What does Colin McRae have to do with forecasting?
Colin McRae was a rally driving legend who sadly died when he was 39. He won the World Championship in 1995 when he was 27 and I was 20. My brother and I were sports junkies at the time, binging on World Rally Championship coverage on the telly.
I remember Colin being interviewed where he was describing going through a forest, whilst driving at 80-90 miles per hour. He said that if the car ever had a wobble on the loose gravel surface his instinct was to hit the accelerator.
I remember at the time thinking “isn’t that the last thing you should be hitting?!”
The reason, he went on to say, is that the accelerator is connected to the wheels on his four-wheel drive Subaru Impreza, the wheels drive the car and in that critical split second he needed to be driving the car. So, the safest thing to do was stay on the accelerator, drive the wheels, and stay in control. If he touched the brakes, he was not in control or driving the car and bad things could happen.
I’ve worked with many early-stage companies over the past 14 years and I use this analogy a lot.
All businesses need to be driven. And the CEOs and businesses that I work with know how to drive their business, even in disruptive times. When things go wrong, it’s quite natural to hover your foot over the break.
But you don’t necessarily need to brake – you can hit the accelerator, as long as you know what’s driving your business. In the same way that Colin McRae knew what was driving his car – the wheels – as a business owner you should know what drives yours. Those drivers should be front and centre of your forecast. They’ll help you to see how you can drive or get your business out of trouble or through the disruption.
Take one business I work with as an example. After 12 months of soul searching and getting on top of their finances, they now know what a profitable customer is and they are only doing business with that sort of customer. They also know only too well what a loss-making customer is and they’re not going to work with any more of those. Simple and effective.
So, in an instance, this business now has a very clear view of where the money and value is. This gives them a solid foundation to grow, even in times of economic uncertainty.
If your forecast doesn’t have any drivers, you need to agree what drives your business and put those assumptions front and centre of your forecast. So, not just Sales, but also what drives your sales?
If your forecast has drivers, you need to track actuals and compare them to your forecast. Allowing your forecast to remain credible. Knowing these drivers, or key performance indicators, gives you the opportunity to fast track your business and not hit the brakes.
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