Continuing from where yesterday’s note on budgets left off (link) this one is about the long-term forecast. The model isn’t used to manage cash and operations or to track line-item performance. Its purpose is to tell a story.
Like all linear tales, it has a beginning, a middle, and an end. Its characters are the value drivers of the business. They evolve as the story unfolds, they grow or sometimes surge, or, if the plot calls for paring down a certain product or deemphasizing a direction, that character trails off with a diminished presence. The one that leads is the one that dominates the current vision.
In the beginning, the baseline year, this may be a young adult already, or possibly much younger. With time’s passage (i.e., business execution), the character will grow to early maturation – but probably no further. The promise of adulthood is more valuable than old age, and this story is about character development.
There may be a whole cast of characters, some more critical to the plot than others, some who lead and some who follow, some take charge and some support, but all are interesting and real, developed to the story’s end, which is the last year of the forecast. There is sufficient detail to make them come alive, but not so as to slow the story’s progress.
This calls for reality and familiarity in the tale, although it is a fantasy, without which the story falls apart and the audience loses interest. That final year, the end, should leave them wanting more, like all good stories peak our curiosity and lead to further speculation.
The key is to know your story well before you tell it, to know the plot points and the thrills, the dangers and the conquests, as though it has already happened. For as much as the audience may be the usual constituencies to whom such forecasts would be shown – investors, lenders, partners, prospects – the audience is also you, and it’s a story that you must believe and love in order to tell properly.
This isn’t an operating tool, like a budget (link), it’s an expression of your vision.