Fragile Forecasting

The UK’s economy is likely to slump by at least 11.5 % in 2020 one of the highest rates throughout the world as a result of the pandemic.

One of the most prevalent issues I have seen during this crisis is the lack of forecasting and planning within SME’s, something which I consider to be vital to any business and one that could reliably anticipate the financial “make or break” of a company.

Whilst no one person could foresee a pandemic and the economic crisis that would ensue; a strong business forecast would at least provide the basic understanding a business needs to be able to anticipate the issues, and avoid the level of business insolvency we have seen during this pandemic.

Many businesses fail to understand the basic principles of forecasting and forge ahead blindly not expecting a crisis let alone one of this magnitude to hit. Over 90% of businesses fail within the first 2 years under normal market conditions.

One of the common mistakes or misdemeanors I see in many businesses is the unrealistic estimates and lack of reserves which could be the savior in times of crisis. Many businesses believe that by writing a sales number on a piece of paper it is accepted as reality, and therein lies a plan, this is a huge mistake and one that will have been at the detriment of the business during 2020.

The common belief that you need a 50-page in-depth review for a business plan is simply unrealistic in today’s fast-paced environment. Keeping things in perspective and simple makes for a much more manageable and realistic outcome, one in which you can set milestones that you can work towards, manage cash, adapt, and change quickly before a serious problem hits and one in which you can create your “What IF” scenarios.

Without having a strong financial plan how can any business make the all-important strategic decisions and objectives to survive and grow? These fundamental basics have been proven to be the difference between a failing and thriving business under normal circumstances and now they have shown the flaws and open wounds of the many who have buried their head in the sand and thought that they have little time for planning, so the fragile forecasting is just that fragile and breakable.

Having a clear focus on a few important metrics and having a process for improvement by clear planning has a huge impact on business, having none sets the business up for failure.

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