Five Quick Skills to More Effective Business Forecasting

Sometimes the best blog ideas emerge during the process of designing and developing new business simulations. Earlier today, I was interviewing a senior finance subject matter expert as part of the process of designing a new business simulation, and I asked him about the single biggest business skills challenge he thinks the organization faces. Before I even finished asking the question, he blurted out...“Without a doubt, forecasting! It is our Achilles heel, and if you can help our company develop better forecasting skills, that would be amazing. Think of it this way. If we were just 1% better in forecasting, we would create over $50 million of free cash flow every quarter. That’s a significant number.”

We had a great 10-minute conversation about it, which prompted me to do some research and review years of notes I’ve accumulated on forecasting skills. Based on that work, here are five quick skills that make business forecasting more effective:

1) Connect Forecasts to Business Strategy

Forecasts shouldn’t live in isolation. Numbers must connect to the bigger picture; the company’s strategy, market assumptions, and competitive positioning. A forecast that ignores strategy becomes an academic exercise. A forecast that reflects strategy becomes a decision-making tool for both the short term and the long term.

In our core business simulations, we make sure to provide learners with insights into market segmentation so they can understand the size of the targeted segment, the reasons customers in that segment buy, and the competitive share analysis. These vectors should be the beginning of a best-guess estimate of the forecast.

Forecasts collapse when they lean too far in either direction; overly quantitative models that miss context, or pure gut instinct without data. The strongest forecasters blend both approaches as they use data as a baseline and apply judgment to capture factors like competitor behavior, customer adoption, or regulatory shifts that haven’t yet been reflected in the numbers.

Behind every forecast are assumptions about demand, pricing, costs, supply chain reliability, and customer behavior. Effective forecasters constantly stress-test these assumptions with “what if” scenarios. Asking, “What if demand is 10% lower than expected? What if input costs spike?” helps identify risks early and builds resilience into the forecast.

Every one of our business simulations provides the ability to look at, practice on, and learn from a what-if analysis tool.

Forecasting is not Finance’s job alone. Sales owns customer input, operations owns supply capacity, marketing knows campaign impacts, and HR knows workforce dynamics. The best forecasts come from collaboration across the business so that every function contributes and feels ownership of the numbers.

One of the most important aspects of an enterprise-wide business simulation is understanding the business system and how to collaborate across functions.

Forecasting will never be perfect, but every miss offers insight. Was the error caused by optimism bias? By ignoring external signals? By underestimating risk? The organizations that improve fastest are those that build discipline around looking back, analyzing misses, and refining forecasting processes accordingly.

Simulations are great for learning by doing, and this is the ultimate tool to achieve that goal!

Summary Thoughts

In our business simulations, forecasting is often the “make or break” capability. Teams that forecast well allocate resources better, anticipate risks earlier, and generate stronger results. Those that don’t struggle with cash flow, inventory, and customer commitments.

Forecasting may never be 100% accurate, but it can absolutely be 1% better, and in many companies, that 1% means tens of millions of dollars in value. Building these five skills into your business toolkit is a quick and powerful way to start.