Phase 1 - Business Analysis
Business Analysis Includes:
  • Company Description
  • Business Model
  • Product and/or Service Description
  • Industry Analysis
  • Product or Service Research
  • Intellectual Property Searches
  • Entity Verification
  • Name Search
  • Trend Reports
  • Emerging Market Analysis
  • SIC Code
  • Micro and Macro Economic Factors
Phase 2 - Market Analysis
Market Analysis Includes:
  • Marketing Plan
  • SWAT Analysis
  • Market Needs
  • Per-Capita Analysis
  • Promotion and Price
  • Marketing Budget
  • Direct/Indirect Competition Research
  • Market Penetration Models and Demographic
  • Research
Phase 3 - Financial Analysis
Financial Analysis Includes:
  • Financial Forecasting Methods
  • Opportunity Cost
  • Scarcity Analysis
  • Break Even Analysis
  • Maximum ROI Analysis
  • 12-Month Forecast
  • Ability to Repay
  • Cash Flow Report (burn-rate)
  • Use of Funds
  • 5-Year Forecast
Phase 4 - Certified Business Plan
In the forth phase our technical writers and project managers summarize phases 1-3 by "writing" the Certified Business Plan which includes 9-Sections:
  • Statement of Purpose
  • Executive Summary
  • Company Description
  • Products and Services
  • Marketing Plan
  • Financial Plan
  • Management and Operations
  • Exit Strategy
  • Supporting Documents and Bibliography
Financial Forecasting Methods

COMPANY APPROVED FORECASTING METHODS

 

Certified Business Plan(TM) worksheets and assumptions models are created using Wharton School of Business forecasting methods (The Wharton School of Business Financial Forecasting Dictionary is one of our Citations in the bibliography section of most Certified Business Plans). 

 

Project Managers and Financial Forecasters on Certified Business Plan(TM) Teams use the following formulas, tools, and methods when completing forecasting spreadsheets (Effective Summer 2008):

 

Accelerationt

"A change in the trend, also including a negative change (deceleration). Although there have been attempts to develop quantitative models of acceleration for forecasting in the social and management sciences, these have not been successful. Of course, if one has good knowledge about its cause and its timing, acceleration can be a critical part of a forecast. Consider this when skydiving and you need to predict when to open a parachute."

 

Auto Regressiont

"A form of regression analysis in which the dependent variable is related to past values of itself at varying time lags. An autoregressive model would express the forecast as a function of previous values of that time series data (e.g., Yt = a + bYt-I + et, where a and b are parameters and et is an error term)."

 

Benchmark Forecastst

"Forecasts used as a basis for comparison.  Benchmarks are most useful if based on the specific situation, such as forecasts produced by the current method."

 

Business Cycles t

"Periods of economic expansion followed by periods of economic contraction. Economic cycles tend to vary in length and magnitude and are thought of as a separate component of the basic pattern contained in a time series. Despite their popularity, the use of business cycles has not been shown to lead to more accurate forecasting."

 

Consensus*

Agreement of opinions; the collective unanimous opinion of a number of persons. A feeling that the group's conclusion represents a fair summary of the conclusions reached by the individual members.

 

Cost Drivero

"In activity based costing (which states that products consume activities and activities consume resources) any factor which causes a change in the cost of an activity. An activity can have more than one cost driver attached to it. For example, a production activity may have the following associated cost-drivers: a machine, machine operator(s), floor space occupied, power consumed, and the quantity of waste and/or rejected output."


Cross Sectional Datat

"Data on a number of different units (e.g., people, countries, firms) for a single time period.  Cross-sectional data can be used to estimate relationships for a forecasting model. For example, using cross-sectional data from different countries, one could assess how prices affect liquor sales."

 

Cyclical Datat

"Time-series data that tend to go through recurring increases and decreases. See also business cycle. This term is generally not used for seasonal variations within a year. Although it is difficult to forecast cycles, knowledge that a time series is subject to cycles may be useful for selecting a forecasting method and for assessing uncertainty. (See also Long Waves.) See Armstrong (2001c) and Armstrong, Adya and Collopy (2001)."

 

Expectation Surveyst

"Surveys of how people or organizations expect that they will behave in given situations." (See also Intentions Surveys.)

 

Forecast Horizont

"The number of periods from the forecast origin to the end of the time period being forecast."

 

Forecasting Support Systemt

"A set of procedures (typically computer based) that supports forecasting. It allows the analyst to easily access, organize, and analyze a variety of information. It might also enable the analyst to incorporate judgment and monitor forecast accuracy."

 

Genetic Algorithmst

"A class of computational heuristics that simulate evolutionary processes using insights from population dynamics to perform well on an objective function. Some analysts speculate that competition among forecasting rules will help to develop a useful forecasting model, but it is difficult to find empirical support for that viewpoint."

 

Heuristicst

"From the Greek word, meaning to discover or find. Heuristics are trial-and-error procedures for solving problems. They are simple mental operations that conserve effort. Heuristics can be used in representing expert systems."

 

Industry & Sector Trends Analysisv

"In the IST forecasting method an assumption is made in which there are industry trends for a specific sector over a period of more than five years.  The Assumption for a start-up business will use the same patterns as the sector patterns for the five year growth unless other micro or macro economic factors influenced the sector trends not allowing a satisfactory forecast of the start-up."

 

Input-Output Analysist

"An examination of the flow of goods among industries in an economy or among branches of an organization. An input-output matrix is used to show inter-industry or interdepartmental flows of goods or services in the economy, or in a company and its markets. The matrix can be used to forecast the effects of a change in one industry on other industries (e.g., the effects of a change in oil prices on demand for cars, then steel sales, then iron ore, and then limestone.)"

 

Interpolationt

"The process of using some observations to estimate missing values in a series."

 

Intuition & Judgmental Forecastingt

"A person's immediate apprehension of an object without the use of any reasoning process. An unstructured judgmental impression. Intuitions may be influenced by subconscious cues. When one has much experience and there are many familiar cues, intuition can lead to accurate forecasts. However, it is difficult to find published studies in which intuition is superior to structured judgment.  Judgmental Forecasting is a subjective integration of information to produce a forecast. Such methods can vary from unstructured to high structured."

 

Lagt

"A difference in time between an observation and a previous observation. Thus, Yt-k lags Yt by k periods."

 

Long Run Effectt

"The full effect that a change in a causal variable has on the dependent variable. In a regression model, where Y = a + bX, a shift in X has an instantaneous effect (of b) on Y. In dynamic regression, there are lags in either X or Y in the model. A shift in X also has a long-run effect, which may either amplify or damp the short-run effect. When using causal variables in a forecasting model, one is typically concerned with long-run effects. Thus, it is inadvisable to formulate a model on first differences."

 

Market Potentialt

"The maximum total sales that might be obtained for a given product. (See also Saturation Level.)"

 

Maximum Likelihood Estimationt

"A method of estimating the parameters in an equation by maximizing the likelihood of the model given the data. For regression analysis with normally distributed errors, maximum likelihood estimation is equivalent to Ordinary Least Squares estimation."

 

Mean Absolute Deviationt

"An estimate of variation. It is an alternative to the standard deviation of the error. The ratio of standard deviation to MAD is 1.25 for normal distributions, and it ranges from 1.0 to 1.5 in practice." (See also Mean Absolute Error.)

 

Posteriori Analysist

"We use posteriori analysis researcher's analysis of a situation before receiving any data from the forecast horizon. A priori analysis might rely on domain knowledge for a specific situation obtained by interviewing experts or information from previously published studies."

 

Protocolt

"A record of a person's thought process as they talk about it when performing a task (such as when making a forecast). The record can be made with audio records, video records, or paper and pencil."

 

Quasi-Experimental Datat

"Data in which changes are introduced naturally, rather than by a researcher. For example, governments in different countries have different levels of spending. This would allow for an analysis of the effect of government spending on growth. (Not surprisingly, this has been studied, and increased government spending is closely associated with reduced economic growth). Forecasters often rely on quasi-experimental data. In contrast to experimental data, there are many threats to validity, so eclectic research might be useful."

 

Replicationt

"Application of given procedures to similar sets of data to determine whether they produce similar findings. Replications provide good evidence on reliability."

 

SWAGl

When all else fails - "Serious Wild-Ass Guess." Note - Not from Wharton! J

 

Switching Model*

"A model composed of two (or more) sub models in which sub model A holds true in one set of circumstances, and sub model B in another (e.g., sub model A applies at time t if Yt-1 is greater than a specified value, sub model B if Yt-1 is less than that value). The purpose is to obtain accurate forecasts by using the most appropriate model for the situation."

 

Time Series Modelst

"The series of autocorrelations for a time series at lags 1, 2, and 3.  A plot of the ACF against the lag is known as the correlogram. ACF can be used for several purposes, such as to identify the presence and length of seasonality in a given time series, to identify time-series models for specific situations, and to determine whether the data are stationary." (See also Stationary Series.)

 

Trend Analysist

"A procedure for predicting trends. Trend analysis (or trend-line analysis) can be performed using different methods. For example, one can use exponential smoothing, simple regression in which time is the independent variable, robust trend, or simply the percentage change between two points in time."

 

Sources:

thttp://armstrong.wharton.upenn.edu/dictionary/defined%20terms.html

ohttp://www.businessdictionary.com/definition/cost-driver.html

vWritten by Tony Smith

lNot a principle, formula, or scientific methodology

*http://www.forecastingprinciples.com/methodologytree.html

*http://www.forecastingprinciples.com/defined% 20terms.html