Forget Forecasts

Forget forecasts

They’re useless.

CrudeOilPriceForecastsChart

It is that time of year when everyone seems compelled to make forecasts. The experts insist on giving us their version and they decide either to be safe and predict more of the same or to be outrageous and predict something extreme – Canadian dollar at US$0.59 or oil back to $100!

We should ignore them all; they’re useless. I have worked on many; in plans and projections for my own businesses and for clients.

It is useful to remember before starting that they are all part of the fiction we are writing to convince ourselves or someone else what we hope will happen. It would be better to describe them as “reasonable expectations.” All we know for sure is that the forecasts will be wrong. We just do not know by how much or in which direction.

So if we cannot predict the future, what can we do?

Our primary objective should be to understand our business environment – the competitive landscape and the economic conditions. The real issues to understand are the trends, the causes and effects, the alternative scenarios we need to be prepared for and the most likely ones to occur.

Then we have something we can work with.

Happy forecasting!

Your Uncle Ralph, Del ChattersonDon't Do It the Hard Way

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