Driving with the Rear View Mirror
As a business owner, I knew it’s important to know my numbers, so every month when we closed our books on the 10th, I would look over the financials. Some months were better than others, but the history really didn’t offer me a lot of insights. When I did dig into something, it was to find out what had already happened. I’d learn that we spent extra money on traveling that month or I’d find out that a large project hadn’t been billed as expected. None of this information was especially helpful in making decisions for our future.
Then I was introduced to forward forecasting.
In this practice, instead of looking at where I had been, I created a month to month forecast of where I expected to be. Then I would update the forecast for the upcoming month based on what was expected to happen. If a new key account was to be delayed by a few weeks, I would update the forecast before it happened. These forecasts would roll out to the end of the year so I could get an idea of where the year was going to end up.
That is very powerful in aiding me in day to day decisions. When I thought about updating computers or hiring a new employee, I could look to see where we were tracking in the forecast to help me. When we started tracking that our profit would be less than we wanted, we started making adjustments in spending. We hit our targets for the year because we didn’t wait until we reached the target to see if we won or not.
Forward forecasting is even more powerful when you include more people in the process. Imagine your leadership team owning different lines on your forecast. The combined knowledge of what is happening from your team would be reflected on the forecast. Plus think about how much your team would learn about the business if they had to think about what impacted their area of responsibility. This is just a part of what is known as The Great Game of BusinessTM.
Don Harkey has recently become certified to coach The Great Game of Business. If you’d like to learn more about this program and what it can do for your business, visit our page and we will send you more information. Maybe it’s time for you to get in the game!