Top Down vs Bottoms Up Projections

Matt Preuss
Marketing Manager
Top Down Projections Bottoms Up Projections
Unlock your investor relationships. Try Visible for free for 14 days.
Start your free trial

Financial projections are essential for any business, even if it’s not yet generating revenue. A variety of specific methods exist for performing this task, but they can generally be classified into top-down and bottom-up approaches. Financial analysts often use both methods as checks upon each other.

Top Down Projections

A top-down method of estimating future financial performance uses general parameters to develop specific projection numbers. You’ll often use a top-down approach to determine the market share that your new business can expect to receive. You might start with the market value of your product, narrowing it down to a particular location as much as possible. You would then assume that your business will receive a specific portion of that market and use that estimate to generate a sales forecast.

A top-down approach is comparatively easy since the only parameters it really requires is the total market value for your area and the market share you expect to receive. This method is most useful for checking the reasonableness of the projections resulting from a bottom-up approach. However, top down projections aren’t recommended for preparing detailed forecasts.

Example

Assume for this example you plan to open a business in an area where the total annual sale value of your product is $2 billion. You believe that your business might get 0.01 percent of that market, resulting in annual sales of $200,000. Note that your financial projection is entirely dependent upon the accuracy of your estimate on the product’s market value and your market share. Furthermore, the top-down approach doesn’t you to ask “what if” type questions.

Bottoms Up Projections

The bottom-up approach uses specific parameters to develop a general forecast of a business’s performance. This method might start the number people you expect to pass by your business each day, also known as footfall. You would then estimate the percentage of footfall that will enter your store and make a purchase. The next step is to estimate the average value of each purchase to project your annual sales. Bottoms up projections are based on a set of individual assumptions, allowing you to determine the impact of changing a particular parameter with relative ease.

You may use a bottom-up approach to select a location for a new business. You can obtain an accurate estimate of the footfall by direct observation. You can also observe similar stores in that area to estimate the percentage of footfall that are likely to enter your store. The prices that your competitors charge will give you a good idea of the price you can expect to charge.

Example

Assume for this example that an average of 10,000 people pass by a particular location each day. About one percent of this traffic in this area enters a store and makes a purchase, and the average total of each sale is about $5. The expected annual sales revenue in this example is therefore 10,000 x 0.01 x 5 x 365 = $182,500. You can then refine this estimate by considering additional factors such as price changes, closing on weekends and seasonal fluctuations.

You may also enjoy:
Product Updates
Shaping the Future: Unveiling Our Brand Refresh
Visible started as a way for founders to update their investors but has since transformed into a purpose-built platform for both founders and investors. Since 2014, we’ve powered over 3M interactions between founders and investors. Our brand refresh represents our commitment to equip founders and the investors who back them. Founders can now manage their investor relationships and capital raises from start to finish. Investors can centralize data, uncover insights, and report to their LPs and stakeholders—all from one place. We are excited to unveil our refreshed brand, marking the beginning of the next decade in our dedication and commitment to founders and investors. Equipping Founders and Investors for Growth Raising capital is fundamentally about building relationships. Founders and investors spend months forging connections that, once solidified by a term sheet, can evolve into partnerships lasting 8 to 10 years and beyond. We set out to highlight the people behind the investments, not just the companies or firms they represent. As we continue to grow, you'll notice more familiar faces from different startups and venture funds featured on our site (👋 Hi Lacey!). Shaping Our Future Across our website and marketing assets, you’ll see 3D shapes floating in the background. While they add aesthetic appeal, they also carry a deeper meaning. For example: We believe raising capital from VCs or LPs closely resembles a fundraising funnel, a concept brought to life through the funnel shape that appears across various pages and assets. Sphere, torus, and pill shapes symbolize the connections between VCs, founders, and stakeholders, reflecting the interwoven nature of these relationships. These forms also symbolize forward momentum and the continuous progression within the venture ecosystem. As our product has evolved to offer greater flexibility in moving data into and out of Visible, you'll notice pipes integrated into the design, visually representing the seamless flow of data through our platform. Logo and Wordmark To maintain and perpetuate our brand equity, we opted to anchor our brand to our current logo and wordmark. The Visible logomark is made from three overlapping, equilateral triangles. Each triangle is slightly transparent, allowing the mark to interact with other design elements. These triangles represent human relationships and the connection between founders and investors, which is core to our mission and vision for our company. Color Palette Our signature black primary color remains, but we've refined our palette for a fresh look. We've transitioned from a complex, rich color scheme to a more cohesive and defined palette, creating a unified and bold approach to color across our brand. Introducing the new Visible color palette: Product Guided by our core values of trust and transparency, we designed our product to embody these principles. Our product visuals across the site are predominantly high-fidelity for the first time, highlighting its capabilities visually rather than relying solely on words. The updated typography and refined color palette are seamlessly integrated into our product screens, further enhancing the overall brand experience. Voice & Tone A brand is more than just its visual identity; it requires a voice and tone that harmonizes with its design. We aimed for our voice to be authentic, credible, and consistent, supporting both investors and founders alike. This commitment led us to define key principles for our voice and tone: Be a guide Less is more Recognize that different users face different challenges As you explore our marketing site, we hope Visible reflects these values and resonates with you. Transparency = Trust As we noted earlier, raising capital is fundamentally about relationships. Trust and transparency form the foundation of any strong connection. Throughout our website, you'll notice subtle transparency elements that embody this core principle. This new iteration of our brand is built to scale, but that doesn’t mean we won’t continue to evolve and elevate the experience for the betterment of our prospects and customers. Here's to shaping the next 10 years! Up and to the right,  The Visible Team
Product Updates
Product Update: Turn Emails Into Insights With Visible AI Inbox
Customer Stories
Case Study: Airtree Venture's Transformation with Visible
Fundraising
9 Tips for Effective Investor Networking