![]() Contrary to the top down method, the bottom up approach begins with a micro/inside-out view and builds towards a macro view. The bottom up approach is less dependent on external factors (the market), but leverages internal company specific data such as sales data or your company’s internal capacity. Therefore, it could be useful to complement the top down method with the bottom up approach. Often entrepreneurs calculate SOM (equal to sales) by taking a random percentage of the market, without really assessing whether this target is realistically achievable.Ī tiny percentage of a market might seem insignificant, but could be way too optimistic for instance in the year of your launch. The pitfall of the top down approach is that it might seduce you to forecast too optimistically (especially sales). How do you know how your company is doing if you don’t have any targets to achieve or steering information to compare against? How are you going to update your shareholders on how you are spending their money and whether you are performing as promised without any financial plan to benchmark against? You will need a forecast to do so.ĭo these reasons apply to your case as well? Good! Then definitely continue reading…
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