TheresaAs CEOs and entrepreneurs, we want to be as prepared and equipped for the future as possible, and the important role of business forecasting in our operations. We understand that in order for our business to thrive, we must be able to scale in a sustainable and sophisticated way.
But before we can begin working on a growth strategy, we have to gain an understanding of where our business is headed and what we should (or should not) expect in terms of sales, demand, and organizational changes.
So, how do we gather this information? And is it really possible to predict the future of a business?
The answer is yes, absolutely— but there’s a contingency.
The contingency is that accurately anticipate what’s to come for your company is only possible with the right business forecasting strategy.
What Does Business Forecasting Mean?
Business forecasting is a method of calculation used by entrepreneurial professionals to better predict future outcomes and developments, including sales, budgetary needs, and production quotas.
How is Business Forecasting Done?
In order to begin forecasting in business, you need a strong foundational knowledge of the different techniques that can be used, what areas of your business you should prioritize, and where your company stands currently.
If you’re interested in learning more about how to include forecasting in your business planning efforts, I highly encourage you to check out my YouTube video, Operations Management Forecasting for Creative Agencies. In it, I take a closer look at the various methodologies entrepreneurs can use to better predict future outcomes, and go over the necessary steps for getting started.
How Does Business Forecasting Benefit My Business?
There are several advantages associated with accurate forecasting in business.
When discussing the importance of business forecasting with my clients, I like to focus on the common entrepreneurial problems this strategic process can solve.
This approach allows business owners to see the powerful end-results that can be achieved when business forecasting is applied effectively.
Let’s get to it.
The 3 Business Flaws a Forecasting Strategy Will Fix for Good
1. Bloated Sales Pipelines
Are your sales reps great at gathering leads, but not-so-great at turning those leads into signed deals? Do they reference the leads in their pipeline when predicting future revenue? This is what financial advisors and operations managers often refer to as “sales bloat”— and it can be dangerously detrimental to your business. If sales professionals are relying on potential deals that are unlikely to close when estimating future profits, they’re skewing the picture— which means you’re making business decisions based on inaccurate information.
HOW BUSINESS FORECASTING CAN FIX IT:
By meticulously analyzing which leads have converted to sales in the past, which deals have been the most valuable, when those deals occurred, and who was responsible for them, business owners can use this verifiable data to more precisely predict future sales and fine-tune their frameworks accordingly. This will eliminate guesswork, giving sales team managers a clear vision of where they should be focusing their efforts and which accounts they should deprioritize or eliminate.
2. Obsolete Inventory
If you own a merchandising or manufacturing company, there are few things worse than sitting on obsolete inventory that you can no longer sell. Unfortunately, however, this is a common side effect of poor business forecasting. Companies often over-estimate how much stock they will move, ordering more in advance than they ultimately sell. This results in inventory that is at the end of its life cycle sitting in warehouses and retail stores that is outdated or no longer in demand.
HOW BUSINESS FORECASTING CAN FIX IT:
This is another reason why it’s crucial for entrepreneurs to understand the importance of business forecasting. By using it, they can base upcoming inventory orders on historic sales data, previous market trends, and previous seasonal fluctuations. With this information in mind, entrepreneurs can strategically reorder product at ideal times, maximizing their profit and reducing the amount of obsolete inventory they they amass over time.
3. Inadequate Staffing
Both over-staffing and under-staffing can negatively impact workplace productivity and business profitability. When there are too many employees and not enough work to keep them engaged, team members will become bored and disconnected from the mission and vision of your business. When there is too much work and not enough employees, stress levels rise and the quality of work produced will suffer. Managing human resources is a delicate science— one that keeps entrepreneurs balancing on a thin tightrope, with the potential of problems on either side.
HOW BUSINESS FORECASTING CAN FIX IT:
A comprehensive forecasting strategy will enhance your business planning as it relates to staffing. It will take into account the current employment market, previous and current organizational needs, historical employee turnover trends, and work-to-employee ratios. This valuable data will make it possible to correctly pre-figure staffing requirements and mitigate unnecessary labor costs.
How I Can Help
Strategic business forecasting is one of the core services I offer as an Operations Coachsultant. I view it as one of the essential keys required to unlock a company’s full potential.
I have used business forecasting, along with other systems and methods, to produce unprecedented results for the CEOs and entrepreneurs I serve.
For one of my clients, I was able to increase profits from $8m/year to $50m/year in just 4 years.
For another, I helped them go from $600 in the bank account to over $70K consistently in 3 months.
Scaling businesses sustainably from the inside out is my greatest passion. And forecasting is a huge component of what makes that possible.
Your Move
Could you use some guidance as you get started with business forecasting? Schedule a virtual coffee date with me today. There’s no obligation to commit and it’s completely free!
Come over to our Free Exclusive Community where you can find support from other CEOs on the same journey.
