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Forecasting Success

Fri, 28 Feb 2020

Stuck in first gear, or accelerating away? You can't guarantee success, but you can forecast it.  

It’s well known that most start-up ventures never get off the starting line or splutter away, stuck in first gear. Those that slip smoothly into the fast lane of growth are very much the exception.

What’s less well understood is just why some accelerate while others stall.

A recent research paper by TrueSpace and Gallup set out to answer that question. They followed a sample of 150 start-ups over several years to see which succeeded in making it to ‘middle market’ size. They then looked more closely at the 14 of those that made the grade and sought to identify which characteristics and behaviours differentiated them from the chasing pack.

Their findings were summarized in this inc.com article. It came down to a list of 5 characteristics, with my paraphrased explanations:

  • Alignment – single-mindedly pursuing a particular market opportunity rather than changing focus on a whim.
  • Discipline – putting processes and controls in place to support scalable, sustainable growth.
  • Predictability – this is what we found really interesting. Read on below!
  • Endurance – rapid growth can take a toll on employees. Enduring companies know how to manage the effort, hours and stress that involves.
  • Value Creation – understanding that market value is more nuanced than just a multiple of revenue.

More on Predictability

All the sample of CEOs were asked the following simple question on the last day of May:

What chance do you have of meeting your second-quarter sales forecast?

There was a wide range of responses across the total cohort, but...

for the 14 benchmark companies it was a simply binary: 0% or 100%. No guesswork. No gut feel. They just knew.

Why? Because they had confidence in the robustness of their forecasts.

That confidence wasn’t misplaced. Over 4 years their forecasts had proven to be out by an average of 5%. For the rest of the companies in the study, it was a whopping 35%.

Achieving top-of-class Predictability

To achieve those levels of predictability the report highlighted the need for a well-managed sales pipeline, but also:

the ability to extensively use financial data to set and communicate performance goals and support forecasting.

Orchid Systems products can help you achieve that level of predictability.

Optional Tables allows you to create and maintain custom data structures within your Sage 300 database that are tailored to your specific business needs. That could include highly granular budgets and forecasts, plus KPIs and actual sales results.

With Info-Explorer, Orchid’s affordable Business Intelligence tool, you can extract the latest data, analyse and manipulate it in multiple dimensions, create or adjust budgets and forecasts, and write the results directly back to Sage 300. With the help of Process Scheduler, you can then regularly refresh your cubes and distribute them, providing full visibility to your management team.

For more on this topic see our Budgeting & Forecasting solution page, where you can also find links to some of our featured videos.

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