ENTREPRENEURSHIP, QUARTER 4

Name of Learner: _______________________________ Grade Level: _______________

Section: __________________________________________ Date: _____________________

LEARNING ACTIVITY SHEET NO. 4

I. Introduction

Maintaining and advancing in business require a great deal of

effort—from planning, executing plans, and evaluating its outcomes.

To be able to prepare a precise budget, which is like the

yearlong plan for your business, you need to develop revenue
forecasts to evaluate the state of your business and its capacity to
advance.

In this lesson you will discover more about revenue forecast.

II. Learning Competency

Forecast the revenues of the business (Forecast the costs to be

incurred)

III. Objectives

At the end of the lesson, you are expected to:

1. Define a revenue forecast;

2. Explain how revenue forecast is done; and
3. Recognize the importance of revenue forecast to business.

IV. Discussion

What is a Revenue Forecast? 

Essentially, a revenue forecast is an educated prediction or
estimation for the upcoming year about how much money your
company is likely to bring in. 
 
This allows you to determine how much you can spend, and
what your margins will be overall. 
 
Once you have a better idea of the total amount of money
coming in and out of your business, you can build a more relevant
budget to your long-term goals. 
 
If you are at a point during the year where you might get off
your track, your forecasts can serve as a useful reminder of where
you should be – better affording you the ability to understand
deviations from the track you have set. 

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Forecasting is also an essential tool to help plan for your growth
in your business. Whether with new hires, launching campaigns, or
cutting costs when business slows down. You can better see how your
money needs to align in timing with your initiatives. 

How Do You Begin Revenue Forecasting?

There are numerous methods to revenue forecast effectively, so
let’s break it down. 
Revenue forecasting is equal parts art and science – you need to
rely both on judging the market and past performance. 

In fact, if you have have been in business for years, the best
place to start is with your previous year’s revenue forecasts as a
foundation to predict what will occur in the coming year. 

From there, you can begin to think of any changes in: 

 Personnel 
 Products offered 
 Industry Competition

But, let’s dive a bit deeper to consider the other ways you can go
about revenue forecasting.

Revenue Forecasting: Bottom-Up Planning 

This is one way to think of revenue forecasting in terms of your
business. 
Begin with your existing customers, the contracts you currently
have running, opportunities in the pipeline, and put them all together to
understand where your current money is coming in. 
What happens if you are disappointed with your forecast? The next
best thing is to put together a plan to acquire new customers and
estimate their value in time. This can help determine if acquiring them is
worth it, and if it features in your long-term success.

Revenue Forecasting: Top-Down Planning 

On the flip side, you can also build a revenue forecast with a top-
down approach. 
Start by researching the size of the addressable market for your
product or service. Analyze your competition, their market share, and set

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 how much of that market you would like to capitalize on with your
business. 
 

Next, estimate your organic sales. Between that share and your
goals, take into the account the cost of sales (how much they cost to
acquire) versus the revenue (the value of the sale over the course of its
lifetime) to close that gap. 
Finally, calculate the resulting marketing and sales cost. Compare
it with your budget, and adjust your plan accordingly. 

Should You Update Your Revenue Forecast? 

It’s simply a fact: nobody can forecast revenue with 100%
accuracy. That’s not the point. 
The idea is to lay down important assumptions that can be
regularly monitored and compared to the performance of your business
overall. 
A forecast is a living document, meaning that it changes with the
times. Ideally, you would keep your revenue forecasts up to date once per
month, or every quarter, to ensure that they are consistently in line with
your goals. 

Revenue Forecasting Methods You Can Use 

The following are revenue forecasting methods you should consider
to make forecasts more in line with your goals and plans for the future:

1. Start with Expenses (Not Revenues)

This applies to business in the start-up stage. An ideal place to
start with forecasting is to focus on your fixed costs and overhead, things
like rent, utilities, technology, and salaries. 

Consider doubling or tripling your estimates, in the event that you

need to invest more in things such as marketing, legal, or licensing fees. 
 

Even if you’re doing these activities yourself, keep track of sales

and customer service time as an expense of labor. When you have more
clients, and more workers, knowing this kind of expense will be
essential. 

2. Forecast Conservatively and Aggressively 

If you are a business owner, you need to toe the line between
conservative estimates and your aspirations for your business. 
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Instead of creating forecasts based on conservative guesses, it

might be helpful to create two sets of forecasts: one that is more in line
with current realities, and one that is catered more to an aggressive
growth strategy for your business. 
 

In creating these types of forecasts, you may even begin to

strategize new thinking and ideas to succeed even more with your
business. 

3. Check Key Ratios

There are a handful of ratios which can help guide your revenue
forecasting methods: 

 Gross Margin – The ratio of direct costs to total revenue. 

 Operating Profit Margin – The ratio of total operating costs to
total revenue during a given quarter or year. 

These ratios can help inform your revenue forecasts moving into
the future, making key considerations in areas such as customer service
and the other costs associated with your business. 

V. Activities

Activity 1: Identifying Concepts and Terminologies

Directions: From the box below, choose the term/concepts referred to

or described by each statement. Write your answer before the
number.

 Operating Profit Margin

 Gross Margin
 Industry Competition
 Forecast Conservatively and Aggressively 
 Revenue Forecast

_________________ 1. If you are a business owner, you need to toe the

line between conservative estimates and your aspirations for your
business.
_________________ 2. It is an educated prediction or estimation for the
upcoming year about how much money your company is likely to
bring in.
_________________ 3. It is the ratio of total operating costs to total
revenue during a given quarter or year.
_________________ 4. It refers to the ratio of direct costs to total
revenue.

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 _________________ 5. In preparing a revenue forecast, you can think of
personnel, products offered, and _________________.
VI. Assessment
Directions: Complete each statement by supplying your ideas. Write
your answers on the space provided.

1. Revenue forecast is _________________________________________________.

(provide a definition in your own words)

2. To prepare a revenue forecast, you must

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
(provide a simple outline on how to prepare a revenue forecast)

3. Revenue forecast is important because

________________________________________________________________________
________________________________________________________________________
____________________________________________________________________
(state the importance a revenue forecast)

VII. References

Revenue forecast by the best method for your yearlong business

strategy. Board by BudgetBakers. (2019, September 27).

https://board.budgetbakers.com/blog/the-best-revenue-forecasting-
methods-for-yourbusiness/#:~:text=What%20is%20a%20Revenue
%20Forecast,your%20margins%20will%20be%20overall.

Prepared by:

Harold Nicolai F. Garcia

Teacher II-Maruhat National
HS

Note: Practice Personal Hygiene Protocols at all times.

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VIII. Key to Corrections

Activity 1: Identifying Concepts and Terminologies

1.Forecast conservatively
2 industry competition
3.operating profit margin
4.gross margin
5 check key ratios

Assessment

Answers may vary