“But I have a new product, how can I forecast for that. There’s no history.”
Join the club. Lots of people start new businesses, or new groups or divisions or products or territories within existing businesses, and can’t turn to existing data to use for forecasting the future.
You’re still going to forecast, and don’t worry so much about it, because although you’ll do it for the next 12 months, you’re only going to be grossly inaccurate for the first month. By the second month, you’ll have data to use to revise your forecast.
Think of journalists covering a free election. They don’t want to wait for the formal official results to be published, so they ask people coming out of polling places how they voted. Maybe those people tell the truth, and maybe not, but there’s information to be gathered. They call this exit polls. And if the exit polls surprise people — they thought Jones was going to win by a landslide but the exit polls indicate Smith is winning — then the reporters investigate further. Are these early results coming from just one kind of voter (rich, poor, rural, urban, early voter, whatever) and does that one kind of voter favor Smith more than the rest of the voters? Time to apply common sense.
You do the same thing with your forecast that journalists do with elections. You can get what data is available and apply common sense to it, human judgment, and then make your educated guesses. As more information becomes available — like the first month’s sales, for example, then you add that into the mix, and revise or not, depending on how well it matches your expectations.
It’s not a one-time forecast that you have to live with as the months go by. It’s all part of the plan-as-you-go process.
Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry.
