Saturday, August 18, 2012

Forecasting - A Tool for Small Business Success

Putting together a budget has left me feeling both satisfied and empty. When I was wearing my finance hat, I enjoyed seeing how all parts of the organization were putting together strategies and action plans to accomplish goals that would help grow the business.

The other positive was that as a finance team, we had a tangible output - a budget. We consolidated all the inputs from other departments, asked questions, challenged assumptions, performed what-if analysis, and put together a pretty package that was sent to the executive teams and department heads.

After the "high" of completing the budget, reality soon set in. In working with colleagues from other departments, I could see the budget package on a shelf, under a stack of papers, and in some cases, the budget wasn't to be found. Talk about a cold dose of reality.

Budgets will always have a place in business, but to increase their effectiveness, you have to incorporate forecasting into your business planning. The forecast helps take into consideration the changes that are happening in the business right now and those you expect to happen very soon.

A budget is static, and serves as a baseline. The forecast is evergreen - it changes each time you take a look at conditions, and provides you with the ability to make small gains in your business, hit a homerun, or protect your current position.

In volatile times, forecasting is an essential tool. Pull together your sales, marketing, and service and operations team. Ask them to take a look at the market, and analyze and develop a 4 quarter or 12 month rolling forecast. When you do this, you can optimize your investments, and pare back those that just won't cut it in the current market.

Along with the sales piece, review the expenses. When people have a budget, many will spend to the budget. It's human nature. Have your department heads or key leaders reevaluate their spending, and tie it back to the new direction that the forecast is dictating.

Budgeting is a baseline. From the CFO chair, it will always have a place in business. Drive innovation and resource optimization, you MUST do the forecast. Forecasting leads to agility - being quick on your feet to respond to threats, and take advantage of the opportunities that are right there.

With your business and the economy in a constant state of fluctuation, can you really afford to rely solely upon a static budget?

My name is John Sipple, and I am the President of Ignite Business Coaching. As a business coach, I work with business owners, leaders, and entrepreneurs to grow businesses profitably in stable and uncertain times, and still attain the quality of life you want outside of work.

Visit Ignite Business Coaching at, or contact me today! Call 859-420-5950, or email me at

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