Forecasting

What the Forecasting page answers

Where is the business headed, what could you change, and are the cash and the schedule there to deliver it? The page looks forward only. Reviewing a past period is the job of Financials, and acting on an opportunity happens in the Action Center.

The page reads top to bottom:

The View assumptions button at the end of the page lists the inputs the page runs on, for the period being reviewed and for the forecast.

The date range does not move the forecast

The forecast is anchored to today, not to the date range at the top of the page. Changing the range from Last Month to Year to Date does not change the months the forecast learns from or the inputs it projects with.

Its inputs are measured over one fixed window: the last three complete calendar months. On September 28 that is June, July and August. The contribution margin, campaign spend, the collection rate, deferred sales cash, the ticket and visits the what-if dials start from, utilization, revenue per provider hour, the time one visit takes and the payment fee rate all come from that window. Committed costs are the ones in force today.

The date range selects a period to review. On this page it sets the "period being reviewed" section of the assumptions drawer and the revenue shortfall that Plan for next period is sized against.

When the range runs past today, Nabu also projects where the range will end. It projects the remaining days from this location's own average revenue on each weekday, adjusted for how the elapsed days compared with those averages. With fewer than 14 days of revenue history before the range, or a remaining weekday with no revenue history, it uses revenue to date per day instead. Ask Nabu states that projected period-end revenue, and the assumptions drawer names the method used.

Monthly history

Each month's revenue is recognized revenue, the same figure Financials reports for that month: delivered work whether or not it has been paid, less refunds in the month they happen.

Revenue counts in the month the work was delivered, not the month it was paid for. A treatment paid for in September and delivered in October is October revenue, and a treatment that has been paid for but not yet completed is not revenue in any month. The prior-period comparison in the assumptions drawer and the weekday averages behind the period-end projection count revenue on the same dates.

The forecast looks back up to 18 months. Months before the location first had revenue are left out, so a clinic that opened in February is not averaged against the months before it existed. The month in progress appears on the chart as a faded bar and is never used to set the run rate.

The opening ramp. A clinic's first month is often a partial one. Once there are at least three complete months, the earliest complete month in the history is left out when its revenue per day is below half the typical (median) revenue per day of the months after it. It is then excluded from the run rate, the trend, the likely range, the visit count and the seasonal pattern, and the forecast's note names the month it excluded. Only that earliest month can be excluded this way. A later slow month is a real month and stays.

How revenue is projected

Based on chooses the months the forecast learns from: the last 3, 6 or 12 complete months. If the location has fewer, the forecast uses what it has and says so. The run rate is revenue divided by the calendar days in those months, so a short month does not read as a slow one.

Each forecast month is:

run rate per day x days in the month x the month's seasonal index
  x the trend, when Continue trend is chosen
  + what the what-if dials add

Seasonality needs 12 complete months, after any opening ramp is excluded. Each calendar month is indexed by its average revenue per day against the average revenue per day across every complete month, and the index is bounded so no month is marked more than 75% above or 60% below average. The month by month table shows the adjustment beside each month, for example "+12% seasonal". With fewer than 12 months the forecast says seasonal swings are not modeled.

Growth is Hold flat or Continue trend. Hold flat repeats the run rate. Continue trend fits a straight line through the revenue per day of the basis months (it needs three) and carries that direction forward with damping: each further month adds 85% of the previous month's increment, so growth flattens instead of compounding. The fitted rate is capped at 10% a month in either direction, and the trend never moves a month more than 75% above or 50% below where holding flat would put it. With Hold flat, the forecast's note still tells you how fast revenue has been growing or declining.

The likely range is an 80% range: the span the actual month should land inside four times out of five. It needs three completed months in the basis. It is built from how much revenue per day has varied from month to month, widened for a small sample, and it widens the further ahead it looks, because a month a year out is less knowable than next month. With Continue trend it also allows for the trend being wrong, so choosing it widens the range rather than only moving the line.

Horizon is Next month, Next 3 months, Next 6 months or Next 12 months. The page opens on the next 3 months, based on the last 3 months, held flat.

Visits in each forecast month are completed appointments per calendar day over the same basis months, scaled the same way as revenue, plus any visits the dials add.

What the forecast charges against revenue

Contribution is forecast revenue times the forward contribution margin, the margin Financials reports over the last three complete months. Revenue added by the what-if dials is valued at each dial's own rate (see below).

Fixed costs are the costs, people and devices in force today, charged a whole month in every forecast month. A $500 monthly retainer is $500 in February and $500 in March; the charge does not follow the number of days. They include provider base payroll, rent, overhead and support staff pay, equipment and marketing. A cost, provider or device you have retired is not charged. A one-time cost is not a monthly commitment and is not in the forecast's fixed costs, as on Financials.

Marketing is the marketing retainer in force today plus campaign spend at its average over the last three complete months. When no marketing is entered, the forecast carries none, and "How this forecast is built" says so.

Debt service and owner draw are not in net profit. They appear only in the cash outlook.

Net profit in each month is contribution less fixed costs, marketing included. The month by month table shows fixed costs with marketing included, a running cumulative total, and, when the horizon starts in a loss, the month cumulative profit turns positive.

The verdict and the headline figures

The verdict is always the baseline, the forecast at the current pace with every dial at rest, for example: "At the current pace, the next 3 months are projected to generate about $X in revenue and lose $Y. 1 of the next 3 months are expected to be profitable." Its tag reads Profitable outlook, Mixed outlook or Loss projected.

The four figures below it are revenue, the likely range, net profit and months in profit over the horizon, with the first month below zero named. Once you move a dial, these figures, the chart, the month by month table, the cash outlook and the capacity check show your plan and are tagged as your plan. A notice above them states the baseline's revenue and net profit, and each headline figure shows its baseline value beneath it. Back to baseline puts every dial back.

When the page cannot forecast

The forecast needs two measured inputs from the last three complete months: a ticket, which needs completed appointments, and a contribution margin, which needs recognized revenue. Without either, which includes a location that has not completed a month yet, the page reads "Forecasting is not available yet" and says which one is missing, rather than modeling on numbers the location has not earned. The assumptions drawer is still available.

What-if planning

The dials model a change in how the clinic runs. Each is per month and applies to every month of the horizon.

They start from the last three complete months, in one unit. The ticket is recognized revenue per completed appointment, and visits are completed appointments per month, so ticket times visits is that window's monthly revenue. This is not the average ticket on Financials, which divides revenue by revenue-generating invoices, because the dials add and value appointments.

Utilization when it cannot be measured. Utilization is delivered provider hours over schedulable provider hours. When no provider working hours are entered, or none were delivered in the last three complete months, it is unknown, never 0%. The dial is then off and says why, and spare provider hours are not valued anywhere on the page.

Each dial keeps its own share of the revenue it adds. A dial that books a visit (extra appointments, rebooking, utilization) brings that visit's whole delivery cost with it, so its revenue is valued at the forward contribution margin. A higher ticket on a visit already booked uses no more product and earns no more flat or per-unit provider pay; only commission and card fees rise with it. Its revenue keeps everything except the share of revenue that went to commission (service and retail) and payment fees over the last three complete months. At a 66% contribution margin, with 11% of revenue going to commission and fees, $1,000 more ticket revenue adds $890 of monthly profit, not $660.

The badge beside each dial shows its revenue and profit a month, and the forecast and the cash outlook use exactly those figures, so the badges add up to the change in monthly profit the forecast shows.

Your plan vs baseline compares revenue, net profit, months in profit and net cash movement over the horizon. Net cash movement is left out when the cash outlook is not available.

Saved scenarios store dial positions, plus the horizon, basis and growth setting that framed them, never the resulting dollars. A case reopened next month is re-costed against the current cost base, so its dollars will differ from the day you saved it. Saving under a name that already exists replaces that case. A saved case records no memberships.

Cash outlook

Profit and cash answer different questions. The cash outlook projects cash in and cash out for each forecast month and the bank balance that results.

Cash in  = forecast revenue x operating collection rate
         + deferred sales cash
Cash out = variable delivery cost + fixed costs + marketing paid in cash
         + debt service + owner draw

Operating collection rate is cash collected less deferred sales cash, divided by recognized revenue, over the last three complete months. Below 100% means billing runs ahead of collection. It is bounded to between 50% and 120%, so one large prepaid package cannot project forward as recurring cash. It is not the cash-to-revenue ratio on Financials, which counts all cash.

Deferred sales cash is what clients paid for memberships, packages and gift cards, averaged over the last three complete months and scaled to each forecast month's length. That money is in the bank but is not yet revenue. The collection rate leaves it out, so it is never counted twice.

Cash out charges forecast revenue at the forward variable cost rate, adjusted so each dial carries its own rate, then fixed costs for a whole month, marketing less any marketing paid in kind (trade), and debt service and owner draw from the commitments in force today.

Why cash differs from profit walks from net profit to net cash movement in named steps: deferred sales cash, collection timing, marketing paid in kind, debt service and owner draw. The last line lands on net cash movement with no balancing figure.

The balance starts from the cash on hand you entered, on Financials or here. The page shows the date the balance was entered as of, and cash that has moved since then is not reflected, because Nabu has no bank record of it. Update it to keep the forecast current. With a balance entered, the outlook shows the ending balance, a month-end balance chart, and "Runs out in" the month the balance first goes below zero, if it does within the horizon. Without one, it shows monthly movement only.

Forecast runway is the opening balance divided by the average monthly net cash outflow over the horizon, shown only when a balance is entered and the forecast consumes cash. It is not the trailing cash runway on Financials, which uses the selected period's burn, so the two can differ.

The cash outlook is not available when no revenue was recognized in the last three complete months: there is no measured collection rate to project cash in from, and the page says so instead of assuming one.

Can we deliver it?

For each forecast month, the page sets the hours the forecast needs against the hours you have, for providers and treatment rooms separately, because a service can hold a room longer than it holds a provider.

• Hours needed are forecast visits times the provider time and room time one visit takes on the service mix delivered over the last three complete months. A service's provider time is its labor minutes, and its room time is its room minutes, each falling back first to the service's duration.
• Provider hours available are each provider's weekly productive hours, or total weekly hours when productive hours are not set, spread over the calendar days of the month.
• Room hours available are treatment rooms times open hours per day, over the working days per month in Business Targets (22 when not set), scaled to the month's length.

A month above 85% of either is Tight, and above 100% is Over capacity, with the limiting resource named. When no provider hours or rooms are set up, the page asks you to add them.

Plan for next period

The services this section plans with are ranked by contribution per provider hour, because provider time is the constraint. A service's contribution is its list price less its products, commission at the average rate of the providers who earn one, and the payment fee at the location's measured fee rate over the last three complete months. The ranking costs a service with no particular provider, so flat per-service and per-unit pay, which depend on the provider, come to zero here. Only services with a price and complete product cost are ranked, since a missing product cost would make a service look better than it is. With no revenue in that window the fee rate is unknown and no service is ranked. The top three are used.

Best use of spare provider hours turns the ranked services whose contribution margin is above 20% into bookings, each with its revenue and contribution profit. Spare provider hours are the month's provider hours not filled at the measured utilization, and the plan assumes half of them can be filled. When the reviewed range ends today or earlier and its revenue fell short of the revenue goal for the same days, quantities are sized to that shortfall, split 40%, 35% and 25% across the services, and capped by the spare hours when utilization is known. Otherwise they are sized to the spare hours alone, and a note compares what those hours are worth at the current service mix with what they are worth concentrated in these services.

Ways to close the gap appears in that same case, when at least one service is ranked. It sizes three modeled what-ifs to the shortfall at list prices: High-Margin Focus, on the service with the highest margin after provider time, device and overhead; Balanced Mix, split 60/40 across the top two by that margin; and Rebooking Focus, at the starting ticket. Each service is valued at that margin. These are calculations, not recommendations or Action Plans, and nothing is scheduled or sent.

View opportunities in Action Center opens the Action Center, where prepared actions are approved.

Forecast accuracy

A forecast that never scores itself asks to be believed on faith. The first time the page is viewed in a calendar month, it records its forecast for each of the next three months on one fixed method: based on the last 3 months, held flat, with no dials. Nothing is recorded when there is no completed month to project from or no forward contribution margin.

Once a month closes, its recorded forecast is compared with that month's recognized revenue, to the cent. A month with no revenue is not scored. Each month counts once in the headline, on the call made nearest to it. The card shows:

• Average error, the mean absolute percentage error across scored months;
• Bias, whether forecasts have run high or low;
• Range hit rate, the share of months that landed inside the published range, which should approach 80% over time;
• the latest scored month, and error by how far ahead the call was made.

An average error within 5% is graded Reliable, within 12% Usable, and above that Loose. Below three scored months the grade is Provisional. The newest recorded forecasts are the ones scored, and the card appears once at least one forecast month has been scored.

Goals

Your revenue and profit goals come from Business Targets. The forecast does not use them, so its figures are the same with or without a goal.

On this page, the selected range's goals appear in the assumptions drawer, prorated to the days of the range that have elapsed. For a range that ends today or earlier, Plan for next period sizes its plans to the shortfall between revenue in the range and the goal for the same days. Without a revenue goal, or with no shortfall, it sizes bookings to spare provider hours only.

Ask Nabu states the selected range's goal both to date and for the whole period. A projected period-end revenue is a projection of the whole range, so it is set beside the whole-period goal, not the goal for the days elapsed so far.

Marketing and acquisition

Forecasting states no customer acquisition cost, return on ad spend or marketing ROI, and assumes no marketing spend you have not entered. Campaign-to-date CAC and ROAS, from the results you enter on each campaign, are on the Profitability page.

Asking Nabu about the forecast

Ask Nabu reads the same Forecasting model the page uses. It can state:

• the forecast outlook for the next three months on the scored method: revenue, its likely range and net profit;
• the selected period: recognized revenue so far, projected period-end revenue, the goal, actual contribution and net profit, break-even revenue, completed appointments and average ticket;
• goals: monthly, to date and whole period, beside the projected period-end revenue;
• revenue composition: service and retail revenue, deferred sales cash and the prior comparable period;
• the selected period's fixed costs and contribution margin, the forward contribution margin, the dials' starting points (revenue per completed appointment and completed appointments per month over the last three complete months), overdue clients and the rebooking baseline;
• recognized revenue for the closed months among the six up to the start of the selected range, each with its year, leaving out the month in progress;
• capacity, the marketing cost entered, the cash outlook's inputs (opening cash, deferred sales cash, the collection rate as measured and as bounded, debt service, owner draw, fixed cost and marketing paid in kind), the service recommendations, and forecast accuracy overall and by horizon.

It says plainly that it cannot yet read a forecast over a horizon you choose, the what-if plan built from the dials, the cash outlook's balance, movement and forecast runway, or how many forecast months are in profit, and offers the outlook instead. It declines to estimate acquisition cost, return on ad spend, marketing ROI or a planned marketing budget, and points to campaign-to-date CAC and ROAS on Profitability. It declines to put a value on new memberships.

What is coming

• New memberships in the what-if dials, once there is a rule for when a membership's fee is earned and what its included benefits cost.
• Marketing's effect on revenue. Today marketing spend only reduces forecast profit.
• Ask Nabu reading more of the page: the what-if plan, the cash outlook and forecasts over a horizon you choose.

Frequently asked questions

How far out does Nabu forecast? You choose: next month, or the next 3, 6 or 12 months. The page opens on the next 3 months. Every month is shown separately, so a weak month is visible instead of averaged away.

What if I just opened? The forecast needs one completed month of revenue to project anything. The likely range and Continue trend need three, and seasonality needs twelve. If your first month was a partial ramp, it is excluded once there are three complete months to compare it with.

I changed the date range and the forecast did not move. Is that right? Yes. The forecast learns from completed months counted back from today, so reviewing a different period does not change what it projects from.

Why does the ticket on the dial differ from the average ticket on Financials? The dial is recognized revenue per completed appointment over the last three complete months. Financials' average ticket is revenue per revenue-generating invoice for the selected period. Both are correct; they divide by different things.

Why is the utilization dial off? Utilization needs each provider's weekly hours and provider hours delivered in the last three complete months. Without either it is unknown, and the dial says which is missing.

Where is break-even? Break-even is on Financials. The assumptions drawer repeats the selected period's break-even revenue from the same model.

The fixed cost run rate looks wrong. What should I check? Open View assumptions and compare the fixed cost run rate with Business Costs, People & Payroll and Equipment. The run rate charges what is in force today for a whole month, so a cost you retired is not in it and a new one is in full. Look for a cost entered twice, such as a device both as a cost row and in the equipment register, or a one-time expense entered as monthly.

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