What are the Alternatives to Assuming Stable Earnings?
Instead of assuming stable earnings, entrepreneurs can adopt more realistic financial forecasting methods:
1. Scenario Planning: Developing multiple financial scenarios (best-case, worst-case, and most likely) can provide a comprehensive view of potential outcomes. 2. Rolling Forecasts: Continuously updating financial forecasts based on real-time data can provide a more accurate picture of future earnings. 3. Sensitivity Analysis: Assessing how changes in key variables (e.g., sales volume, prices, costs) impact earnings can help in understanding potential volatility.