Gold Medal Business Forecast: Best Practices For Success

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You have done your due diligence.  You have established the rudimentary foundation for your business or company to move forward.  But how do you implement a winning plan for the future.  Our Olympic athletes have prepared for this summer for the last four years if not their entire lives. Although you have not considered such a plan for your business as long in most cases, you still can learn a thing or two from their preparation. Planning for the future is a critical aspect of managing any organization or business. In fact, the long-term success of any organization is closely tied to how well the leaders or management of the organization is able to foresee its future and to develop appropriate strategies to deal with likely future scenarios. Obviously, poor forecasts or estimates may lead to poor planning and thus result in increased costs to the business. So where does one start? Here are Olympic size tips to help you effectively measure your ability to identify the factors that influence sales and generate forecasts for high future sales volumes:

Qualitative Forecasting: Whether historical data is available or not there is a group consensus technique called the Delphi Method.  Group managers or leaders assess several questions regarding the future strategy of the organization. These views are calculated by senior leaders or company ”experts” until a consensus is met. A single solution in this scenario is not the objective, rather a relatively narrow range based on senior leadership is met. Consider the group consensus over individual subjective feelings and ideas.

Quantitative Forecasting: When you have historical data available, quantitative methods of forecasting is ideal. You are simply using important past variables to determine your future forecast.  Olympic athletes from Games gone by obviously measure and set new goals based on past performance. It doesn’t get any more simple than that.  This “casual method” is a time tested cause and affect versus new variables.

Scenario Writing: In Scenario Writing, the forecaster generates different outcomes based on different starting criteria. The decision-maker then decides on the most likely outcome from the numerous scenarios presented. This method typically yields best, worst and middle options.

Management Plan: All forecasts must be tracked on a regular basis, and this might be the most important step of all. By looking at the variance each period, you develop a solid feel for how accurate the forecast really is. As you use the forecast to make decisions, recognize that the actual value could easily be anywhere in that range.

A Gold Medal forecast is only as strong as its weakest link (the assumptions), and every piece that you add to your model is another link. So don’t add any more links than you need. And then go validate every one of them. Good luck!

by Russ Dula

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