When formulating a long-term plan, try for 10 years out

"It's tough to make predictions, especially about the future." ~ Yogi Berra

I recently attended a strategic planning session where the facilitator wanted us to plan for 10 years out. The group I was working with quickly realized how hard it would be to plan that far in the future. We were just clueless about what the world and our industry would look like that far down the road.

I think my biggest takeaway from this planning session was that the further you go out in time, the harder it is to forecast. I think most businesses can do forecasted statements for one or two years fairly easily. But depending on the industry, any farther than that, and it is going to get tough.

For example, in the technology industry, you do not want to go more than two years out because so many changes can occur in relatively short periods of time. With retail, however, you can go out longer since changes do not happen as often.

What makes it so hard to forecast the future is that the variance or uncertainty in outcomes increases as you go out in time. The farther out you try to predict, the less accuracy you can achieve.

That said, it is still important to keep an eye out for future trends. To understand how important that is, one only has to consider Kodak. They invented the technology for digital cameras but absolutely refused to see how digital photography would be the way of the future. They filed for bankruptcy in 2012 and came out in 2013 a completely different and greatly slimmed-down company.

Similarly, Blockbuster failed to recognize the wave of the future and put themselves right out of the marketplace. Though they handled the transition from VHS to DVD, they refused to adjust when Netflix introduced video streaming.

As Kodak and Blockbuster demonstrate, you must stay alert and watch for trends that will affect your industry over the long term. While you may only be able to forecast one or two years out, you need to watch for these changes -- most often technology -- and be prepared to consider them as soon as they appear.

I was trying to help a small manufacturing company that had been making small parts for a very small industry. A major competitor came into the market with much lower prices, and the company did not react because they were not paying attention to industry trends. Within one year, most of the firm’s sales had dried up.

To stay on top of the changes coming for your industry, one of the best things you can do is read and study everything you can. The Wall Street Journal is a great resource as they have so much information in there every day. Every week, do a Google search on your industry and see what pops up.

Now go out and make your plans for as far out as is feasible. Remember to always look 10 years out to ensure you do not miss any important trends.

You can do this!

Dr. Osteryoung has directly has assisted over 3,000 firms. He is the Jim Moran Professor of Entrepreneurship (Emeritus) and Professor of Finance (Emeritus) at Florida State University. He was the founding Executive Director of The Jim Moran Institute and served in that position from 1995 through 2008. His newest book co-authored with Tim O'Brien, "If You Have Employees, You Really Need This Book," is a bestseller on Amazon.com. He can be reached by e-mail at jerry.osteryoung@gmail.com.

Tags: Florida Small Business