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Описание: Earnings guidance is the ultimate translation of internal operations for external consumption. In this eighth installment of our series, we break down the 6-step process to building a guidance range that preserves optionality and protects your stock's valuation.

Timestamps
0:00 The premise: Guidance is more art than science

0:45 Translating operational finance for capital markets

1:15 Two primary inputs: Internal vs. Consensus

1:55 The 6-step guidance creation process

2:30 Optimizing and refining the range over time

2:53 Key Learning: Preserving your optionality

𝗕𝗲𝘁𝘄𝗲𝗲𝗻 𝗧𝘄𝗼 𝗘𝗮𝗿𝗻𝗶𝗻𝗴𝘀 𝗖𝗮𝗹𝗹𝘀 𝘄/ 𝗠𝗿. 𝗜𝗻𝘃𝗲𝘀𝘁𝗼𝗿 𝗥𝗲𝗹𝗮𝘁𝗶𝗼𝗻𝘀
𝗛𝗼𝘄 𝘁𝗼 𝗕𝘂𝗶𝗹𝗱 𝗮 𝗚𝘂𝗶𝗱𝗮𝗻𝗰𝗲 𝗥𝗮𝗻𝗴𝗲 𝗧𝗵𝗮𝘁 𝗗𝗿𝗶𝘃𝗲𝘀 𝗩𝗮𝗹𝘂𝗮𝘁𝗶𝗼𝗻

Financial guidance is more art than science. It is the process of translating complex, internal operational finance into a summary level that capital markets can actually digest.

The goal isn't just to provide a number—it’s to preserve optionality and protect your valuation. If you build your range correctly, you can move up or down without backing yourself into a corner.

Here is my 6-step process for building an optimal guidance range:

𝟭. 𝗗𝗲𝗳𝗶𝗻𝗲 𝗬𝗼𝘂𝗿 𝗜𝗻𝘁𝗲𝗿𝗻𝗮𝗹 𝗛𝗶𝗴𝗵 𝗮𝗻𝗱 𝗟𝗼𝘄: Collect your internal budget, forecasts, and various operating scenarios. You need a range that contemplates all likely outcomes to minimize the need for changes later.

𝟮. 𝗔𝘂𝗱𝗶𝘁 𝘁𝗵𝗲 𝗦𝗲𝗹𝗹-𝗦𝗶𝗱𝗲 𝗖𝗼𝗻𝘀𝗲𝗻𝘀𝘂𝘀: What are the high and low expectations currently held by the street?

𝟯. 𝗜𝗱𝗲𝗻𝘁𝗶𝗳𝘆 𝘁𝗵𝗲 𝗗𝗶𝗿𝗲𝗰𝘁𝗶𝗼𝗻𝗮𝗹 𝗧𝗿𝗲𝗻𝗱: Compare your internal data against that consensus. Are your numbers trending above, below, or in line with what the street expects?

𝟰. 𝗔𝗻𝗮𝗹𝘆𝘇𝗲 𝘁𝗵𝗲 𝗢𝘃𝗲𝗿𝗹𝗮𝗽: Understanding where your internal range sits relative to consensus is what drives your stock's valuation. This comparison tells you exactly what kind of signal you are about to send to the market.

𝟱. 𝗦𝗲𝘁 𝗮𝗻𝗱 𝗗𝗲𝗹𝗶𝘃𝗲𝗿 𝘁𝗵𝗲 𝗢𝗽𝘁𝗶𝗺𝗮𝗹 𝗥𝗮𝗻𝗴𝗲: Establish the range that protects your downside while leaving room for outperformance.

𝟲. 𝗢𝗽𝘁𝗶𝗺𝗶𝘇𝗲 𝗮𝗻𝗱 𝗥𝗲𝗳𝗶𝗻𝗲: Guidance isn't "set it and forget it." Over the coming quarters, you must refine the range—narrowing or adjusting as the internal data becomes clearer.

𝗞𝗲𝘆 𝗟𝗲𝗮𝗿𝗻𝗶𝗻𝗴𝘀

Good guidance drives valuation improvement and, more importantly, protects you when things go wrong.

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