What Is Your Tell?ByRaymond D. Matkowsky
It is very important to make reasonable predictions as to the direction of our businesses. If we expect a speed up of orders, we want to make sure that we have enough inventories to meet demand. On the other hand if we expect a slowdown in orders, we don’t want to be caught with a lot of extra inventory. However, it is not always easy to make such predictions.
Swiss Army Knife of Predictors
There are so many variables in economics that it is futile to even try to put these into a single equation. Just like a Swiss Army knife that has many tools built into a compact form, what is needed is a single factor that encompasses all of these variables and is directly or inversely proportional to your business prospects. Your tell!
I like to focus on housing statistics. That is my tell! The housing market factors into many other businesses. For example, during a good housing market, many other businesses such as home furnishing and home appliances, just to name a couple, flourish. When someone pays 30 to 50% of their income for housing, they are unlikely to buy a new car or a boat. In this case I would expect the auto replacement parts industry to boom. Every business has such predictors and in many cases it is unique to that business. Housing statistics give me an impression of the health of the United States economy, so I use it to make judgments.
Trends
Many times we don’t know what will happen until it is too late! For advance notice, you have to find a predicting factor. However, when you do, you are still far from over.
A single point in time does you little good. You do not know where you have been and where you are headed. What is needed is a long term trend line. Is the trend positive or negative? What does the trend mean for your business? How do you prepare in advance if the trend line continues along its present course? Suppose it changes course? What is the likelihood of it changing course? All of these questions need to be answered.
Active Management
Ideally, you want to take advantage of trends, adjust, and increase your profits long before your competition does. To do so requires in depth analyses. Get started now!
Do you have any other suggestions, please share them with your fellow readers. Email me at rdm@datastats.com.
Copyright © 2015 Raymond D. Matkowsky
Raymond D. Matkowsky is the Chief Executive Officer of Data Stats, a consulting firm specializing in system or product improvement through mathematical and scientific modeling. He can be reached at rdm@datastats.com or through Data Stats’ web site at www.datastats.com |
