No one can deny that 2020 has been a year of change, and as entrepreneurs, agility is what we thrive on. With every new obstacle has come new opportunities—and this year has been filled to the brim with growth and innovation in the property management industry.
Even though business-as-usual has met new challenges, at ProfitCoach, we’ve seen property managers become much more invested in monitoring their cash flow, tracking year-over-year variances, getting clear on cash positions, and overall stepping up their game in owning the financial outcome of their business. While times are still uncertain, this shift could prove to be the game changer that’s needed for anyone driven to total ownership of a thriving property management business in 2021.
But the question remains, how do we make a strong forecast for our business in the year to come?
It will take intentionality and courage, but with the right mindset and forethought, let’s think through how we can take what we’ve learned from this paradigm-shifting year as we estimate what 2021 will bring.
Why Worry About Forecasting?
So much of our success in business comes back to our planning mindset: how we evaluate the future, but also how we evaluate the past. It can be easy for us as entrepreneurs to view past data with overly idealistic retrospect that can cause us to ignore data points that may prove helpful in fine tuning our direction for the future.
There are things out of our control (COVID-19, anyone?) that we have no way of knowing how to forecast; however, we can often discount the hard numbers of past performance due to unexpected disruptions to our plans. We have to own the fact that the results of the past are often the greatest indicator of our real commitments. Did you plan to grow your doors by 20% this year? Did you miss that because of COVID—or because you didn’t have a realistic plan in the first place?
If you look back on a year of missed goals it can be easy to explain them away by the circumstances we couldn’t predict, but the one thing we can control is our commitment level to future performance. Asking ourselves whether we were committed to a plan or just an ideal outcome can be a hard question to answer frankly, but it’s essential for clarity to forecast the future. With an understanding of why our past performance has been what it has been, for better or worse, we can move forward with meaningful data from the past to keep us on track.
The 5 Characteristics of a Solid Forecast
An effective, productive forecast has 4 essential characteristics.
#1: It’s Accurate
Go through an exercise that allows you to forecast for next year based on what really happened this year (remember, use reality, not what you hoped for, as your starting place). Remember to account for seasonality, as there will always be patterns of fluctuation that are important to keep in mind as we compare year over year.
#2: It’s Simple
Your tools don’t have to be elaborate, but you need an up-to-date spreadsheet with essential data that makes sense. If it’s not simple, you probably won’t be taking the time to regularly update actual numbers, and if you’re not updating numbers, it’s just obsolete ideals and no longer an active vision that is helping guide your business toward growth. Simplicity goes a long way toward success.
#3: It’s Agile
You need to be able to adapt and make reforecasting changes on the fly so that it continues to be useful and current. You set your forecast without knowing all the contingencies of reality, so make sure you’ve left room to adjust and bend while continuing on your set trajectory.
#4: It’s Realistic
While we encourage you to set your goals high, your forecast really needs to be realistic and based off an accurate picture of past performance. If you’re going to deviate from past performance, you should have a detailed, realistic plan that articulates your justification for making any changes and gives a realistic expectation of what that new forecasted result will be.
#5: It Includes a Downside Forecast (Plan B)
The last facet to keep in mind while setting your trajectory is your “downside forecast.” As we all have seen repeatedly this year, things really don’t always go as planned. You may need to figure out where you can cut back to be able to stay true to your profitability targets. This reassessment needs to start from a place of accuracy to be effective.
Once you know your real numbers and have set up your goals—and made real commitments—there will still be obstacles you face. Having every dimension of your business accounted for in your forecast will be a major asset when you need to make a quick pivot from Plan A to Plan B. Remember, we set our forecasts to not just be accurate, but agile.
The exercise of forecasting helps entrepreneurs clarify their “why.” Bigger is not always better, and bigger is not for everyone. Forecasting allows you to step back and ask, “Why am I in this to begin with? Am I getting out of this what really matters to me?” Freedom of time, money, relationship, and purpose are critical areas to constantly evaluate if you are actually achieving our goals as entrepreneurs. Use your forecasting exercise to assess these very real areas of your “why” in light of the insight past performance and future planning can offer you.
If you want to be successful in property management, you need to move from gut-based decision making to data-based decision making. Forecasting can give you real world answers to help mature your business from fly-by-the-seat-of-your-pants management to actually making informed decisions with financial outcomes for which you can take full ownership.
This year has driven us to be forward thinkers and agile planners; let’s use what we’ve learned through this curve ball of a year and start planning a strong game for whatever next year brings.
For more from Daniel Craig, check out the video interview, Forecasting 2021, Planning 2021.
Read more on Scaling