Art of Achieving the Forecast

Trend lines, competition, scale… I’ve been forecasting business results in a global financial services setting for over 20 years, in domestic retail banking, international private & commercial banking, and trading technology. I’m a numbers geek and a storyteller. I evaluate everything through a math lens and I’m passionate about my work! If your business typically adds 200 of something monthly, your forecast had better not add 400, without some increase on the expense side of the equation. No matter how great your account management team is, cancellations are a fact of business and you should always know the % of cancellations to the outstanding book of business… and model it in your forecast. No matter how great your sales team is, and I’m sure they’re terrific, you must trim something off their forecast. Understand your firm’s relative value in the market and client pricing sensitivities. Pay close attention to trends in key expense drivers and what is going on with major clients. Make sure they’re happy and feel important to your business. Once you’ve reached a thoughtful and intelligent forecast, reduce revenue a little and increase expense a bit.   The last thing you want is the actual net p&l to be unfavorable to forecast. And of course make sure you meet the targeted growth the management team and Board is expecting. That’s all, the analyst’s job is simple!

To build a meaningful forecast, you have to first create timely recurring analytics for both revenue and expense. Do everything you can to find Type A “out of the box” thinkers, passionate about their work, who never give up. Great analytics will also increase operational efficiency and therefore add to the bottom line. Never nickel and dime. Be bold and strategic. Encourage feedback and face reality.

Of course I’m focusing on p&l forecasts, but there are certainly other timely forecast subjects. FOMC Monetary policy comes to mind.

http://www.federalreserve.gov/monetarypolicy/default.htm

The Federal Open Market Committee issues its Monetary Policy Report twice a year, in February and July. They also issue a quarterly report on federal balance sheet developments, and the Beige Book 8 times annually, an economic report on each Fed district. With the federal funds rate at a historic low of between 0.25% and 0% for an extended period of time, and with the economy now improving, all eyes are on Janet Yellen and her team as to the first increase. Goldman CEO Lloyd Blankfein’s September sentiment proved to be accurate since there was no action taken at the October 27-28 policy meeting.

http://finance.yahoo.com/news/goldmans-blankfein-fed-hike-wouldnt-142818462.html

The next meeting is scheduled for December 15-16. What is your prediction? I’m not certain if the first increase will happen then or at the first meeting in 2016, but I believe it will happen at one of them.

Of course another topic of great debate and interest is the 2016 election. Similar to the business intelligence analysts develop, and the economic data FOMC staff produce, political campaigns rely on pollsters to understand trends and sensitivities. The first thing I learned on this subject, from a friend and experienced professional in the Public Opinion space, is you have to look at trend lines, and NOT single polls.

http://elections.huffingtonpost.com/pollster

Of course you need to confirm the reasonability of your data. An article by veteran polling editor Mark Blumenthal suggests current low online response rates may make results unreliable. Great, then what’s the purpose?

http://www.huffingtonpost.com/entry/pollsters-debate-online-modern-surveys-trusted_560540a8e4b0af3706dbd353?utm_hp_ref=%2540pollster

You also have to take into consideration the success rate of various polls, because there is certainly a wide disparity in outcome. Here’s a great article on the 2012 presidential race.

http://fivethirtyeight.blogs.nytimes.com/2012/11/10/which-polls-fared-best-and-worst-in-the-2012-presidential-race/?_r=0

Another interesting article I found, was on the polling behavior specific to current GOP front runner Donald Trump. http://www.huffingtonpost.com/entry/republicans-donald-trump-support_55fc060de4b00310edf699a9?utm_hp_ref=%2540pollster

As to who is going to secure the GOP nomination, my money is on Marco Rubio. As to who will win the General Election, I think we need to see where the following poll trend lines take us in 2016.

http://elections.huffingtonpost.com/pollster/republican-party-favorable-rating

http://elections.huffingtonpost.com/pollster/democratic-party-favorable-rating

http://time.com/3960958/clinton-hispanic-univision-poll/

http://www.ibtimes.com/marco-rubios-sanctuary-city-law-2016-election-can-republicans-win-without-latino-2149142

To round out the forecasting discussion, let’s consider what it takes to create international success and Rock & Roll Hall of Fame status. Extraordinary talent, tireless work ethic, image & appeal, and perhaps humility. Certainly there was never any doubt that two of the hardest working and most talented musicians on the world Rock & Roll stage today, wouldn’t achieve this. I give you one of the greatest electric guitar players of all time, Slash! And the amazing Myles Kennedy with a 4 octave vocal range, performing their smash hit Anastasia from their 2012 album Apocalyptic Love, at the 2014 MTV EMA World Stage ! Enjoy!

https://www.youtube.com/watch?v=yAm6RIeXm_o

Photo Credits: Rock & Roll Hall of Fame Bass Guitar Player Duff McKagan Guns & Roses, Jeff Rouse Singer & Guitar Player The Guessing Game, Bass Player Loaded.