From Philip Campbell’s book A Quick Start Guide to Financial Forecasting: Discover the Secret to Driving Growth, Profitability, and Cash Flow Higher.
Think Decision Making, Not Precision
Picture this in your mind. You are in Honolulu, Hawaii (one of my favorite places to spend time–you should put it on your travel list if you have not been there, or if you have not been there recently). Here’s the weather you are enjoying on a beautiful Sunday afternoon as you admire the awesome view of Diamond Head on Waikiki Beach (this was in December).
But you are leaving for Flagstaff, Arizona on Monday. (Why you would want to leave Hawaii in December is a whole different issue–the Humpback whales are just arriving–and whale watching in Hawaii, especially when you do some island hopping to Maui, is super-fun).
You need to make some decisions about what to pack. So, you pull up the weather forecast for Flagstaff and it says:
(Not everyone realizes Flagstaff is 7,000 feet above sea level even though it is in Arizona. Average annual snowfall there is about 100 inches.)
Is a weather forecast always going to be exactly right? Nope. Is it likely to be cold and wet where you are going? Yep.
Is there any question what kind of clothes you should pack for your trip? Nope.
The question isn’t whether the forecasted temperature is exactly right or if the exact day of the snow is right. The question is “What kind of clothes should I pack?” The forecast shows that it will likely snow and be very cold and wet on the front end of your trip. The forecast gives you enough information to make a smart decision about what to pack for your trip.
That’s where the forecast brings value. It helps you make better decisions. The value of the forecast is in painting a picture of what you are likely to experience when you arrive in Flagstaff so you can make wise decisions before you leave Hawaii.
The Panoramic View
Let’s say you decide to visit the Grand Canyon during your visit to Flagstaff.
You are looking out over the South Rim and you want to take a picture to capture the beauty you are surrounded by and share it with your friends and family. But it’s hard to capture the complete beauty in front of you in a single photograph. The beautiful view spans from your far left to your far right. So, you use the special panoramic feature of your smartphone (or camera) to capture more of the beautiful view.
Merriam-Webster defines panorama as “a picture exhibited a part at a time by being unrolled before the spectator; an unobstructed or complete view of an area in every direction; a comprehensive presentation of a subject.”
In photography, capturing the panoramic view is a way to “stitch together” multiple images to create a single, wide photograph. In essence, you are able to capture a more complete view of the beauty in front of you.
Traditional financial statements are that single, non-panoramic, picture of financial performance in the past.
The “panoramic view” of financial performance includes a reliable financial forecast so you have the more complete view of what’s about to happen financially.
A reliable financial forecast helps you “stitch together” the wider, more panoramic view of your financial performance. Why settle for that single snapshot of the past when you have a tool available to you to capture a complete view of your financial past, present, and future?
We are all forecasters. When we think about changing jobs, getting married, buying a home, making an investment, launching a product, or retiring, we decide based on how we expect the future will unfold. These expectations are forecasts.”
—Philip E. Tetlock and Dan Gardner, SuperForecasting
A Fun Little Experiment
Take a minute to try this fun little experiment. Stand up, cover your eyes with both hands, and then try to walk slowly to the opposite side of the room without bumping into something. Even in a room you are familiar with, it is very uncomfortable to walk across the room with both hands covering your eyes without running into something.
Now try it again…but this time separate your fingers just a tiny bit so you can see a little bit of light between your fingers.
That little bit of visibility between your fingers is enough to help you walk safely across the room without bumping into something. That’s what a reliable financial forecast is all about. It’s not about providing complete visibility or certainty. It’s about providing a little glimpse of what lies ahead so you increase the likelihood of reaching your destination safely.
It’s like driving your car at night. You can only see as far as your headlights…but that’s all you need. You can make your whole trip that way. It doesn’t matter if your drive is five miles or five hundred miles.
Shining a light on the road immediately ahead of you is all you need in order to get where you are going safely.
A Quick Start Guide to Financial Forecasting:
A Quick Start Guide to Financial Forecasting
Discover the Secret to Driving Growth, Profitability, and Cash Flow Higher
This book provides a straightforward, easy-to-understand guide to one of the most powerful financial tools in business: a reliable financial forecast. It will transform the financial future of your company and help you make better, faster, smarter financial decisions.
Too many entrepreneurs and CEOs today are feeling more like passengers than drivers in their business. They’re staring at their rearview mirror as they bounce along in the passenger seat. Their company is careening along on the highway of business as they wonder and worry about where their business might end up financially.
A reliable financial forecast solves this problem by providing a clear view through the financial windshield of your business. It creates the visibility and clarity you need to drive your company toward a bigger and brighter financial future.
What if you had answers to questions like:
What’s about to happen to my profitability and cash flow?
How much cash can we distribute to the owners of the business?
How long will it take to pay off our debt?
What will our taxable income be this year?
A reliable financial forecast puts the answers to these questions at your fingertips. It helps you take control of your profitability and cash flow because it gives you answers to the most important financial questions you have to deal with every day.
Put yourself in the driver’s seat of your business by tapping into the unique and exciting benefits that financial forecasting can unlock for you.
Buy the Kindle version at Amazon.
Buy the book at Barnes & Noble.
Buy the book at Bookmasters (including a PDF version you can download immediately).
Never Run Out of Cash
The 10 Cash Flow Rules You Can’t Afford to Ignore
The single biggest reason the small business failure rate is so high today is this one simple fact: Most business owners don’t really know what’s going on with their most precious asset – their cash.
Despite the fact that cash is the lifeblood of the business, the fuel that keeps the engine running, most business owners don’t truly understand thier cash flow. As a result, more businesses are failing today than ever before.
Never Run Out of Cash shows you a powerful and simple set of principles that will transform the way you manage your business from this point forward.
It’s an easy-to-understand, here’s exactly how you do it approach to understanding and managing your cash flow.
Buy the Kindle version at Amazon.
Buy the book at Barnes & Noble.
Understanding Your Cash Flow – In Less Than 10 Minutes
This online course teaches you a simple, step-by-step approach to understanding and managing your cash flow. Here are the two unique promises I make to you in this course:
- I’ll show you how to understand your cash flow in less than 10 minutes
- I’ll show you how to explain what happened to your cash last month to your business partner or banker (or maybe even your spouse) in a 2-minute conversation.
I take off my CPA hat and I speak in the language every business owner can relate to. No jargon. No stuffy financial rambling. Just a simple, common sense approach that only takes 10 minutes a month.
The course includes:
- The video presentation of the course. This is a screencast that you can watch and listen to on your favorite device. I walk you through the step-by-step process and show you how to understand your cash flow in less than 10 minutes a month.
- The course workbook. This is a downloadable workbook to help you get a fast start with the course material. It has all the examples and everything you need to complete your first Cash Flow Focus Report.
- The Cash Flow Focus Report. You get the links to download the PDF or spreadsheet version of the Cash Flow Focus Report. 10 minutes a month with this unique and simple tool and you will wonder how you ever got by without it.
- The slides from the presentation. You can download a document with a copy of each slide from the presentation so you can go back to any specific example or portion of the recorded presentation.
I provide a no questions asked, 100% refund guarantee with the course. If you don’t love the course I’ll refund 100% of the purchase price.
Learn more about the course.
If you have already purchased the course (and/or the related coaching), get the full course here.