three keys to better forecasts

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 Officerdavid.levy@trefis.com

Larry Gorkin, Managing Director Corporate Solutionslarry.gorkin@trefis.com

www.trefis.com/info/solutions

THANK YOU