Yes, we know you’re busy. Very busy. But don’t get so caught up in the busy that you neglect long-term planning for success.
Planning your company’s long-term strategy often takes a back seat to the pressing everyday demands of running your own business. But business forecasting is one of those activities you need to push to the top of your to-do list, because it can help your overall business growth. It can also reveal parts of your business that need attention or areas where you can expand.
Don’t worry if numbers aren’t your strong suit (hey, that’s why we have accountants, right?). You don’t need an MBA to calculate a few simple forecasting scenarios.
Establish a Benchmark
Before you can make a serious attempt at predicting how many gizmos and widgets you’re going to sell in a given year (and how much that will cost you), you need to understand where your business stands in the present. Start by gathering the following information:
- Fixed expenses
- Variable expenses
- Revenue, broken down by product line if appropriate
- Gross margin and operating profit margin
- Interest rates
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Test Different Variables
Now that you know where you stand, you can run different calculations to test different scenarios. Yes, you should run multiple forecasts using a variety of situations and variables such as
- Price points
- Staffing levels
- Marketing and advertising
Multiple scenarios give you more strategic insight into the coming year, and they can help you plan more effectively. Tap into your historical data and use the variables above to predict future sales. If your growth rate over the past few years has been a consistent 2 percent, for example, use that as a starting point. Then run forecasts for negative growth, flat growth and above-average growth.
Of course, not all of your expenses are fixed, so be sure to account for utilities and interest payments and other variable expenses that can change over time.
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Lauren Simonds is the managing editor of Small Business Computing. Follow Lauren on Twitter.