Forecasting

Forecasting works only when you make realistic and honest assumptions about your business and its environment.

Forecasting is the process of predicting the future based upon past and present trends. For example, if your salary bill has increased by a consistent three percent per annum for the previous 10 years, you can realistically extrapolate the rise for the next two years.

You can also carry out more sophisticated forecasts based on intelligence. For example, you may know that your sales are strongly influenced both by a competitor's activity and by consumer price inflation. By gaining intelligence on your competitors' projected activity, and economist's predictions of inflation, you can make an informed forecast of next year's sales. Forecasting works only when you make realistic and honest assumptions about your business and its environment.

ACTION POINT: Understand past trends and use the available intelligence to make informed forecasts.