Last week I was in an app mastermind group discussing how revenue spikes in certain months and shrinks in other months of the year. For some businesses, holidays are the busy season and revenue increases. For other businesses (like travel), summer drives the most revenue.
With revenues going up and down month-by-month, how do you determine if you are growing or shrinking revenues over time? As the CEO of my past software business, I used a method called “Twelve Month Trailing Graphs” to clearly show whether my business was growing or shrinking. It removes the seasonality component. By graphing revenue this way, you simply look at the graph. If the graph is increasing (sloping upwards), you are growing revenue. If it is decreasing (sloping downwards), you are shrinking revenue.
If the graph goes up you are growing revenue (it is growing in this example)
How to Setup a 12 Month Trailing Graph
To work with a 12 month trailing graph, you must have at least 13 months of actual revenue and it really becomes more meaningful once you have 2 years of revenue. So the first point on the graph is a sum of revenue for months 1-12, the second point is revenue for months 2-13, and so on. So it is a rolling sum of revenue that looks back 12 months.
Sometimes it is easier to understand by watching a quick video, so here you go:
Here is the spreadsheet I used in the example: http://www.aMemoryJog.com/12MonthTrailingGraphs.xlsx
Brought to you by aMemoryJog
This blog was brought to you by aMemoryJog, a free password management app for the iPhone. If you are looking for an app to track your passwords and other easy-to-forget information, download aMemoryJog now at http://apple.co/1BsnQ7K. Why not, it’s free!
Subscribe to this Blog
Every few days, 2HourAppreneur publishes an article that we think is cool, thought-provoking, motivational, or makes life more fun and a bit easier. If you would like to receive these articles in your email every few days, sign up below.
If you prefer to check Facebook for the blog postings without getting an email, you can LIKE my Facebook page here and the posts can be seen from there or follow me on twitter.