Should your Business Plan be Conservative or Aggressive?
Posted on 6th April 2017 in Business
Written by James Marren
Like Keanu (Neo), fight back against the Matrix (spreadsheets)! If you change your approach to your business forecasting, you’ll see why you can have the best of both worlds, and you don’t need to choose between the red or blue pill.
Any business owner knows deep down that business planning, and forecasting is a worthwhile investment. However, when you’re trying to wear every hat in your business, this can feel like spinning one plate too many. As a result, this vital part of navigating your business towards success is often one of the first plates to fall.
If you do manage to get round to it, time constraints often limit the number of business Forecasts you can create and the frequency with which you update them. By changing your approach and ditching the spreadsheets, you’ll see that you can plan for a range of eventualities and you’re not left with an either or situation where you’re forced to choose between making a conservative or aggressive business forecast.
How to create better Forecasts
I asked FUTRLI Co-Founder, Hannah Dawson for some tips from her experience of forecasting with FUTRLI for FUTRLI. She explained that although its impossible for you to get it right every time, it’s still crucial to consider as many scenarios as possible and plan for every eventuality. Her advice can be broken down into the following key parts…
Move away from spreadsheets, to the cloud
“The most important thing is to make sure that you are using a cloud package to do this – do not use spreadsheets! I have created some monolithic, amazing spreadsheets and they have become so big that you really struggle to update them. So what happens? You feel very proud of this impressive wall of numbers, which ends up going in the bin as you reflect on it in 12 months time and realise that your business doesn’t look like this at all.
If your Forecast is online, in the cloud, you can access it anywhere and connect it to the financial heart of your business, your accounts package. FUTRLI integrates seamlessly with QuickBooks and Xero, for example, and frees you from the unrelenting inputting of data that takes up so much of your time.”
Test different Scenarios
“Every business has got a multiple set of futures that it could pursue; there’s not one hard and fast track that you’re going to run down, because sometimes you just don’t know what is around the corner. So, to be able to re-test different scenarios, we use our aptly named Scenario section which allows you to create your base forecast and layer other assumptions on top of it.
So, for example, I create a scenario of us taking on 10 new members of staff at different times in the future, allowing for all the costs and benefits of this. You can then, with the click of a button, link those scenarios to your base Forecast and you’re able to see, clearly, the differences between them. The fact that the software easily keeps up with all the questions that formulate in your head, gives you so much scope.”
Better communication leads to better collaboration
“To avoid ‘System failure’ one of the most important parts of business planning and forecasting is the communication of your assumptions. However, it’s hard to keep your team informed and on target if you’re the only one with access to a master spreadsheet that only you understand. FUTRLI allows you to visualise your data and draw deep insight, which you can then share easily with your team.”
Amy Harris, FUTRLI’s other Co-Founder, explains:
“The reason I love it is because last time Hannah and I ran a company together I felt that she always had the upper hand because she knew the forecast inside out and then she’d share her masterpiece and I’d think… aahh this is just a wall of numbers. I’d waste time trying to trace formulas and work out her assumptions. And it was one fairly static view of our business that had little relation to the day to day. For me, FUTRLI allows me to run our business with financial information that makes sense.”
Work smarter, not harder
We are all aware of this old phrase, but it’s the key to putting yourself in a position where you don’t have to choose between creating an aggressive or conservative forecast.
By moving away from spreadsheets and having cloud financial services deal with the hard yards, time is no longer an issue. You can, therefore, create a range of business forecasts that encompass a conservative, aggressive and most likely outlook for your business’ future, as a minimum.
Don’t put yourself in the position where you can only present part of the story to your board or investor. You don’t want to set expectations too high and under deliver and nor do you want to show a lack of ambition or confidence. Providing a full picture of your potential scenarios shows that you are in control and ready for any eventuality. You will also be in a much stronger position if you can confidently visualise and communicate how they will be kept informed of the figures moving forward.