I get suspicious when someone tells me they have 47 drivers in their forecast. At that point, I don’t think you have drivers. I think you have a very complicated spreadsheet. There is a difference. Driver-based forecasting is one of those FP&A ideas that sounds almost impossible to disagree with. Instead of taking last year’s […]
I have never understood why companies spend enormous amounts of time building sophisticated forecasts and then use essentially the same forecasting method for everything in them. Revenue? Historical growth plus an adjustment. Travel? Historical growth plus an adjustment. Software? Historical growth plus an adjustment. Headcount? Last year plus the people we think we’re hiring. Coffee? […]
I have trust issues with scenario models. Not because I don’t like scenarios. I do. I’ve built plenty of them. I’ve also sat in meetings where we had so many scenarios that I started to suspect we were using Excel to avoid making a decision. You know the meeting I’m talking about. Base case. Upside […]
I have a complicated relationship with revenue growth percentages. Not because they’re useless. Because they have a tendency to arrive before the explanation. “Revenue grows 10% next year.” Okay. Why? “Well, we grew about 10% this year.” That is certainly information. It is not yet a revenue forecast. One of the easiest ways to build […]
I have a fairly simple test for a forecasting process. When the forecast changes, can anyone explain why? Not which cell changed. Not which department submitted a new number. Not that revenue is now $600,000 lower than it was three weeks ago. What changed in the business? That question sounds embarrassingly basic until you’ve sat […]
The traditional budgeting process is broken. We know it, we live with it, and every December or January, we perform the same ritual — copy last year’s numbers, slap on a 3% increase, and call it strategic planning. That’s not strategy. That’s spreadsheet theater. As someone who has spent years entrenched in M&A integration, post-acquisition […]
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