabilities around each. Also look at the obstacles to hitting the higher numbers, including manufacturing capacity and the cost of increasing capacity.
    • For examples if your most likely forecast is $X, then put probabilities around achievement of multiples of this number:
      • $X – 95%
      • .75X – 99%
      • 1.5X – 75%
      • 2X – 60%
    • Once your determine the objective, think through everything that must be covered to meet that goal, from sales to production, and start developing plans and contingencies to address these.
  • Share your probabilities with the board, as well as your plans and contingencies that may increase likelihood of reaching the higher targets. Ask for their input and assistance hitting the higher targets.

2 thoughts on “How Do You Forecast Revenue for a New Technology? Three Ideas

  1. http://www.trampoline-pas-cher.org/

    First of all I want to say wonderful blog!

    I had a quick question that I’d like to ask if you do not mind. I was curious to find out how you center yourself and clear your head prior to writing. I’ve had difficulty clearing my mind in
    getting my thoughts out. I do take pleasure in writing but it just seems
    like the first 10 to 15 minutes tend to be lost just trying to
    figure out how to begin. Any suggestions or
    hints? Many thanks!

  2. Sandy Post author

    In my case the task isn’t so difficult. The material in my blogs comes from notes from actual round table discussions among CEOs. I have many years of these and just look for one that strikes my fancy. The notes are already there so I just form them up into a blog post.

    If you don’t have a resource like this, just try keeping a journal of thoughts and experiences. Not just a single line or two, but a series of thoughts around a particular topic that interests you. Doesn’t take much time for each entry – just a couple of minutes. When you’re ready to write, peruse your journal and when you find one that inspires you then use this as the energy spark to start writing.

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