I am working on rolling forecasts, a good way to replace your annual budget process and position your business for future growth. Rolling forecasts are not new. Rolling forecasts have been in use for some time, and large organizations undertake these with some regularity.
As a small or mid-size business, rolling forecasts can give you real power to control your financial future. The concept is simple, and involves setting targets for where you want to be profit wise in, say, five years. Lets say you want your profit level to be at $5 million, or $500K. Either way set the target.
What you are going to do is make a plan. But, instead of setting a one-year plan and going through an exercise of sticking to that plan, you are going to set a plan that involves real time business operations. The plan will be set up by quarters, so you will be setting up the first five quarters, or the next 15 months.
Now, instead of nickel and diming your financial expenses set the main levels of production and inventory expense, sales and marketing expense, and administration.
Have patience and wait under the end of the first quarter. How did you do? Where did you fall short? Is there a product that needs to be marketed more? Or costs too much to be profitable? Are you paying too much?
After the first quarter is complete, decide how you will achieve your sales and profit again for the next 15 months. Redo the second through fifth quarter of your original rolling forecast, and add another. Second now is the first quarter, third is now the second, etc.
After you do this for a few quarters, you'll get the hang of it. And you will be able to see where your business is going, and decide where you want it to go.
As a small or mid-size business, rolling forecasts can give you real power to control your financial future. The concept is simple, and involves setting targets for where you want to be profit wise in, say, five years. Lets say you want your profit level to be at $5 million, or $500K. Either way set the target.
What you are going to do is make a plan. But, instead of setting a one-year plan and going through an exercise of sticking to that plan, you are going to set a plan that involves real time business operations. The plan will be set up by quarters, so you will be setting up the first five quarters, or the next 15 months.
Now, instead of nickel and diming your financial expenses set the main levels of production and inventory expense, sales and marketing expense, and administration.
Have patience and wait under the end of the first quarter. How did you do? Where did you fall short? Is there a product that needs to be marketed more? Or costs too much to be profitable? Are you paying too much?
After the first quarter is complete, decide how you will achieve your sales and profit again for the next 15 months. Redo the second through fifth quarter of your original rolling forecast, and add another. Second now is the first quarter, third is now the second, etc.
After you do this for a few quarters, you'll get the hang of it. And you will be able to see where your business is going, and decide where you want it to go.
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