EQUITY-RESEARCH5 MIN READ
Build A Driver Tree For Revenue
Break a revenue forecast into MECE operating drivers and evidence tests.
Model review The model has one revenue line growing 11% per year. The PM asks which operating driver explains it. A forecast that cannot be decomposed cannot be tested. Issue tree Revenue = clean driver branches Break the top-line question into branches that explain the whole number without double counting. Shortcut Growth rate because demand is strong Each assumption has evidence attached to it. A good driver tree makes the forecast falsifiable. 01 Unit 02 Price 03 Mix Define the unit No abstraction
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