how to forecast the revenue growth rate?

First we understand what is Revenue Growth Rate:

• Revenue Growth Rate measures the month-over-month percentage increase in revenue.
• It is one of the most common and important startup metrics.
• The Revenue Growth Rate provides a solid indicator of how quickly your startup is growing.

How to calculate Revenue Growth Rate:

1. Calculate the Revenue Growth Rate by subtracting the first month revenue from the second month revenue.
2. Divide the result by the first month revenue and then multiply by 100 to turn it into a percentage.

For example, if you have $1000 in revenue the first month and $3500 the second month, your growth rate would be 250%.

($3500 - $1000) / $1000 x 100 = 250%

Forecasting Revenue Growth Rate:

As the revenue growth rate links to revenue, we need to understand the forecasting of revenue.

• Revenue forecasting is getting to know how much you can make throughout the year, your expected cash flow and how much growth your business may experience.
• Revenue forecasting is not intended to give you exact figures for yearly earnings. Instead, it does provide several methods that will help you forecast your revenue as accurately as possible.

Here are three things to keep in mind to assist you in forecasting a company's revenue:

1. Research thoroughly:

   • It takes a significant amount of data to forecast revenue.

   • In addition to your standard expenses and recurring payments, look at data from competitors in similar growth stages as your business, predicted seasonal trends and other increased revenue periods.

   • Pull data from your analytics and financial reports, industry case studies and reports, and other data sources for a compilation.

2. Provide a thorough breakdown of expenses:

   • Obtain a full accounting of your yearly expenses.

   • After all, figuring out your revenue is trickier than anticipating your fixed costs.

   • Look beyond your regular costs and estimate the amount of occasional expense costs.

   • Estimate irregular costs on the high side. It's better to plan for higher costs and be pleasantly surprised if you have a budget surplus.

3. Review the company's cash flow history:

   • You can't predict sudden growth phases, but you can estimate your future revenue based on your company's performance during the last few years.

   • If you are planning big changes, such as a new product line or a major company announcement, look at revenue trends from similar events in the past to guide you for the direction your business may be headed.

So considering all of this, we can forecast revenue for different accounting periods and forecast revenue growth rate by applying the formula discussed earlier.