Getting on Top of Business Forecasting

The best way to remain in business in this climate is to plan; however, the days of the three to five year plans are over. Instead, focus on the next 18 to 24 months with plenty of scenario planning and stress testing.

Build Scenarios: Create a forecast for the next 18 months to 2 years. Take your business plan and then impose a series of scenarios. A business-as-usual scenario, for example, might have flat growth. Another scenario might project a 10% drop in revenue and a 20% increase in input costs. These scenarios show you the effect on the business of outside forces. They also allow you to develop contingency plans to mitigate their effect if you start to detect their impact through your monthly reports.

Develop Your Business Plan: Critical to forecasting is your business plan. It should cover market analysis, organization and management, strategic analysis, marketing and sales, products and services, the amount of funding needed, and financials. The best business plans are updated every three months.

Helpful Tools: Business owners can build a basic financial forecast model using Excel spreadsheets. It is a very structured process where you look through the historical financial statements and the balance sheet history.
Track Targets and KPIs Constantly: Analyzing your balance sheet every three months is simply not frequent enough in this climate. Make sure that your key performance indicators, such as sales targets for each week, are in place. Analyze the month end financials comparing the actuals with your budget to see where you are performing well and where there are shortfalls.

With help in creating your business forecast, contact Simons Bitzer at (317) 782-3070.