If you are on a beautiful island enjoying a white sand beach and crystal blue water and there is an earth quake thousands of miles away in the ocean, you need a tsunami warning system to alert you that a huge wall of water may be headed your way.
In business, you need a system or process for alerting you in advance of financial problems or challenges. A reliable financial forecast is a tsunami warning system for your business.
A Tsunami Warning System Was Missing
Do you remember the terrible tsunami that struck Asia back in 2004? It was a tragedy where as many as 280,000 people died, most of whom were in Indonesia.
A magnitude 9.1 earthquake occurred in the Indian Ocean, 100 miles off the western coast of Northern Sumatra. Within hours, the massive waves generated by the earthquake created enormous devastation in many countries.
One of the discussions around that tragedy was the lack of a tsunami warning system in the Indian Ocean.
A tsunami warning system can detect the wave, or predict the magnitude of the wave based on the information about the earthquake, and then provide warnings to all the places where the tsunami is expected to impact. But there was no warning system in place in 2004 and a tragedy ensued as a result.
There is an analogy there that can help us. Say you're in a cabin just 20 feet or so from the ocean. And all of a sudden a huge 50 foot wave crashes onto the beach. Water starts roaring through the doors and windows of the cabin. What will you start doing immediately and instinctively?
- Hold on for dear life
- Try to keep your head above water
- Try to find something to grab onto so you can pull yourself to safety
- Try to avoid being hit by chunks of debris racing past you in the water
That's the basic picture of what you might be doing when a crises hits you without warning.
An Early Warning System Makes All the Difference
Now let's look at a different scenario.
You're in a beautiful cabin just 20 feet or so from the ocean. All of the sudden you receive a tsunami warning. It's telling you an earthquake has happened, and a huge wave is headed your way and it could be there within hours.
What will you start doing right away?
- Get your children and loved ones rounded up real fast
- Maybe grab a few precious possessions or heirlooms
- Throw some clothes or food in a bag
- Get the family in the car and start driving away from the ocean
- Turn on the radio and check your smartphone to learn what's going on and get traffic reports
In both scenarios you are moving fast and everything you are doing is important. But WHAT you are doing is very different.
In one case you're fighting just to stay alive. In the other, you're protecting your loved ones, saving your keepsakes and valuables, and moving to a safer place. You're avoiding the problem.
What you're doing and when you are doing it are very, very different because you received a warning that a problem was on its way.
You knew what kind of problem it was, how big a problem it was, and when it was expected to happen. You had the information you needed to take action. You knew what to do and when to do it.
Financial Forecasting is a Powerful Tool
A reliable financial forecast is a tsunami warning system for your business.
It provides the heads up you need when a financial problem is brewing. It gives you time to figure out a solution or find ways to minimize the potential negative impact.
It helps you see financial problems or challenges in advance. Far enough in advance for you to develop and implement an action plan to solve the problems before they arrive on your door step.
Do you have a reliable forecasting process in place?
Click here to get my blog posts delivered right to your email inbox. I publish one new post each week.