Secret Weapon to Advancing A Small Business: Forecasting

It is all too easy to get caught up in the day-to-day hustle bustle of your small business; but, it is important not to lose sight of where your business is heading.

While often overlooked, the fact remains that forecasting where your business will be in the future is vital to staying afloat. Forecasting can be easy; it requires you to first establish a benchmark, then to test different variables based on the determined benchmark.

The point of a benchmark is to determine the current status of your business. You can start by compiling a list of your fixed expenses, variable expenses, revenue, gross margin and operating profit margin, and interest rates.

There are a number of variables that will affect your forecast, so you will need to run multiple forecasts in order to account for any and all possibilities. You can begin by considering variable price points, staffing levels, and marketing and advertising costs. Each variable will require 3 separate calculations in order to account for all possibilities: negative growth, flat growth, and above-average growth. Don’t forget to include other variables in your calculations, such as utility costs.

Numbers not your thing? There are several software programs that can do the number crunching for you! And if you’re the likes of an old-fashioned, technologically inept business owner, then hey, isn’t that why you hired an accountant?

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