Only 5% of You Can Actually Forecast Your Financials

We're looking at the results from how 75 people scored in the Financial Forecasting section of our Ecommerce Business Performance Assessment, and they're rough.

37% scored low

57% were in the middle

Only 5% scored high

That means 95% of you don't really know what your cash situation is going to look like next month, let alone next quarter or next year.

You're guessing or worse, you're not even guessing, you're just hoping it works out.

What do these scores actually mean in your day-to-day business?

Low scores

You're not forecasting at all.

You've got a big bill coming, but you haven't mapped out whether you'll actually have the cash to pay it.

You're definitely not planning for inventory besides knowing when you probably should make an order.

When Q4 hits, you're scrambling to figure out if you can afford the stock you need and how much stock you need.

You're reacting, not planning.

Medium scores

You're thinking ahead a little.

You know when big expenses are due, and you might even have an idea of what you'll need to pay them.

But you're not actually running numbers and modeling out different scenarios.

You're not asking "what if Q4 is softer than last year?" or "what if our ad costs spike?"

You've got a general plan, but it's fuzzy.

High scores

You're actually forecasting.

You know what your cash position will look like 13 weeks out.

You've modeled different scenarios.

The best case, the worst case, the most likely case.

You know when you'll need to pull back on inventory or when you can afford to hire a new employee.

You're not surprised by cash crunches because you saw them coming months ago.

Here's why this matters so much in ecommerce.

Your cash gets tied up in inventory. Your sales swing with seasons. Your ad costs can spike overnight.

If you're not forecasting, you're just one bad month away from not being able to pay your bills, or missing out on growth opportunities because you don't know if you can afford them.

I've seen it play out over and over.

Business owners who don't forecast are prone reactive decisions, most often bad ones.

They can't buy enough inventory for the busy season because they didn't plan for it ahead of time.

They don't hire someone who could grow the business because they don't know if they can afford the payroll bump.

They get stressed about every expense because they don't actually know what their financial picture looks like.

The 57% of you in the middle are right on the edge.

You've got the awareness.

You just need to actually sit down and figure up the numbers.

Build a 13-week cash flow forecast.

Model out your inventory needs.

Look at what happens if sales are down 20%.

That's the difference between scoring medium and high, and it's the difference between hoping you'll be okay and knowing you'll be okay.

Find out where your business compares.

Take the Ecommerce Business Performance Assessment

Cyndi