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Forecast Errors

21 January 2019

We love the weather here in the UK. Endless hours are spent grumbling that it’s too cold, when it’s cold, and too hot when it’s hot.

If it’s dry we ask for rain, to water the plants in the garden. When it’s pouring it down we like to grumble about that and wish it was a sunny day.

People are never satisfied and yet their grumbles are generally good natured, happy ones, part of the culture and a product of being an island in the middle of at least two distinctive weather systems. They arrive and clash and give us our seasons and plenty of opportunities to discuss the weather.

Pity then the poor weather forecasters. Using the latest satellite images and complex algorithms they do their best to tell us what will happen tomorrow and next week. And we like to listen and then loudly tell everyone how they got it wrong.

Snow is forecast? Then there’s no snow and people grumble.

A sunny day? It rains. We love to grumble.

As someone who has to drive a lot for business, any day when it doesn’t snow is a good day for me. And if it rains hard and means I’m unable to mow the lawn, I count that as a win too!

At this time of year many businesses are setting budgets, which are based on sales forecasts.

The problem I’ve seen many times is that if people want to spend more, they raise the sales forecast to cover it. What they need to do is keep the sales forecast as a cautious number and then budget cautiously from that.

“A forecast is just a bad guess written down.”

I’m not sure who said this, but I like it. It’s what guides me when I’m forecasting for my own business and it keeps me in awareness that caution is the best defence against being wildly over-optimistic.

Forecasting errors tend to be down to bullish sales managers who readily agree that they will double sales this year. It’s an enticing proposition and all too easy to buy into the excitement that this year is going to be a big one!

Forecasting errors creep in when managers lose sight of what happened last year. They assume that all problems are solved and that this year there will be no staff issues, material shortages, quality problems, machine breakdowns, or cashflow delays.

Forecasting errors can sneak up on us if we ignore competitor activity, cultural shifts and the impact of new technology. Blockbuster famously ignored the potential of Netflix and along the way must have produced one of the worst sales forecasts in business history!

If your method of forecasting is to take last year’s sales and add 10% then you have a useless forecast. It’s just a bad guess written down.

We can never forecast accurately. So, we need to look at what happened over the last two years and see what the trends are, both in terms of external sales and competitor activity and in terms of our internal ability to deliver.

An example of internal silliness is this: A business I worked for many years ago would base their output on the productive time of 10 staff, completely ignoring the effect of holidays, which meant they had a net staffing figure of 9 people for the year. As a result they spent the whole year chasing their tails and whipping people hard to meet targets. Not a happy business.

Maybe the best forecast is no forecast, or at least one that avoids:

1. The vanity of over-ambitious managers.

2. The curse of unfounded optimism.

3. The stupidity of not accounting for what happened last year.

4. The danger of neat maths, such as rounding up numbers to make things look rosy.

Whatever sort of business we are in, we can all take time this week to introduce our business forecast to the shredder. Then we can sit down, switch off our ego and really think about what the year ahead could look like.

And whatever answer we end up with we can be cheery and smile and know that our forecast is going to be wrong!

If we can use a pine cone to forecast the weather, maybe we can use it for business issues too?

Now then… what’s the weather doing today? Hmmm fog. That wasn’t forecasted!

Next week: 6 Month Selling

Brand By Association

13 January 2019

Marketing experts love to say that it takes years to build a brand and seconds to lose it.

Gerald Ratner is often the go-to example of this. When he compared the longevity of his jewellery to that of a prawn sandwich, he was just repeating a joke he’d told before.

The first time he said it nobody noticed. We can all use humour to lighten the mood. However, the second time he said it, it was a slow news day and the press minced him.

I interviewed him a few years back for Future Radio and I must say that he was a thoroughly decent person. Polite and warm and easy to talk to.

With hindsight it probably wasn’t the best move of his to compare jewellery with shell fish and yet it’s easy to be wise after the event.

However, we do need to think about how our own brand is affected by the choices we make. Also how our brand is affected by the company we keep too.

It would be easy to wear a smart suit and think we were presenting an up-market image, when being photographed at a business event …whilst shaking hands with someone, well known for their dishonest trading practices.

What would that say about us?

Likewise, if a competitor-colleague asks us to work with them on a project, we have to be clear about our branding. Are we helping them, or are they detracting from us? If they make a hash of the project how could that affect our reputation? Why do they need us? Are we being flattered into something that’s going to cause us heartache?

All useful questions and all are good to ask.

We do need to think about how our brand is shaped by the company we keep, the image we project and the comments we make.

That extends to social media too. I wonder that Facebook would be a very different place if user generated content was linked directly to their business brand image. It might make people think twice about some of the things they choose to share.

Brand by association; this week we can all pay more attention to who we are working with and who we are standing next to at a busines networking event.

Prawn sandwich anyone?

Next week: Forecast Errors

books

Click cover to view details on Amazon

bouncingback

Riding the Rocket

How to manage your Modern Career

Published 2013 Marshall Cavendish

240pp

bouncingback

Bouncing Back

How to get going again after a career setback

Published 2012 Marshall Cavendish

200pp

keepyourjob

How to Keep Your Job

Brilliant ways to increase performance, stay employed and keep the money rolling in

Published 2011 Marshall Cavendish

208pp

jobhunting

Job Hunting 3.0

Secrets and skills to sell yourself effectively in the Modern Age

Published 2010 Marshall Cavendish

260pp

leave

Leave the Bastards Behind

An insider's guide to working for yourself

Published 2007 Cyan Books and Marshall Cavendish

192pp

boss

My Boss is a Bastard

Surviving turmoil at work

Published 2006 Cyan Books and Marshall Cavendish

192pp

© Richard Maun 2015 / Click here to contact