Financial forecasting

Financial forecasting estimates future revenue, costs, and cash flow based on historical data and growth assumptions. It helps set realistic targets and communicate expectations to stakeholders. While product managers may not directly plan resources, they often collaborate with finance and operations teams to align forecasts with broader business plans. Accurate forecasting prevents cash crunches and supports informed strategic decisions.

Start with historical performance data if they are available, then layer in growth assumptions and known changes. Consider seasonality, market trends, and planned product updates. Build conservative, realistic, and optimistic scenarios to understand potential outcomes. Update forecasts monthly as new data emerges. Your forecast accuracy tends to improve dramatically after 6-12 months of consistent tracking and adjustment.

Common forecasting methods include bottom-up (aggregating individual estimates) and top-down (applying growth rates to current numbers). Combine both approaches for accuracy. Remember that forecasts are educated guesses; build buffers for uncertainty and track variance to improve future predictions.