Forecast floor

Run rate, as the reference a forecast is compared to rather than a forecast itself. The gap between the floor and the forecast is five lines with evidence: new business at historical conversion, expansion at pursuit share, churn from the lists, seasonality from the index, and dated known changes.

DefinitionRun rate, as the reference a forecast is compared to rather than a forecast itself. The gap between the floor and the forecast is five lines with evidence: new business at historical conversion, expansion at pursuit share, churn from the lists, seasonality from the index, and dated known changes.

Below the floor needs a reason

A churn or seasonality line with a list behind it. Otherwise pessimism or a sandbag.

Above it needs pipeline

At historical rates. Forty percent above with a pipeline line worth ten is thirty points of hope.

How it is used

Run rate placed beside the forecast as a reference. The gap between the two is what the forecast is claiming will change, and the bridge has to explain that gap with named lines.

Example

Run rate says $11.2 million for the year. The forecast says $12.6 million. The $1.4 million difference must be named: two large deals, a price rise and a new site.

Where it goes wrong

Run rate presented as a forecast, or a forecast with no reference. Either way nobody can see what is being assumed.

Articles that use this term

Forecast and pipeline

Run rate and forecast: why the floor is not the plan, and what the gap between them is made of

Why run rate is the floor a forecast should be compared to rather than a forecast itself, what the gap between the two is made of, new business, expansion, churn, seasonality and known changes, the bridge from run rate to forecast with a line for each, the forecast that sits below run rate and needs a reason, the one far above it and needs pipeline, and the rule that the forecast is defended by the lines between it and the floor.

16 Sept 20263 min read