Bottom-up Forecasting

This week’s topic is about making things happen at the right time. Part of that is creating a forecast model with the right parameters in place. Obviously no predictive model is perfect but executive management who follow conventional planning believe that the organization should meet the numbers that were predicted. With discovery- driven planning, predicting the correct numbers is not the main focus. The goal of discovery-driven planning is to learn as much you can for the least amount of expenditure. Within these plans many entrepreneurs do a top-down forecast, but a bottom-up forecast is able to predict numbers that are more likely to happen.

The Boston Consulting Group released a report, “The First Billion, A forecast of social investment demand.” The purpose of the report was to assess the future of social investment demand (in the UK). Part of their methodology in researching the market was by the bottom-up methodology. This methodology starts with the sectors the organization would like to target. From there, these sectors are broken down into sub-sections. Then the market size of each sub-section is added up to gain a comprehensive picture of the market.

I believe that when creating a business model, Care Van can benefit from the bottom-up methodology. By dissecting the market into sub-sections will allow us to see what part of the market is growing and actually attainable. One example of a sub section in our market would be individuals over 65, who live independently vs. living in a assisted living home. My question is, in order to have a good idea on the growth rate of the population, how far back do you need to go for your forecast model?

Source: https://www.bcg.com/documents/file115598.pdf