Budgets by firms, being forecasts, degrade quickly as you extend their timeframe

“The accuracy of economic forecasts diminishes in months into the future.” William A. Sherden, The Fortune Sellers: The Big Business of Buying and Selling Predictions (John Wiley 1998) at 63, goes further: “The average forecast errors percentages for real GNP growth were 45 percent at the beginning of the year being forecasted and 60 percent six months in advance of the year being forecasted.” Forecasts decline in accuracy the farther they try to peer.

Likewise, the accuracy of case budgets degrade the farther out you ask law firms to forecast. How can in-house managers expect law firms to predict budgets for entire cases? Ask for the upcoming quarter on a rolling basis (See my post of April 27, 2005: budget no farther than your headlights; Aug. 4, 2009: use a funnel metaphor for budgets; Oct. 22, 2008: build for flexibility rather than strive for prediction; July 9, 2009: budget scenarios instead of single figures; and May 21, 2007: matter budgets with 9 references.).

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