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Forecasting seems like a simple idea, yet many entrepreneurs don’t put it into practice. Forecasting is a valuable tool that will give you better control of your business and help establish a measure of predictability in today’s tough times. It will enable you to evaluate your company’s performance in both the short and long term.
You should develop a budget and profitability forecast for each business unit, office, or region of your company. Forecasts should incorporate fixed and variable costs and the projected profitability—not just sales or revenues—for each customer or account. The total of all projected customer activities in each business unit will give you a basis to build real budget estimates.
Once you begin forecasting on an ongoing basis, you’ll see that it is also a useful exercise that reveals weaknesses or inefficiencies in your business and helps you identify specific areas that need improvement. If you could predict what would happen tomorrow, what would you change today? No one can predict the future, but a forecasting regimen can show you what you need to fix now to compete more effectively next month, next quarter, and next year.
Chris Carey Advisors
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