It sounds like something you need a business degree to understand, but a business forecast is really just a clever way of letting you predict the future. With all sorts of variables accounted for, it will let you plot a course towards your ultimate goals, personal or otherwise. This keeps the big picture outcomes in mind, with smaller milestones set in place along the way. The output of a forecast is, more often than not, a budget showing what you need to bring in, and what you’ll be spending each month. This should also plan for any big jumps in growth or purchases that you’re likely to make
It isn’t just a great way to ensure your business is successful (whatever that means for you). It also frees up your mind. When you know you have a plan in place, and steps to tackle each and every day, you’ll find it easy to focus, ignore distractions, and be confident in where you’re headed. That means you’ll work harder, get better traction and have more fun, too.
Here’s why a business forecast delivers all that, and more.
Say goodbye to decision fatigue
Every day in business you’re faced with decisions – you have people ringing you about opportunities, clients who’d like to work with you, or new staff members who you think might be good additions. It’s so easy to feel overwhelmed – or worse, to get distracted by shiny, exciting opportunities that won’t necessarily move you toward your goal. With a business forecast, you already know what needs to happen – and if that new opportunity isn’t in the plan, it’s far easier to say ‘no’.
Have real targets to hit
You know SMART goals? It’s the S for ‘specific’ that people often miss. They have big, audacious goals, but no plan for how to get there. Working backwards from your personal and professional goals, your business plan will put these steps in place. In black and white, you’ll know what targets you’re aiming for each month – whether that’s profit, cash in the bank, new staff or new clients – to deliver on that overall goal.
Part and parcel of any good business forecast is a cashflow forecast – that is, what cash you need to pay everyone (including you!) and what you are likely to have coming in. It means you can relax each month knowing you’ll have the money in the bank. That saves you a whole lot of money on things like interest and late fees, but most importantly, it will be a stress burden completely removed. You’ll be able to make decisions based on what’s good for your business, rather than from a scarcity mindset.
See how you’re tracking
Let’s talk about SMART goals again – M for ‘measurable’. With your forecast put into Xero, you can actively monitor your progress. That gives you real insight into how you’re doing, which lets you troubleshoot any issues holding you back or adjust goals if you’re doing better than expected. It’s also extremely motivating – arguably the most important element in setting and achieving goals.
Make smarter decisions
In business, things change – perhaps you’ve lost a key staff member, won a huge client, or need to replace equipment unexpectedly. Your forecast isn’t set in stone. Rather it’s a line in the sand, which actually makes it easier to change tack if you ever need to. It gives you the visibility you need to respond to these surprises in the best way possible.
Know you’re in the right business
Business can be a slog and it can sometimes feel like you’re going nowhere. With a forecast laid out, you’ll be able to see the course plotted to your ultimate goal, and more easily appreciate the slow and steady progress you’re making. That gives you the reassurance you need that your business isn’t just going to get the mortgage paid, but will ultimately deliver on your life’s big mission.
Break free from stress
Every year, lots of businesses are started, and within too short a time, a whole lot of them fail. A big part of that failure is caused by people thinking that simply being good at what they do – plumbing, farming, manufacturing widgets – is all that’s needed to succeed. They don’t think about where their business is going, or how to get there. It’s just about as bad as crashing a business by not keeping proper accounts, or failing to pay tax.
Planning for the future by setting goals is an essential aspect of successful business. With a business forecast, you’ll have a map – the steps you need to get there – so you can focus on what’s important and, most importantly, free yourself from all that worry.