Making Decisions When You Cannot Forecast

Here is a way to decide anyway.

Sort decisions by reversibility, not by size

Two categories.

Reversible. You can undo it within a few months at modest cost. Trying a new service, a short contract, a small price change.

Make these quickly. The cost of deciding wrong is lower than the cost of delay, and you learn something either way.

Hard to reverse. A long lease. A senior hire. Significant capital. A structural change.

These deserve the time. Wait for information, or find a smaller version to test first.

Most businesses treat both categories the same way, and get it wrong in both directions. They agonise over reversible choices and rush irreversible ones.

Set trigger points instead of predicting

You cannot forecast the next twelve months. You can decide now what you will do at specific points.

If cash falls below a stated figure, these three costs stop.
If our largest customer's revenue drops by a stated percentage, we do these two things. If revenue is above a stated level by a stated month, we proceed with the hire.

Written in advance, calmly. When the trigger arrives you act rather than deliberate, and the decision is better because you made it before the pressure.

Widen what you can survive rather than narrowing what you expect

Forecasting harder does not help when the uncertainty is real.

What helps is knowing your runway, knowing your floor, and knowing which costs stop in 30 days.

Those three tell you the range you can survive, which is more useful than a more detailed guess about the range you expect.

The trap of waiting

Waiting feels prudent and is often expensive.

The price of not deciding is real. A hire delayed six months is six months of work not done. A price rise deferred through an uncertain year is a year of margin lost that you never recover.

Ask what waiting costs, in money, before choosing it. It is rarely free and almost never counted.

What to keep doing regardless

Reconcile monthly. Update the 13-week forecast weekly. Watch gross margin.

In uncertainty the temptation is to stop routine reporting because the numbers feel unreliable. That is exactly backwards. When conditions move fast, current information is worth more, not less.

The one calculation worth doing now

Committed costs for the next quarter, divided by cash available.

That is your runway in months. It bounds every other decision, and most owners have never calculated it.

Where we fit

We produce the runway, the floor and the forecast, and help set trigger points against them. Send your management accounts.