Another way in which forecasts are a powerful tool is that they can help the business owner understand the key metrics of the business.  Similar to what you will find on a financial statement, metrics are financial parameters that evaluate the performance and productivity of your business.  The difference being that they are simpler and easier to understand than financial statements.

When I work with clients, I study all the metrics so I can provide the proper guidance.  However, I only share the important and key metrics with clients because they would get paralyzed by the analysis otherwise. 

Here are just some of the key metrics I analyze:

• Operating costs per hour 
• Gross margin percentage
• Inventory turns ratio 
• Average wage rate of direct laborers

When a business owner forecasts, they know their numbers.  When the business owner knows their numbers, they are on top of almost all business scenarios that can take place in their business. They have a stronger sense of control over their business. Most importantly, the business owner who Knows Their Numbers reduces the risk of business ownership!