Precise, Accurate Estimates are more than Guesses 6

When you are in the midst of creating your business’ planning forecasts, do you use Guess, Estimate, Accurate and Precise interchangably? I don’t. I believe there are very distinct differences in these words — they are not synonymous. Here’s how I see them.

Guess: Pulled out of thin air. “Oh yeah, sure, no problem, easy-peazy! I can get all my darts into the target! Um — uh — er — which target was that?”

Estimate: Prediction of the future, based upon past results, or research.  “In my previous rounds I’ve hit the target. I’m improving. I think I have a 65% chance.”

Accurate: The real data, the actual results — in a broad sense.  “I did hit the target.”

Precise: Specific detail, categorization, analysis.  “I hit the bulls-eye once, the triple 20 once, and one dart hit the target, but outside the scoring rings. I need consistency.”

When you are initially writing and then regularly reviewing your business’ operating plan think seriously about these concepts.

Guess: Leave these blue-sky, gross generalizations out. Venture Capitalists and investors can tell when you pulled these out of ……. thin air. If you run your business on guesses, guess what, you’re out of business.

Estimate: Do your research. Forecasting is more than guessing. It is grounded in past experience, sound market research and analysis. Cite your sources.

Accurate: Keep your records and use all your results. You can use the big picture, but it may not serve you well if your view is too broad. “The fewer the data points, the smoother the curve.” But really, you want to see all the peaks and valleys so you can adjust your business activities and future planning to account for real-world variables.

Precise: Be honest here. Look closely. Continue to do your periodic scheduled reviews. Do your analysis thoroughly and completely, even if the conclusions may not be exactly what you wanted to find. If you throw out half of your data in order to reach correspondence with your estimates, you are neither accurate, precise, nor honest with yourself nor with everyone else participating in your business.

About the Author Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry. Follow Tim on Google+ Read more »

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  • Jacques Benoit

    The Guess stage in in fact an important step, this allow you to test your business model. After that your are confortable with the anticipated result, you can start to invest time and money in a more deeply investigation.

    The Guess stage is also critical to understand which parameters you should spent time on it.

    Thank you

  • s smith

    what is the Profit/expense ration in order to be successful?

  • http://beeskneescds.com Aaron

    profit >expenses?

    :)

    profit actually = revenue – expenses & reinvestment

  • ali nekumanesh

    Doing your research accurately will greatly improve your chances of success. Be honest about your finding, analyze and evaluate. Work critically to produce a true picture of what your business is going to look like, what challenges it faces, what the numbers might look like, and most of all can you see the light at the end of the tunnel, and what its going to take for you to see that.

  • http://b2bhelps.com/ Lara

    I am so much impressed by the way you describes business planning here. In one line you give precise, accurate, short and simple information. Many thanks to you.

  • http://sharronclemons.co.cc/ Sharron Clemons

    The Guess stage in in fact an important step, this allow you to test your business model. After that your are confortable with the anticipated result, you can start to invest time and money in a more deeply investigation. The Guess stage is also critical to understand which parameters you should spent time on it. Thank you