Whether your company is on a high growth roll, merely trying to survive this recession or somewhere in between, if you aren’t using forecasts, you may be incredibly lucky. The odds of continued success and building a high-value company are stacked against you. On the other hand, that may help explain why you are in survival mode. Forecasting can change the odds to your favor.

1. Start Forecasting Now!
by R. Thomas Stocker
You wouldn’t drive on the highway looking
Annual plans (budgets), although important
through your rearview mirror would you?
for setting a stake in the ground for
So if you don’t have a system to predict
measuring the year, are not the best measure
your company’s near-term future, what do
for each period because it is static. And,
you call it? Most of us are used to using
given how long ago the plan may have been
monthly financial results as our measure of
created may not be realistic if major
success, and maybe cash in our bank
assumptions have changed, such as the 2008
account for cash flow. But you don’t stop
oil spike and collapse for example. Annual
your business at the end of the month to see
plans are a static measure and need
how you did and decide what you are going
something more dynamic on an ongoing
to do next. Every business uses forward-
basis to make them useful and current. The
looking tools internally, some formal and
plan (if you have one) is your goal for the
some informal. Your sales group continues
year. In many companies they are the de
to sell and your operational group continues
facto annual bonus targets and sometimes
to produce. Both use their own metrics and
stretch targets. They help you plan your
schedules. But the company as a whole
tactics and cash use to support those tactics
needs to measure against something to
and long-term strategies.
ensure it is on track, both from a cash flow
and profitability perspective and to provide
The best measure for operational
every area in the business with a dynamic
effectiveness is a rolling forecast of both
central plan for guidance of what to do and
profitability and cash flow. It bridges the
what to expect.
dynamics of what is happening right now to
the history of period results and the annual
So how are you measuring your business
plan. When using a forecast process with
and determining how you are doing, what to
the annual plan, it gives you the ability to
do and what to change? You are using some
make realistic adjustments to exploit
form of forecasting and estimating. No one
opportunities if you are ahead of your plan
waits for the numbers. From an operational
or make the mid-course corrections you
point of view, as important as the results are
need to reach the plan goals if you are
to know as soon after the period as possible,
behind.
they are ancient history and only a piece of
the complex system you need to run your
I recommend rolling forecasts to my clients,
company. And if it takes longer than seven
updated monthly. It should be a living
days to get those results you already have a
document with assumptions and action plans
problem (a different story for a different
continuously reviewed, challenged and
article) you need to address. Financial
adjusted. Each month or period the forecast
information must be current. This is
is updated by stepping off the monthly and
imperative regardless if your company is on
YTD results and are updated the last week
a track of high growth, survival or anywhere
of the period. Some companies use a twelve
in between.
month roll, some use thirteen periods and
some use however many periods are left in
10 Larkspur Road, East Greenwich, RI 02818 401-451-9799 www.boardroomadvisorygroup.com

2. the plan. Regardless of what you use, keep if you don’t have a plan, measure your
in mind that after four to six months out, success and make adjustments on a
your crystal ball will most likely get very continuous basis, you won’t remain in
hazy very quickly. For example, did you business very long. This is equally critical
call Q4 2008 in your 2008 plan or April in times of success and in times of stress.
2008 forecast correctly? All the very reason
There are many positives about utilizing
your forecast must be a living document.
tactical planning and measuring throughout
Therefore, in my mind the closest four
your company. If shared widely, you are
periods are the most important for this
sharing “the score” and building a team. I
process and demand the most attention.
can’t stress the power of score. Human
So how do you start? With the annual plan. nature is to try to win. If you don’t share
The purpose of your annual plan is to where you are or where you want to go
provide a roadmap of what you want to along with the tactical adjustments you are
accomplish. Your entire company making, you are ignoring a powerful
contributes to the process and gives resource you have available…your people.
everyone a tool to understand where they are The earlier your team knows you have a
supposed to go, how much they should tiger by the tail or are off course the sooner
expect to spend and when things should be they can implement counter-measures and
expected to occur. But what happens when adjustments to take advantage or get back on
things don’t happen the way you planned, course. Determining how planned tactics
especially since you started making the plan are working by predicting and sharing
the previous August. I suspect how the expected results gives everyone additional
fourth quarter of 2008 unfolded made your opportunities to make positive adjustments.
confidence in your 2009 annual plan a bit
Earlier in the article I suggested the first four
suspect, especially since annual plans are
months of the forecast are the most
typically completed by the beginning of
important. I think any forecast should have
December and finalized before the start of
the most detail and attention in declining
the New Year. If you are on a different
order as you work through the forecast.
fiscal year schedule your annual plan may
Clearly if you are updating your forecast the
be completely unrealistic as a result of those
week before the current period closes, this
events. This makes the rolling forecast all
period should be very close to the actual
the more important.
results. If not, you may want to understand
Regardless of your fiscal year, the goal is why. If this happens consistently, there is
always to make or exceed the plan. But the something wrong within your process that
timing and methodology of how you get you need to understand. This is important
there may need to change. Using a forecast because the most important period in the
process helps you keep the planning process forecast is the following period and that
in front of everyone in the company. It could be suspect as well.
helps to know how far away the goals may
If you are new at forecasting it may take
be or what mid-course changes can be made.
several periods to gain confidence in the
Forecasting is a logical method to measure
process. Don’t give up. You will find this
how effective those changes are as you go
process a very important part of building a
forward. An analogy I like to use is skiing
more valuable company. Continuous
moguls. In mogul skiing, if you haven’t
tactical planning is in the fabric of “A”
picked your path at least four bumps ahead
companies. It should be in the fabric of
you will crash…soon. Likewise in business,
yours.

3. To comment on this or other topics important to private business owners, access my blog at
www.boardroomadvisorygroup.com.
About the author; Tom is a Principal of Boardroom Advisory Group, LLC, an owner advisory and consulting firm. Tom serves on the Board of
Directors for the RI Economic Development Corp’s Small Business Loan Fund Corporation (SBLFC), the finance arm of the RI EDC. He writes
a monthly article for the RI EDC’s Every Company Counts initiative. His articles focus on areas that can add significant value for business
owners. Contact Tom directly at 401-451-9799 or tstocker@boardroomadvisorygroup.com.
Boardroom Advisory Group, LLC is a business advisory and consulting firm specializing in helping business owners resolve day-to-day systemic
issues that interfere with cash flow and profitability attainment. The Firm works with both growing and underperforming small to mid-market
private companies. The Firm’s team of hands-on senior professionals find and implement solutions to improve top-line and bottom-line growth,
increase cash flow, reduce costs, improve process, structure, and use world-class metrics to keep the business on track. The team also has
extensive experience working with troubled companies through business restructures and recapitalization. Boardroom Advisory Group’s core
focus on developing strategies to drive and measure performance has resulted in a history of sustainable top and bottom line growth, healthy cash
flow and increased company value for their clients. For more information about how we can help you build a more valuable business visit our
website at www.boardroomadvisorygroup.com.
©2008-09 Boardroom Advisory Group, LLC All Rights Reserved. No part of this document may be reproduced without the express permission
of the author. All registered trademarks mentioned in this document are the property of their respective owners.
Additional articles written by Mr. Stocker include:
Start Forecasting Now! Do You Have Contingency Plans?
I’m Out of Compliance. Now What? Have You Thought About Your Future Lately?
Are you in a Foxhole? Metrics Should Be Everywhere (Part I)
Are You an Octopus? Metrics Should Be Everywhere (Part II)
What is Value? It’s All About Growth
These articles can be accessed at www.boardroomadvisorygroup.com/pages/pubs.php. You can also request to be added to his email list to
receive his latest articles on a monthly basis on the Company website. Contact Tom at tstocker@boardroomadvisorygroup.com.