ABSTRACT
This chapter examines how revenue forecasting will differ between manufacturing firms and service firms and how commission-based selling and seasonal sales affect forecasting models. Sound financial management requires entrepreneurs to develop a model of revenue forecasting that helps establish the validity of the venture’s ability to realize the revenue levels. The most basic mistake in revenue forecasting is to assume a simple linear growth in revenues. This is a common mistake of entrepreneurs who have a strong technical knowledge base that has led them to start their businesses. There are many risks with using the oversimplified assumption underlying a linear revenue forecast. The marketing plan and the revenue forecast should be telling the same story—the marketing plan in a narrative format and the revenue forecast in numbers, the language of business. Accurate revenue forecasting requires a thorough understanding of the competitive environment. Once the revenue forecasts are supported and validated through the marketing plan, the entrepreneur should create multiple scenarios.
