It is a type of forecast in finance that involves preparing an in-depth budget with expenditure calculations & forecasts by the departmental heads. The bottom-up forecast is calculated by the formula:
Bottom-up= Operating expense plan- depreciation expense
A Bottom-up forecast, also termed as “operational expense plan”, as indicated above is a realistic forecasting tool in which potential revenues of the business are calculated by forecasting your potential sales produced by one product times the average sales figure. The approach allows you to loosely analyze your current business scenario & future reasonable expectations of investors. It is based on the analysis of individual stocks rather than market cycles. The bottom-up investing option encourages the investor to drive his attention on a particular competing company, instead of the industry in which the company is working or analyzing the overall economy. The logic behind the bottom-up forecast is that individual companies can do well in a poor performing industry. Analysis of the company’s products and services, its financial soundness and its research plans form a part of this tool.