Forecasting the future

Forecasting is an inexact science.

Data is gathered, evaluated and crosschecked to determine validity and then decisions are made based upon those results.

So, what is the final outcome?

If the forecast indicated warmer temperatures and partly cloudy skies, we could, in reality, be dealing with two inches of precipitation and heavy clouds.

If the forecast predicted our stock pick would deliver double-digit growth over the next six months and the value actually plummeted to half of the purchase price, we would not be a happy investor.

Results and forecast outcomes are often two very different things.

When we look at a business plan (or strategic plan), the document anticipates future results based upon a number of assumptions ... and then we recall the old adage about the word "assume" and that cold reality brings us to our senses -- or should.

If we expect the weather forecast to be wrong and we also recognize stock performance to be risky, why then do we feel so confident about our proposed business performance in our business or strategic plan?

I have had entrepreneurs tell me their enterprise "will" succeed and that their forecast financial results are actually quite conservative.

Predictions and errors

Predictions, whether dealing with business performance or lottery numbers, are just that -- they are predictions. And as such, they are subject to being wrong more often than they are correct.

While past performance is no indication of future results, we continue to rely on historical data to build our model of next generation outcomes.

Does that mean we should stop trying to anticipate the future of our business? Absolutely not.

What I would suggest to you is that you should spend the majority of your time attempting to identify the most promising future markets and then look at those niche sectors to forecast sales revenue based upon economic indicators.

So, what does that mean for your business?

Assess the future

Looking into the future, five and 10 years to come, we know that the "Baby Boomer" generation is aging and will be affecting a number of changes on the marketplace.

Increased demand will be placed upon health-care services. Can your business provide any of those expected services?

Emphasizing fitness should reduce medical-care services and also extend life expectancy. Can your business provide some of those services?

The boomer market

Aging boomers may be looking for others to provide lawn care and snow removal for their property or they may choose to relocate to condominiums or apartments where those services are provided as part of the package.

Building maintenance will also be contracted to others. That may include interior cleaning, painting, exterior work on the dwelling, window washing and other related activities.

Businesses could be launched or expanded to address these needs.

While we know that boomers are approaching retirement age, we also recognize that some of them may not be able to retire. Their investment portfolio may have been adversely affected by stock market changes, significantly reducing their expected monthly income.

Simultaneously, increases in fuel, food, clothing, travel, utility, insurance and other household expenses may mean that more boomers will be seeking part-time employment.

Some may also choose to work because they enjoy what they are doing; still others will work because their skills are in greater demand.

If boomers continue to work, how will that impact your business?

• Will some of them have additional disposable income to direct to your company?
• Will some boomers need to find more affordable housing?
• Will boomers be looking for energy-efficient technologies to reduce their utility costs?

If so, how will your business respond to that opportunity?

Predictions challenging

Predicting the future is challenging at best. What we can depend upon is that the population will continue to age and that aging process will cause a shift in the need for new products and services.

Your ability to respond to those needs, and to anticipate them, may well make the difference between growing your company and just surviving.

While we cannot necessarily forecast financial results for the future with great accuracy, we can predict which market sectors will have the largest impact on the economy.

Focus your attention on those niche opportunities, monitor technology trends, stay abreast of new innovations, and try to apply those offerings to an aging population.

If you can do that, you won't need to buy a lottery ticket; your business will provide winning results.

Bud Gayhart is director of the Center for Innovation and Business Development at UW-Whitewater.