Let’s Play Weatherman
by Aaron Strecker ~ November 30th, 2009
October, November and December in the business world are a wonderful time of year. Those months mark the time that, for all those companies whose fiscal year is the same as the calendar year, budget planning and forecasting starts and gets into full swing. Ah yes, budget planning. Tell us what exactly is going to happen over the next 12 months and you might just get held to it. We want to believe that budget planning is a very concrete and analytical process. You put together the business plan for the upcoming year, you look at all the economic forecasts, you apply expected new business growth, you add in expected costs (staffing, marketing, etc), plug in your expected variables, and voila, out comes your budget. But in some ways, isn’t it more akin to calling Miss Cleo on the psychic hotline to find out what will happen? You are making those decisions based on what you think is going to happen over the next twelve months. Be honest, how often does the year go exactly as you planned? The problem is that for all the variables that you control, there are 2x, 5x or 10x as many that you don’t. Mergers, acquisitions, loss of business, earthquakes, invasions, the near collapse of the banking industry, heck, even swine flu – sorry have to be politically correct to the pigs, H1N1 – can throw off your plans. Not all variables have to negatively affect on your business though, but even the positive ones still put you off your established plan. Is it any wonder that budgets are constantly reviewed and why they get reforecast periodically? We look back at the quarter, for example, and make the most educated changes for upcoming quarters based on what just happened.
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