The Power of Offensive Forecasting
Added: (Mon Mar 25 2002)
Pressbox (Press Release) -
A quarter of UK portfolio companies could be managing their revenue with as much confidence as they handle costs, according to a survey by The Revenue Partnership (December 2001) into 2,450 UK portfolio companies.
Yet boards persist in devoting more attention to spending and counting cash flow than considering how it could be increased – nine times more attention says Tim Ambler, Senior Fellow at the London Business School, in his book ‘Marketing and the Bottom Line’.
No-one would dispute that revenue forecasting is central to business planning. Yet, much of it is finger in the air stuff with too many product managers’ and financial directors’ efforts being wasted.
“Inefficient budgeting takes up to 20-30% of senior executives’ time” - Business Finance Magazine, Jan 2001
“Only 12% of companies thought that their planning process was completely reliable, while 90% labelled it as cumbersome” - CFO Magazine, 1998
Plan producers are spending too much time, effort and money producing documents which investors and company managers find difficult to believe in. The result is poor forecasting, lost business opportunities, market volatility and embarrassing stock market announcements.
It’s this lack of belief that The Revenue Partnership maintains is at the root of the current market malaise.
Its newly published white paper, ‘The Power of Offensive Forecasting’, states: “When belief is shared by producer and evaluator, the capital markets work smoothly; companies get the investment they need and investors get the return they seek.
“When belief evaporates, the markets seize up: companies are starved of cash, and investors are left unwilling to commit and unable to divest.”
Little comment is needed here on the market’s current state. Activity levels are so low that 37% of venture capitalists are expecting to return funds, unused, to their ultimate investors. Exits are seen as tougher than ever, with many private equity firms sitting on portfolios in need of urgent attention.
Growing concern over ‘aggressive’ accounting practices continues to undermine belief in what a company has actually achieved. And belief in a company’s predictions of what it will achieve – a fragile commodity at the best of times – is being undermined by the frequency with which revenue and profit forecasts are being missed.
The white paper looks at the issue of belief in what a company will achieve, reasons for scepticism, and at what a company can do to convert scepticism into trust – how to move from defensive to offensive forecasting.
To receive a copy of the white paper in pdf format, register on The Revenue Partnership’s website www.therevenuepartnership.co.uk, or telephone them on 020 7244 6001.