Part 1, Forecasting: Don’t Get Caught in the Rain Without an Umbrella

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Part 1, Forecasting: Don’t Get Caught in the Rain Without an Umbrella

The weather forecast was wrong. You’re caught in the rain because you didn’t think you needed an umbrella. You left your sunscreen at home and now the sun is shining down like it’s a summer day at the beach.

The weather forecast was right. Your outside party was a hit, no rain and sunny skies. Your wedding day was breezy and cool and your guests were comfortable, just like you imagined.

Forecasts aren’t always accurate, but they do help you plan and many times, they are spot on! And with the right data, weather can be updated even up to the minute and alert us of any changes.

Forecasting Your Numbers

Forecasting the numbers (income and expenses) for your business can be more accurate, because instead of Mother Nature, you’re dealing with more solid, less volatile, information.

Data is data. Numbers are numbers. Retainers, rates, fees. They are set.

Doing a forecast for your business is vital. You can do it annually, quarterly, monthly, weekly, even daily, depending on your industry.

And remember, there is a difference between a goal and a forecast. A business goal might be to have gross income of $250,000 in 2017. A forecast is looking at the actual data and the future data to identify how you will get to that number.

You forecast your income AND your expenses. This month, we focus on income and next month, I explore expenses, so stay tuned for the second part in this series.

Income

  • Look at your past performance, it’s a great indicator of your future performance
  • Figure out the actuals that won’t change (retainers, existing clients, ongoing projects, etc.)
  • Make sure you forecast when the money will come in, not when you invoice for it (your business is cash basis)
  • Are you holding a webinar that will lead to a launch of a product? Put in your projections the income from the revenue and the estimated income from the product sales
  • Don’t be super strict on details – use estimates, not exact dollars – this is not your tax return
  • Will opportunities open in the market? Know when and add them in
  • Are new clients slated to onboard in the next quarter, add them in the mix
  • Ask yourself questions: are there fewer days in the month? Then that’s less business (especially for retail)
  • Am I sponsoring an event and meeting new potential clients – estimate how many of those will become actual clients and what products or services will be purchased
  • Are there more holidays, will my team be away;
  • Am I traveling or taking time off?

Forecasting Tips

In July, I’m taking a week long vacation and attending my daughter’s wedding. I know I won’t be onboarding many clients in and around this time, so my forecast for July will reflect that. If I know this in advance, I can work harder to onboard more clients in June or August, in preparation for my time away.
Forecasting once a year doesn’t work for most businesses, because things change.
New clients sign on. Expenses increase. Rates change. Market conditions change. If you aware of circumstances that may have an effect on your business, get them in your forecast so you can plan accordingly.
In a previous position, I worked in the pharmaceutical industry and one of my responsibilities was preparing the DAILY SALES FORECAST – yes, DAILY!!! Every month, every week was forecast. In the winter months, because the products we sold needed temperature-controlled facilities, the sales on every Friday were lower than the other days – why – because the product could not sit on the loading dock – therefore it was not shipped on a Friday – it was shipped on a Monday to the client.  Our daily sales forecast reflected the effect of the weather!!!  For another product, the product approval by the FDA was anticipated in the forecast – once it was received, a revised forecast had to be completed based on the actual approval by the FDA and the ability to ship the product.
Take into account external factors. The Pope made a visit to Philadelphia in 2015 and the entire city almost shut down for three days.
As for how to do a forecast, I suggest using Excel. It’s a great tool, you most likely have it on your computer already, and it’s the best in my opinion for data analysis. If pen and paper is more your style, and you prefer to write things out, go for it.
Whether it’s raining income or raining expenses… be prepared!

Monthly Workshops:

Did you know I hold a monthly workshop at Headroom? It would be great to see you there. I cover juicy financial topics every month like budgeting, expenses, taxes and a lot more. To see all topics for the year, click the button below.

Monthly Workshops

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