Predicting Your Future: Business Forecasting “Best” Practices

By Carolyn Allmon

Carolyn Allmon Business Forecasting Services

As Henri Poincare said, “It is far better to foresee even without certainty than not to foresee at all”.  With that in mind, here are some guidelines to help your business foresee its future:

·       Maintain an accurate historical data base for whatever you are forecasting for the relevant time period in which you want your forecasts —months, weeks, quarters.  As a general rule, more is better.

·       Understand what’s behind the data.  Be able to explain high and low points in each series.  

·       Use forecasting software to generate a base-line forecasting model and adjust as appropriate based on input from the experts.

·       Beware of the biases of your experts.  Each will have a different perspective based on their area of expertise—e.g., Marketing and Sales may be overly optimistic.

·       Develop and maintain a regular disciplined process to generate the forecasts. Document any adjustments made to the base-line forecast.

·       Measure your forecast accuracy regularly to monitor success.  Set realistic accuracy expectations based on your own experience.

·       Focus your forecasting efforts on what is most important to the business.   Forecast the others using simple, automatic or judgmental methods

·       If your data is difficult to forecast due to volatility, see if you can change it to make it more forecastable— e.g., can you persuade your customer to order more regularly to minimize large peaks in your data?

·       Incentivize the behavior you want— e.g., if you want your sales force to give useful input to the forecast, reward them accordingly.