The explicit forecast period (or detailed projection period) is the horizon over which free cash flows are individually projected in a DCF model, before transitioning to a terminal value calculation. It typically spans 5 to 10 years, depending on the company's visibility, growth profile and competitive dynamics. Beyond this horizon, the business is assumed to reach a steady state, and value is captured in the terminal value. A longer explicit period is warranted when growth rates are far from long-run equilibrium; a shorter period is appropriate for mature, stable businesses.

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Example: a Swiss medtech startup growing at 45% annually is valued using a 10-year explicit forecast period, during which revenues converge progressively from CHF 5.0 million to CHF 42.0 million and EBITDA margins expand from -5% to 28%. A 5-year horizon would be insufficient to capture the value creation phase — the terminal value computed at year 5 would represent 95% of total value, making the model extremely sensitive to the normalisation assumptions.

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At Hectelion, we calibrate the explicit forecast period to the company's growth trajectory — longer for high-growth businesses, shorter for stable ones — to build DCF models that are both robust and defensible.