Business Forecasting
Business Forecasting
What is a Business Forecast
A Business Forecast is a prediction of a businesses future financial performance. It includes forecasts for revenue and expenses from which future profitability can be determined. It is not a detailed breakdown of revenue and expense items (as in a budget) but a higher level view of the business considering the main drivers of business revenue and expenses.
The term Sales Forecasting is often used were a forecast only encompasses the revenue component of a business forecast.
Benefits of a Business Forecast
Building a Business forecast provides insight into both the current and future performance of a business. Building a forecast should involve an assessment of the dynamic environment in which the business operates. Simply considering these issues often allows a business manager to perceive the business in a more strategic manner. This has the capacity to improve decision making and the overall strategic development of the business.
A Business Forecast can (and should be) the precursor to budget development. Developing an overall forecast and using this as a frame work for budget creation improves budget accuracy. This occurs due to the quantifiable approach applied in a valid forecast. It is not simply changing the revenue or expense by some arbitrary percentage. Instead a forecast considers changes in the factors that influence the revenue or expense and uses these to calculate the future value.
The impact of business decisions on business performance can be analyzed using a forecast. This includes decisions related directly to the business micro environment eg products and services offered and the macro environment eg changes in the target market.
Sensitivity Analysis applied to a business forecast allows a range of possible outcomes to be reviewed. Providing worst case to best case scenarios and allowing the business manager to assess, monitor and implement actions to best deal with these possibilities.
In essence a business forecast provides a high level strategic budget overview, assists in the identification of business opportunities and risks, and provides a quantifiable framework for the development of business strategies and actions.
Building a Business Forecast
Business Forecasting methods range from arbitrary year on year variations to complex data driven algorithms. The best choice depends upon the business being analyzed, the quality and quantity of data available, the purpose of the analysis, the analytical expertise of user, and time, usability, and cost constraints.
Where a business operates in a very stable environment and has demonstrated consistent incremental variations over a number of years it may be possible to successfully apply year on year variations directly to current business performance data. This can easily be undertaken using a spreadsheet.
At the other extreme where a volume of high quality data is available, and there are few cost or time constraints the use of complex modeling algorithms may be justified. An excellent coverage of these approaches is provided by Professor Hossein Arsham of the University of Baltimore.
However most businesses operate in dynamic environments, with limited hard data, and considerable time and cost constraints. Therefore building a usable and value adding forecast for these business requires a streamlined approach, that considers the business environment and requires minimal hard data. This is achieved by utilizing the intuitive business and market knowledge of the business manager/owner and converting this into quantifiable values that can be applied to basic current business performance data (ie revenue and broad expense categories) to build a business forecast.
Business Forecasting - To learn more about this author, visit David Morcom's Website.
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Developing a business forecast provides management with strategic and operational insight leading to improved business performance. It is the basis of budgeting and provides the information that allows managers to manage. Without a business forecast a business is simply responding to the day to day operating environment and has limited capacity to maximize future opportunities or minimize potential risk.
What is a Business Forecast
A Business Forecast is a prediction of a businesses future financial performance. It includes forecasts for revenue and expenses from which future profitability can be determined. It is not a detailed breakdown of revenue and expense items (as in a budget) but a higher level view of the business considering the main drivers of business revenue and expenses.
The term Sales Forecasting is often used were a forecast only encompasses the revenue component of a business forecast.
Benefits of a Business Forecast
Building a Business forecast provides insight into both the current and future performance of a business. Building a forecast should involve an assessment of the dynamic environment in which the business operates. Simply considering these issues often allows a business manager to perceive the business in a more strategic manner. This has the capacity to improve decision making and the overall strategic development of the business.
A Business Forecast can (and should be) the precursor to budget development. Developing an overall forecast and using this as a frame work for budget creation improves budget accuracy. This occurs due to the quantifiable approach applied in a valid forecast. It is not simply changing the revenue or expense by some arbitrary percentage. Instead a forecast considers changes in the factors that influence the revenue or expense and uses these to calculate the future value.
The impact of business decisions on business performance can be analyzed using a forecast. This includes decisions related directly to the business micro environment eg products and services offered and the macro environment eg changes in the target market.
Sensitivity Analysis applied to a business forecast allows a range of possible outcomes to be reviewed. Providing worst case to best case scenarios and allowing the business manager to assess, monitor and implement actions to best deal with these possibilities.
In essence a business forecast provides a high level strategic budget overview, assists in the identification of business opportunities and risks, and provides a quantifiable framework for the development of business strategies and actions.
Building a Business Forecast
Business Forecasting methods range from arbitrary year on year variations to complex data driven algorithms. The best choice depends upon the business being analyzed, the quality and quantity of data available, the purpose of the analysis, the analytical expertise of user, and time, usability, and cost constraints.
Where a business operates in a very stable environment and has demonstrated consistent incremental variations over a number of years it may be possible to successfully apply year on year variations directly to current business performance data. This can easily be undertaken using a spreadsheet.
At the other extreme where a volume of high quality data is available, and there are few cost or time constraints the use of complex modeling algorithms may be justified. An excellent coverage of these approaches is provided by Professor Hossein Arsham of the University of Baltimore.
However most businesses operate in dynamic environments, with limited hard data, and considerable time and cost constraints. Therefore building a usable and value adding forecast for these business requires a streamlined approach, that considers the business environment and requires minimal hard data. This is achieved by utilizing the intuitive business and market knowledge of the business manager/owner and converting this into quantifiable values that can be applied to basic current business performance data (ie revenue and broad expense categories) to build a business forecast.
Business Forecasting - To learn more about this author, visit David Morcom's Website.
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David BarrDavid Barr is the President of Venture Opportunities, Inc. David has been a professional business broker/intermediary since 1980 focusing on General Business Brokerage and Mergers and Acquisitions representing client transaction value from $400,000 to $20,000,000. Mr. Barr has handled the sale of over four hundred and fifty companies. David earned a university degree from the State University of New York majoring in economics and business. David holds the Mergers and Acquisition Master Intermediary and the Certified Business Intermediary designations from the International Business Brokers Association. He is also a Senior Business Analyst and a Texas licensed Real Estate Agent. For more information about David and Venture Opportunities, visit www.bizdealmaker.com. - Visit David Barr's Website |
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Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
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Casey GollanCasey Gollan, Business Coaching & Mentoring Programs. Add $1 Million to $10 Million in the next 1 to 3 years. Since 1996 Casey has to added hundreds of millions of dollars to businesses. Watch a free video see client results Business Coaching website. - Visit Casey Gollan's Website |
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Kim CastleWith nearly two decades in the advertising and design business, with clients like Domino's Pizza, General Motors, Direct TV, Pedigree, Wolfgang Puck, Higher Octave Music, Hollywood Celebrity Products, Disney, and Paramount, as well as thousands of entrepreneurs around the world define, structure, communicate, and position their business for greater profits, BrandU(R) co-creators Kim Castle and W. Vito Montone discovered that entrepreneurs could experience the same power that big brands command for a fraction of the cost with the world's only process-based results-drive Integral approach to business creation. BrandU(R) is helping entrepreneurs grow with the power of extreme clarity from idea...to brand...to market(TM) and helping one million entrepreneurs become successful and whole so that they can make a difference in the world. Are you one of them? If you want to experience clarity all the way to the bank(TM), get started now at http://www.brandu.com. - Visit Kim Castle's Website |
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Jeff FosterWebBizIdeas.com is a Minneapolis website design company founded to help people start an internet business by providing them with website, business, and internet resources that help foster the growth of successful online businesses and develop innovative Internet business ideas. We specialize in internet consulting & internet marketing. - Visit Jeff Foster's Website |
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David AchesonDavid Acheson is the founder of DCJA Consultancy. DCJA Consultancy is a management consultancy business specialising in B2B sales consultancy. They offer bespoke and packaged sales consultancy including Sales Optimisation Review, Interim Sales Management, Sales & Marketing Review, 1:1 Sales & Management Staff Analysis, Management Training, Solution Sales Training, Creation of New Pay Plan, KPI's, run Customer Feedback Campaigns, assist with Recruitment, Coaching, Appraisals and set up Strategic Marketing Campaigns. David spent his early career in accountancy and then moved into sales in 1982, working in Office Equipment, IT, Advertising, Training, Outsourcing and Consultancy. He has held many Senior Positions in SMBs and Global Organisations including Head of Sales Operations & Head of Business Development. His knowledge, skills and great experience of the Sales Industry has led to David making keynote speeches and running educational sessions to key businesses through organisations including The Chamber of Commerce and Business Link. - Visit David Acheson's Website |
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Leanne Hoagland-SmithAre your sales where you want them to be? Will you be one of the few who achieves sales or business success or one of the many who have failed to change? Are you tired of being told you are like everyone else? Then you may find my first book on sales of interest. Be the Red Jacket in the Sea of Gray Suits, The Keys to Unlocking Sales available at Amazon or at http://www.processspecialist.com/red-jacket.htm. This book is a reflection of my no-nonsense approach to improving sales to overall business results. If you are truly committed to making sustainable changes, then I can help you secure a positive return on your investment because I focus on executable solutions not telling you the problems you already know you have. From training to corporate (group) coaching to executive one on one coaching, my approach is to assess, create awareness, build a goal driven action plan and then execute. The bottom line question is "Not do you or your employees know it, but do you or they want to do it?" Please call for a free strategy session at 219.759.5601. - Visit Leanne Hoagland-Smith's Website |
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Cheryl MatthynssensCheryl is a life skills coach, licensed Chemical Dependency Counselor and a 20 year entrepreneur. Cheryl's dedication to achieving a life of balance led to her expanding her teaching from the simple managing of life's daily challenges to adding financial well being as well. A direct marketer with DrinkACT, she is gaining ground in the online community with her concepts of making sure business owners, entreprenuers and employees have well rounded life styles. She opened up a small affiliate site - The Balance Guide- to help others find resources for mental and emotional well being. Visit Cheryl's blog to see more of the diversity beyond business she has began offering online at www.thebalanceguide.blogspot.com - Visit Cheryl Matthynssens's Website |
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