Day 5 of 31 Days to Freedom in Your Business

Today let’s talk about forecasting your variable costs.

Do it annually.

Do it quarterly.

Do it monthly.

At first, even do it weekly.

If you followed yesterday’s step to forecast your sales/revenue for the coming week, this should really be pretty easy. 

Step 1: Identify what your variable costs are.  Hourly employee costs, supplies that directly impact your ability to provide service, anything that increases in your busiest times and decreases in your slowest times.

Step 2: See what those costs should be over the next week based on your sales/revenue forecast from yesterday. If these aren’t very different for your 3 scenarios, something is wrong.

Step 3: In a week, when you’re evaluating how you did with your sales/revenue forecast, see how you did with forecasting your variable costs. Figure out what you got wrong and why.

Rinse, repeat for the next week.  As you get more accurate with this, try for a month, then a quarter, then annually.

It is important to note that you won’t get this right.  If we’ve learned nothing else over the last few months it’s that forecasts are only a tool with which to plan for impacting the outcomes of the future.

Do you want to impact the outcomes of the future in your business?

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