Setting Timescales

Defaults

The Standard Model and its variants cover up to 72 months. The Runway Tool and several forecasting tools cover up to 36 months.

How long a forecast makes sense

For early-stage founders, forecasting beyond three years is difficult (one year is hard). A five-year forecast intended to prove long-term revenue and earnings potential is better served by demonstrating market size and the potential for traction in that market. For more mature businesses with better visibility, a five-year forecast becomes more viable.

How to extend the time period in the models

All Hemrock models are open for editing and can be extended to any time period. The process is straightforward but specific. Here's how:

1. Add in the desired number of additional months in-between the last and second-to-last months in the model by inserting that number of columns on ALL sheets that are built monthly. Forecast is required for all tools, Statements and Revenues are required if they are in your model, Hooks, Pricing and Fundraising are required if you are working with a model pre-v5 Standard Model base, and other sheets are optional.

   For pre-v5 Standard Model bases, you will need to add in the additional number of quarters and years for each of the sheets using the same methodology, between the last quarter and second-to-last quarter, or last year and second-to-last year. For v5 and beyond, it is unnecessary.

2. After you've added in all the extra columns, it's time to carry over the formulas. I copy the second-to-last month / quarter/ year and past it over the blank columns, including the last column, and do this on each sheet.

   Note that I insert the new columns before the last period in the model, and carry over the formulas from the second-to-last period with formulas in it ocer the new columns, instead of just adding them on to the last. For example, if the model has 36 periods, and I want to extend it 18 periods, I insert 18 new columns in between period 35 and 36, then copy the column from period 35 across the new 18 periods and the previous period 36 column. This preserves any links and calculations that use all periods.

3. Next, I have to extend any of the calculations that are based on monthly cohorts. In the Standard model bases, that is only the debt repayment schedule, which is located on the Forecast sheet. On the principal and interest payment schedules, insert the same desired number of additional months in between the last and second-last months by inserting that number of rows. After I have inserted the rows for both, I copy the formulas down by copying the row of the second-to-last month and pasting it down over the blank rows, including the last month.

   In the Standard model bases, for any cohort-based revenue forecasts, you will need to also do the same cohort-based adjustments as above for those, either on the Forecast (pre-v5) or Revenues (v5) sheets. As a note, the cohort buildup in the Revenues sheet is fairly extensive, and is a lot of work to extend all cohorts for extra periods, and I generally discourage doing that edit.

4. Next, I update the Summary by inserting in the desired number of years, and copying the formulas over using the same method described in (1) and (2).
5. The Key Reports should update automatically.

   For pre-v5, you will need to edit each report so that it covers the desired time period. On these, you need to insert the columns a little differently, by highlighting the appropriate cells that you want to move to the right and shifting them to the right the appropriate number of times for the number of time periods you want to add. If you shift over the last period in the report, and then copy over the formulas from the second-to-last period, then the chart will update automatically and you won't have to edit the source data in each chart.

It's important that you add in the extra columns on all the sheets before you copy over any formulas, or else the formulas will not work correctly as the linking between sheets will not correspond.

All of that should take less than 15 minutes (unless you're updating the revenue build cohorts on the Revenues sheet).

Alternative: annual forecasts on Summary

Edit the Summary sheet to add annual forecasts for extra years. It's often not necessary to build monthly forecasts for years far into the future. Add columns for extra years on Summary and create a forecast using percentage growth rate (for revenues) and percentage margin (for costs) for each year.