From the course: Financial Analysis: Making Business Projections

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The top-down and bottom-up approaches

The top-down and bottom-up approaches - Microsoft Excel Tutorial

From the course: Financial Analysis: Making Business Projections

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The top-down and bottom-up approaches

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- In this course, we will learn about two techniques to build financial projections. The Top Down Approach and the Bottom Up Approach. Those are not two techniques from which you need to choose, but two different techniques that we will use and then combine in order to get an even better financial projection. The Bottom-Up Approach is a methodology that starts from the details of the company. In a bottom-up approach, you take detailed projections of individual elements of the company, such as product performance, or customer performance, or even the expected performance of actions you will be taking to change the business trajectory, and you will add together those detailed projections to build the big picture. The great thing about bottom-up projection is that they're grounded in concrete, real elements. They are very rational and can be analyzed at the end of the year to understand what did not go as planned. The downside of bottom-up plans is that they tend to project only the…

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