By Shane Bender
The holidays are here. We are spending time with family, eating turkey, buying presents, and just enjoying the holiday season. As the year comes to an end, there may be this unclear feeling in your mind. Do you want to expand? Do you want to hire employees? Do you need to make some cost reductions? Do you need to start the next year with an increased focus on business development? There are so many things to consider. How do you increase this clarity? What do you do?
By this time of year, my clients and I have built out a next year financial forecast or at least one version of it. Why even do this when there are so many unknowns? What is the value of doing it?
Do you feel more motivated when you know the score? I am still trying to get over the horrible debacle that my Alma Mater (Baylor) had against Oklahoma where they were up 28-3 and lost 34-31. I find it interesting that Oklahoma knew the score and scored just enough to come back and win. It sure did help to know the score. If you put together your next year forecast and you see profit or cash flow issues, it will give you increased motivation to increase revenue and maybe trim expenses. This clarity provides you with the motivation to do something now instead of waiting until later. It might be better than you think or vice versa.
2. Guidance and Direction
I was having lunch recently, and a restaurant owner was interested in expanding but wasn’t sure and needed guidance. I would have no idea how any business owner could make a decision like this without putting together a forecast of the next year. Now, when there are changes in your business, you have to put together some assumptions. This may require different scenarios so you can see what could happen in a worst-case and also a best-case scenario. We know reality will be in the middle, but with this kind of stress testing, you can better make decisions and understand your risks. If you find the upside far outweighs the downside, then the decision is much easier to make.
Why not go into the holiday season with more peace about the direction of your business? If you have no clue how your cash flow is looking, how would you know if you should pay bonuses or make capital purchases to help your tax situation? You don’t want to make huge cash investments and then find yourself in a cash crunch in February or March. A good forecast that has been stress tested as I mentioned above can give you more peace and comfort as you end the new year.
4. Take Action Now
Most of the time procrastination is bad and can be expensive. If you have cost reductions that need to be made, why wait until next year when you can do them now? If you need to increase your business development efforts, don’t wait until January when everyone else is back from the holidays. There is always business development that can be done. Maybe it has to be a shift of fewer meetings and more content marketing. Maybe you have more luck getting someone on the phone when business is slower. You just never know. At the very least, this increased urgency to take action will pay dividends eventually.
5. Don’t Use Your Gut – Leave that to the turkey or pie
Let’s face it. If you don’t have a good forecast model, you are probably using your gut to make business decisions. This may have served you well in the past, but most likely it is dangerous. Most business owners I have worked with learn something from this forecasting excercise. The gut can lie, especially if it is in a comotose state of turkey tryptophan.
Give Yourself the Gift of a Forecast
As the year is coming to an end, don’t wait until next year to understand your next year. If you want to learn more about this, check out my book Forecast Your Future, forecast templates, and even course. You can always reach out to me or check out my website at www.bendercfo.com.