Predicting Future Revenue - in Changing Markets
Predicting the future revenue of a B2B company also predicts its Growth Rate, and Business Risk which reveals its position and direction of travel on the continuum between growth and obsolescence. This data, vital to M&A decision making, is achieved by combining 2 fundamental measures - Sustainability of Current Revenue and Capability to Grow Future Revenue.
This combination is unique to Predictive Data because it shines the spotlight on how forward looking a company is in the execution of its daily business, and the impact of this on future customer spend.
In this article we answer 2 questions.
What is measured?
How is it measured?
Sustainability of Current Revenue
This is calculated by asking each customer to rate their expectations of a company as an innovative problem solver. This single-criterion rating provides a quick, accurate, decisive measure that encapsulates answers to 3 underlying questions:
How relevant is their current solution in solving the customer's problem?
What is the customer’s experience of any improvements, and are they expecting more?
How likely are they to seek an alternative solution from a competitor?
Algorithms score and rank the responses, and calculate the impact on revenue across 4 score range bands to calculate sustainability of current revenue. The lowest scores mean those customers don’t see any value in continuing the business relationship. At the opposite end of the spectrum, the highest scores mean customers have strong expectations of value long into the future that can’t be matched by competitors. This provides clear insight into future risks that may not be fully impacting the company yet, and growth opportunities that are not measurable without this market intelligence. Repeat measures track changing customer expectations and the company's ability to keep pace with them.
Capability to Grow Future Revenue
This is calculated by measuring a company’s capability to respond to changing customer needs. It comprises a confidential 80-question assessment across an entire company to assess the collective capability of every employee and team to adapt to changing customer needs, contribute to innovative solutions to new problems, and execute this new value with precision.
Confidential personal and team reports are provided to each employee and team leader. The reports specify to each person and team, where and how to improve their impact on growth in the context of their roles in the business. Repeat measures enable individuals, teams, and the company to track improvements. This provides companies with actional data on their capability to keep pace with the changing needs of customers and the growth opportunities this provides.
Growth Predictor Score
From this combined dataset, a company’s Growth Predictor Score is calculated which is used to certify its capability to Adapt, Innovate, and Execute new solutions that continue to meet changing customer expectations. The Growth Predictor Score provides a benchmark to enable M&A advisors and fund managers to compare the future prospects of B2B companies across a sector.