Updated: Apr 9, 2020
There are some lessons learned in life that are taught through negative experiences. I had the chance to open a new store. The store was successful on paper. It had achieved a 4000% above plan in the first six months. "WOW" you say. But wait, let's look at the details.
Business Forecasting is an estimate or prediction of future business developments. This includes sales, expenditures, and profits. There are four categories for forecasting - which I won't cover here. It will have to be a future blog topic.
I was hired to open a new store for a well-established toy company. I was hired in March; the store opened July 16th, 2005 at the Mall of America. I was hired, because I knew and understood the mall environment the store was going into. I was able to tell the forecast team what days the mall traffic would spike or go down due to year-round events. Things like back-to-school shopping, holidays, and how local events impacted business.
As we were discussing our July to December plan we hit a wall. I believed the store would be capable of $4 to $6 million in six months. My reasoning: the toys we were selling were affordable to most family incomes, people knew the brand, and we had the foot-traffic at the mall to make it happen. Also, we were scheduled to open at the beginning of back-to-school shopping. I was laughed at. The company said that will never happen. Their stores averaged $1 million in a good year. Keep in mind this location is not your average mall. I was given a sales plan of $250,000. The forecast team did not believe our location could average a $1 million in a given year.
Why is this a big deal? The forecasted sales plan is how a company determines inventory levels, staffing levels, supply levels, and so much more. Our actual sales from July 16th to December 24th were over $10 million. The store opened to sell $250,000 - which we did in under 5 weeks. We spent six months struggling to get inventory into the store. We blew our budget for supplies - things like shopping bags, receipt tape, tissue paper needed to be replenished. The company could not keep up with the demand. Now add to the stress level - understaffing. I am dedicated to where I work. From July 16th to December 24th I had no days off. I also did not go back after the 24th. I was working 6am to 1am so my staff could go home. The people who worked with the customers needed a recharge - and I could not go over in payroll. I was also the only salaried person in the store. My District Manager was new in her position and only looked at the positive side - crushing sales plan. Which meant no one above me was fighting for improved inventory levels. Understaffing also meant I was not able to get out of the store to hire more people.
Forecasting has MANY impacts on the business. It's not only about the inventory levels but also about staff morale. I chose to leave the company because of their inability to plan and respond to the situation. How many good people do companies lose because of situations like this? How many customers do they lose because of understaffing? How much money do companies lose in training dollars because of constant turn-over?
So when you see something like 4000% over plan - this should be a red flag to you. What details did the company miss on such an extensive level to achieve those numbers? Even my forecast was off but had the forecast reflected my number - the situation could have been less stressful.
Contact me if you want more details on forecasting and how AMG Innovative Consultants, Inc help your business. Book your Consultation for free and no obligation.
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