Question

How do you determine the length of your forecasting period?

Answer 1

There has been lot of sayings that forecast period is determined by the amount of tome that is taken by the company to reach a steady state of growth. But the actual fact that determines the forecast period is the time taken by the company to realize its current initiatives. For a early stage growth company, this might be 10 years, as its current initiative of becoming a mature company is slowly realized. 10 years later, that very same company might have a forecast period of 3 years, as it pursues the near term goal of expanding business lines. After 3 years, it might have a forecast period of 5 years, as it aims to establish a foreign presence.

Company’s position                                                                                 forecast period

Slow-growing; operates in a highly competitive,                         1 year low-margin industry Solid company; has advantages                                                    5 years such as strong marketing channels, brand recognition and/or regulatory advantage Outstanding growth; operates                                                   10 years with high barriers to entry, dominant market position or prospects

Student,

I have provided the answer according to my understanding. Is this sufficient or you require a formula because i don’t find any formula kind information in any of the sources. Please raise a comment & don’t give thumbs down. Thanks