Chapter 5: Business Forecasting

Business forecasting is simply the process of making predictions about aspects of your business’ future. These predictions can be based on your business’ past performance, the economy, educated/informed opinion, market trends, weather/seasonal trends (think ice cream or snow tire sales), associated factors (an increase in housing permit starts could indicate a rise in lumber sales) or a number of other elements.

You can think of it like weather forecasting. A meteorologist looks at the behavior of systems in the past and makes a prediction about what will happen in the future. In your business, it's important to have an idea of a number of future circumstances including, but not limited to: Revenues, Sales, Attrition rate, Website traffic, Inventory turnover, Expenses, etc.

While it's nice to hope and dream that your revenues will dwarf your expenses, by gathering and analyzing data, you put your company in the position of being able to make reliable predictions about its future.

To do your jobs properly, you and your managers need to be able to make plans for the future. Your business needs to anticipate tomorrow and prepare for it. Without a method to gauge the future, this can be an incredibly daunting challenge. Forecasting helps to take away some of the uncertainty about the future, and makes it possible for you and your managers to make meaningful plans and strategies.