By Steven G. Mehta
Every year I am surprised by June Gloom. I wake up in the morning and say to myself, “who knew that the weather would be like this?” Well the weather forecasters knew. They are able to predict weather for days, weeks, months and even years. The same day that I was thinking about the weather, my staff was discussing the forecast of the upcoming month of July for the number of cases and how they felt better knowing the forecast. I realized that legal and mediation professionals could use a weather forecaster also. In fact, I realized that I have been weather forecasting for a while now.
What exactly is weather forecasting for business?
Forecasting allows you to use data from the past to forecast into the future what business will exist in the future.
Why should you try to create forecasts in the future?
One of the big problems for all legal professionals is slow months. Every lawyer and mediator that I have ever spoken with always says something to the effect that “I am worried because the phone isn’t ringing this month. Is there something wrong?” Well taking the data from the past can help to identify why the phone isn’t ringing that month, or when your business is going to be super busy. Forecasting can help you identify when you can take time off and when you cannot afford not to.
In my experience, I have compiled data for about five years worth of business activity and I am able to look at the data to forecast the upcoming months; determine when cash flow may be problematic, and evaluate why the phone isn’t ringing. All of this results in better peace of mind for me. Generally, the more information I have regarding a problem, the better I feel.
How can you create your own forecast?
Creating a forecast is easy. I use several sources of data to create a forecast. First, I use my accounting program Quicken which tracks all my finances. Quicken has a function that will let you project financial data into the future based upon past performance. This allows me to see what my expected cashflow will be in the future on a monthly basis.
Second, I have instructed my staff to keep track of several relevant pieces of data regarding my practice. For example, how many mediations are conducted each month; how many hours are spent in mediation; how many calls come in inquiring about possible mediations; where my mediations are taking place; among other data. All of that information is placed into a chart on Excel spreadsheet for each year. After that information is input, Excel allows you to easily create a graph of the data.
Finally, I look at my phone bill. The phone tracks exactly how many calls come into the office each month. This helps to track what business activity is going on in any particular month.
You would be surprised at how much peace of mind you can have by knowing information regarding trends. For example, the number of mediations in July are typically less than in January. Phone calls in July drop to a trickle probably because so many people are on vacation. I can review many years data, and the graph consistently remains very similar each year. We can even count that the number of calls received during certain time periods also decreases. This information by itself gives me enormous peace of mind to know that the slow period is simply part of the normal ebbs and flows in the practice. Anytime that I am worried about the state of business, or looking at the number of mediations, I always look at the forecast and projections. It always seems to help.
Don’t worry if you don’t have five years worth of data in the beginning. Just start now. Each month you will have developed new data for yourself that will help you to identify forecasts and trends in the future.
After all, June Gloom won’t last forever. I know that because the weather forecaster told me.