Foolproof Predictions

Often sound advice turns out to be totally wrong. Sometimes things turn out in such a way that only a fool would predict. Which is why fools, too, have their place in analysis and debate.

— Unknown

If you are a small business owner, investor or manager, there’s a good chance you are furiously working away on your financial budget right now (or it’s on the list of things you should be doing). If your budget is finished you are clearly awesome so feel free to skip the next two paragraphs. If it’s not finished (or even started) you may not understand the importance of a budget so here’s a quick refresher from Caron Beesley’s article How to Build and Use a Business Budget That’s Useful All Year Long published on the U.S. Small Business Administration website in 2013:

Budgets are enormously important to the operation of your business; not only do they help you manage your costs, but they also help you determine whether you profit goals are within reach and keep you on the right road from month-to-month. In its simplest form, a budget is a detailed plan of future receipts and expenditures. Think of a budget as a tool for providing control.

 

Supply chain interruptions, unexpected events and collections issues will often be out of your control and can wreak havoc with any business plan, no matter how well written or conceived. You will simply not be able to predict everything in the near and long-term future but your budget can provide a way of controlling and mitigating these risks and your exposure to them. However, regardless of your budgeting method (zero-based, bottom-up or top-down) and your forecasting techniques (annual, monthly, quarterly, real-time, multiple scenario) you will need input from human beings.

Please do not send a spreadsheet with highlighted cells to be completed by someone you barely know and returned to you for incorporation into a master budget. This is not useful for anyone and will likely result in an inflated budget based on fear. You are asking people to make estimates about productivity and efficiency as well as judgements about future events. You will need to rely on people’s ability to be objective, to have the company’s best interests in mind. You will need to rely on their ideas and their instincts, both of which are based on past experience and personal bias. So before you feed any numbers into a spreadsheet you will need to stop and listen. Listen to your colleagues, listen to your trusted sources, listen to your team members, listen to your competitors, listen to your opposition. Heck, listen to people you don’t even like.

This is a really good time to learn the skill of “active listening.” A few tips:

  • Pay attention. Give the speaker your undivided attention and acknowledge the message.
  • Show that you’re listening. Use your body language and gestures to convey your attention.
  • Provide feedback.
  • Defer judgement.
  •  Respond appropriately.

    (Read the full article
    Active Listening: Hear What People are Really Saying
    on MindTools.com)

A prediction is the culmination of several experiences and opinions based on personal bias and available information. This means that some of the forecasts you receive will not agree with your information.

That’s a good thing.

You’ve heard of the echo chamber in social media and the consequent narrowing of minds? It’s time to listen to the opinions of people who disagree with you, even people you actively avoid. This is your opportunity to dig deeper, to challenge your assumptions and to gain confidence in your predictions. If you want your budgeting tool to be useful and relevant it’s worth listening to a few fools.

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