Think of the weather forecast. You don’t have to study the process to know what’s going on. In the background, there’s a community of meteorologists and public sector agencies gathering lots of data, constantly, on winds and clouds and pressure. The forecast takes that data into account and guesses the future, usually adding human judgment to the mix. For example, in the past, when things looked like this, it usually rained. So they call that a 70 precent chance of rain.

Do you think every weather forecast requires some defined amount of data processing? Or, to ask that question another way, do you ever look at the horizon and see clouds looming or rain in the hills and predict, accurately, that it’s going to rain where you are? Of course you do.

Here’s an interesting statistic: in Palo Alto, CA, if you predicted today’s weather by saying, “It will be the same as yesterday” you’d be right more than 75 percent of the days in a normal year.

Sometimes almost everybody knows the weather by looking at the sky. Sometimes only the data-rich people know the weather because what’s coming shows up in the data — radar, pressures, wind speeds, storms off shore, etc. — but not in the sky.

Now take this idea to business forecasting. I think you have to get used to the idea that business forecasting, like weather forecasting, is a combination of data gathering and guessing. You want to have as much data as possible before you make an educated guess, because those guesses should be educated.

• You use past results of your own company first — if you have a company and you have past results — and think through how and why future results might be different.
• Whether you have past results, you use available industry averages as well. Find out about sales per employee or sales per square foot for your industry. Or use the reverse telephone tree (see sidebar) to get help from people with more industry experience. Look at financial reports published by the publicly traded companies in your industry, because they are required by law to report details.

And remember as you forecast, that it’s just the first step. You’re not going to live with your forecast for that long, because (at least with the plan-as-you-go business plan) you’ll be reviewing and revising as soon as you get results.

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