Expert: Ed McFarland - 7/25/2006

Question
This is my first time in the compilation and preparation of annual budget, and I have difficulty of determine the revenue, the revenue type is monthly and/or yearly subscription, recurring as well. Please guide me how to estimate the new members, cancellations, etc. in order to build the budget.

Many thanks.
Kitty

Answer
Revenue is the hardest number to get. Since one of the key elements is the forecast for the year ahead.

The historical basis, current subscriptions, non renewal rates and a certain amount of recurring items get you started, but the issues start when you try to anticipate where the new sales are coming from.

Missing either by too much or not enough can damage profitablity. You need input from the Sales Management about what they expect to happen. Watch them become very evasive when you try to get a number from them. The only sure thing you can do is to get the projections together and get a consensus that is where the business will be and go from there.

Good luck.