Revenue Planning for Law Firms Leveraging Time-Series Forecasting Models
How Law Firms Can Employ Time-Series Forecasting Models to Improve Revenue Planning.
Check out the EPM resources on our web page (CE Web Site | EPM for Law Firms) to learn more about how to better improve your Firm’s revenue planning.
Type 3: Time-Series Forecasting Models
Time-Series Forecasting Models are statistical models used to predict future revenue based on previously observed data points collected over time. The models benefit from data that is sequential and time-dependent such as historical sales figures.
There are four key concepts that are incorporated into these models
- Time-Series Data: Revenue data points indexed in time order, typically collected at regular intervals (ex: daily or monthly).
- Trend: The recognition of a long-term increase or decrease in the data.
- Seasonality: A regular pattern in the data that repeats over a known, fixed period (ex: weekly, monthly, or yearly).
Noise: Random variation or irregularities in the data.
Let us look at two common Time Series Forecasting Models.
- AutoRegressive Integrated Moving Average (ARIMA) – Ideal for firms with seasonal trends such as litigation-intense firms. The model combines autoregression (AR), differencing (I), and moving average (MA). The results provide valuable trend insights into revenue, however, does not reflect seasonality. It requires stationary data (constant mean and variance over time).
- Exponential Smoothing (ETS) – This model is idyllic for smoothing out anomalies in your firm’s revenue. It models trends and seasonality using weighted averages and includes methods such as Holt-Winters for seasonal data.
Final Thoughts
Next week, we will explore the fourth type of data model available to law firms for revenue planning: Driver-Based Models. While there is no universally “right” model, choosing the most appropriate one requires thoughtful analysis and a clear understanding of its outputs. This approach helps ensure that your business decisions are both well-informed and aligned with strategic objectives.
Curious how these methods could work for you?
If you are wondering how to take the first step—or the next one—toward intelligent planning, let us connect. 💬 I would love to hear about your challenges and share what is working for firms like yours. 📩 DM me and watch for future posts on this topic. You can also check out the EPM resources on our web page (CE Web Site | EPM for Law Firms).
