three keys to better forecasts
TRANSCRIPT
THREE KEYS TO BETTER FORECASTS
Presenters:
David Levy, CMO, TrefisLarry Gorkin, Managing Director
Corporate Solutions, Trefis
OUR MISSION IS TO TRANSFORM DATA AND ANALYSIS INTO EXPERIENCES THAT
INSPIRE VISION AND ACTION
David Levy, CMO
He began his career as an editor at Reader’s Digest before jumping into the world of digital marketing and direct response. More than twenty-five years later he brings to Trefis a unique mix of editorial experience, agency acumen and B2B marketing savvy. Before joining Trefis in 2015, David spent five years as a marketing consultant to enterprise software companies.
Larry Gorkin, Managing Director, Corporate SolutionsThroughout his career, Larry has learned what it means to help companies grow and he helps our corporate customers use Trefis to do just that. His line executive experience includes stints at Procter & Gamble, MCI and GE Capital. As a consultant–at McKinsey & Company and Stonebridge Consulting Group–Larry has guided clients such as IBM, MasterCard Worldwide, and Baxter Health Care.
TODAY’S WEBINAR IS ABOUT HELPING HELPING LEADERS DEVELOP BETTER, MORE
ACCURATE BUSINESS PLANS AND FORECASTS
1 2What
you can do about it
3How Trefis
can help
Why companies miss their forecasts
WE’LL COVER THREE THINGS TODAY
DID YOU KNOW THAT EACH YEAR, AN AVERAGE 25% OF PUBLIC
COMPANIES MISS WALL STREET EARNINGS EXPECTATIONS FOR
QUARTERLY RESULTS, OR REDUCE PREVIOUSLY GIVEN GUIDANCE
THE BIG SHORT
25%MISS THE
MARK
HOUSEHOLD NAMES
Internal decisions • Capital spending • Compensation • Hiring • Inventory • Production
External decisions • Analyst projections • EPS multiples • Stock price • Investments
FORECASTS HAVE CONSEQUENCES
SIMPLY PUT:MISSED FORECASTS
DESTROY VALUE
SO, WHY DO COMPANIES MISS THEIR FORECASTS?
1No Agreed Fact Base
Data and analyses overload
Key unanswered questions
Few objective and statistically valid facts
MISSING FOUNDATION
Data and analyses overloadCompanies have TONS of facts and data, probably too much
Key unanswered questionsWhich facts actually impact results? Every business is different. Is your business sensitive to interest rate movements? CPI? Do you know the answers?
Few objective and statistically valid factsEveryone has an opinion. Few companies have objectively measured statistics-based answers for which facts actually count, and by how much.
WITHOUT THESE FOUNDATIONAL FACTS, YOU’RE JUST GUESSING. AND UNLESS THE LEADERSHIP TEAM AGREES ABOUT THE FACTS, IT’S JUST AS BAD AS NOT HAVING THE FACTS AT ALL.
CONSTRAINED CAPABILITIES
2Inadequate
tools
Dense analytic detail
Static presentation limits scenario comparison
Unanticipated questions slows process and drives bad
choices
Dense analytic detailKey facts and business drivers are squirrelled away in rows and columns of individual spreadsheets
Static presentation limits scenario comparisonExecutives want to evaluate alternatives but analysts present them with only a few static options
Unanticipated questions slows process and drives bad choices Teams can never anticipate the full range of scenarios and questions that executives want to consider.
WHEN UNANTICIPATED QUESTIONS ARE RAISED, THE CHOICE IS BETWEEN ADJOURNING TO A LATER DATE OR MAKING DECISIONS WITHOUT FULL DATA. IN A WORLD WHERE TIME IS MONEY, AND FACTS ARE ESSENTIAL, NEITHER IS A GOOD OPTION.
3Incomplete
process
Leading indicators not tracked
Business results focus limits options
Continuous real time feedback and response loop missing
PLANNING LIMITATIONS
Leading indicators not tracked Companies track results but not leading performance indicators that can impact the forecast.
Business results focus limits options Once business results come in, it’s frequently too late to respond.
No continuous feedback loopExecutives need the earliest possible headlights when plans aren’t going to be met; more often than not they don’t have a disciplined or consistent process for doing this.
DRIVING WITHOUT HEADLIGHTSLEADERS NEED INFORMATION AS SOON AS POSSIBLE. OPPORTUNITIES TO CHANGE DIRECTION DIMINISH THROUGHOUT THE YEAR.
WHY COMPANIES MISS FORECASTS
1 2Inadequate
tools
Dense analytic detail
Static presentation limits scenario comparison
Unanticipated questions slows process and drives bad choices
3Incomplete
process
Leading indicators not tracked
Business results focus limits options
Continuous real time feedback and response loop missing
No Agreed Fact Base
Data and analyses overload
Key unanswered questions
Few objective and statistically valid facts
WHAT CAN WE DO ABOUT IT?
1Create
the fact baseIdentify business driver
hypotheses
Use regression analysis to determine actual drivers
Integrate findings into pro-forma financials
BUILD THE FOUNDATION
Identify business driver hypotheses Conduct interviews or work sessions with internal stakeholders to identify hypotheses of what the leading business drivers might be.
Use regression analysis to determine actual drivers Validate with regression analysis which hypothetical factors actually correlate with business results and what weight each has.
Integrate findings into pro-forma financialsOnce the KPIs pass the sniff test, plug them into your forecast
GET IN THE LEADIDENTIFY FACTORS THAT DIRECTLY INFLUENCE FUTURE RESULTS INCLUDING EXTERNAL DATA SUCH AS UNEMPLOYMENT RATES, INTEREST RATES, OR THE PRICE OF OIL. IT ALL DEPENDS ON YOUR BUSINESS.
EXPLORE THE FUTURE
2Develop
ScenariosTest assumptions and the range
of future possibilities
Assess risk and reward and alternative options
Align key stakeholders on the best path forward
Test assumptions and the range of future possibilitiesExamine more than a handful of “what-if” alternatives and test which ones are more likely
Assess risk and reward and alternative optionsWhat risks are apparent, and which do you want to defend? What are potential opportunities, and which do you want to protect?
Align key stakeholders on the best path forwardShare both your conclusions AND your assumptions to align stakeholders on a plan
SLAY HIPPOS WITH DATAOFTEN THE MOST VOCAL AND “HIGHEST PAID OPINION” IN THE PROCESS WINS. GET THE FACTS AND USE STATISTICAL METHODS TO GET PAST MERE OPINION.
3CREATE A CONTINUOUS LOOP
Continuously track and update KPIsMonitor and update KPIs either through automated data feeds or a disciplined work flow
Integrate with business data to determine implications Understand the business implications and share those conclusions with the appropriate leaders
Refine the underlying model as necessaryMeet on a monthly--or at least quarterly--basis to discuss the latest updates and next steps
Install “headlights”
Continuously track and update key performance indicators
Integrate with business data to determine forecast/plan
implications
Refine the underlying forecast model as necessary
DRIVING WITHOUT HEADLIGHTSLEADERS NEED INFORMATION AS SOON AS POSSIBLE. OPPORTUNITIES TO CHANGE DIRECTION DIMINISH THROUGHOUT THE YEAR.
THREE KEYS TO BETTER FORECASTS
3Install
“headlights”Continuously track and update
key performance indicators
Integrate with business data to determine forecast/plan
implications
Refine the underlying forecast model as necessary
2Develop
ScenariosTest assumptions and the range
of future possibilities
Assess risk and reward and alternative options
Align key stakeholders on the best path forward
1Create
the fact baseIdentify business driver
hypotheses
Use regression analysis to determine actual drivers
Integrate findings into pro-forma financials
TREFIS PULLS THE WHOLE PROCESS TOGETHER
Transform models
We take companies’ full forecasting models—those with the correlated business drivers integrated—and transform them into Trefis Interactive Experience.
“What-if” scenarios
Transform models
Teams easily and quickly focus on key drivers and evaluate “what-if” scenarios in real time. Stakeholders test assumptions, assess risk/reward, and align on the best possible plan
“What-if” scenarios
Continuous monitoring and
tracking
Transform models
Trefis automates the process for monitoring and tracking. Each month, the model is updated with the latest business results and KPIs. Leaders can link in directly and see the most current results versus plan.
“What-if” scenarios
Continuous monitoring and
tracking
Transform models
Determine implications and
take action
Finally, executives quickly create scenarios and assess the risks and opportunities in their plan. And TAKE ACTION at the earliest possible moment.
TREFIS TRANSFORMSCLICK THE GRAPHIC TO SEE THE “ABC”
FORECAST
RELATED TREFIS CAPABILITIES
• We will:• Work with you to identify hypotheses for external and
internal business drivers• Conduct regression analysis • Integrate the business drivers into the company’s
pro-forma financials and create a model that can be used to create and evaluate alternative scenarios
As a special offer, Trefis will transform your spreadsheet model into the Trefis Interactive
Experience at no charge.
Click our logo to send your model
TRANSFORM YOUR MODEL
CONTACT INFORMATION
David Levy, Chief Marketing [email protected]
Larry Gorkin, Managing Director Corporate [email protected]
www.trefis.com/info/solutions
THANK YOU