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<\/a>Whether you in turn report to a CEO, a board or just your bank, you must reconcile such projections against the commitment of resources that will drain short term cash in expectation of revenues.\u00a0 Hiring call center employees, building raw materials or finished goods inventory, making that decision to expand space, all are made as a result of pressures from the past or expectation of growth in the future.<\/p>\nSo you bake some amount of these projections into your own budget and forecast and make decisions based upon the result.\u00a0 Some of us who\u2019ve had extensive experience in senior management have lived by a rule of the 50\u2019s.\u00a0 Fifty percent of the salesperson\u2019s forecast rolls into cutting 50% of the sales VP forecast, making 25% of the initial salesperson forecast the operating budget.\u00a0 In a smaller company, the tendency to believe the numbers originally projected is higher because there are fewer levels of management and therefore more danger of overstatement.\u00a0 And some are so good at forecasting that this entire issue seems to be of no value.\u00a0 I had that discussion recently with several CEOs.\u00a0 I left the room wondering if they truly acted upon forecasts without change.<\/p>\n
[Email readers, continue here…]\u00a0<\/span><\/em> Even if you believe future revenues to be a solid guarantee, it is prudent to discount the numbers by some percentage so that planning for expenses is more conservative.\u00a0 Everyone feels great when surprises are positive.\u00a0 We don\u2019t celebrate just making our plan, we expect it.\u00a0 Instead, we celebrate overachievement and all it represents.\u00a0 Bankers, the board, shareholders, employees all love to see success.\u00a0 Think of the public company announcements of earnings, you see them instantly compared to analyst\u2019s projections. The market punishes anything but a positive surprise most of the time, a reflection that this insight is a part of the culture of the public markets.<\/p>\n Why pressure yourself, endanger the business and lose credibility by risking missed forecasts?\u00a0 We are rarely rewarded for the accuracy of our forecasts, and always are dunned when there is a shortfall.<\/p>\n","protected":false},"excerpt":{"rendered":" Lots of people do or will depend upon your leadership in driving growth, stability, and profitability. There will always be times when salespersons or associates provide you with projections for future sales that reflect their inherent optimism. Whether you in … Continue reading