Part 8: The art and science of creating a robust forecast for your brand plan
This month we’re going to look at the principles, stepwise approach and top tips for creating a robust forecast for your brand for the year ahead.
So how good are you and your team (and even your organisation) at forecasting? It’s worth thinking about this: How accurate were your assumptions (quantified and documented of course) for last year’s forecast? How accurate and easy to use is your patient-based forecasting model?
How many times did you need to reforecast? What was the balance of top-down and bottom-up forecasting? (ie, were you empowered to create and recommend a forecast as a team or did you have a target handed down to you from ‘on high’?) How well did you create alternative forecast scenarios to manage risk and uncertainty?
Over the past few years, I have written and run a number of pharma forecasting training programmes and am continually surprised at the complexity, time and angst that is associated with forecasting. I trust I can show you that forecasting can be fun! (Or at least a manageable exercise...)
Let’s start with a few principles for creating a good forecast:
Master your inputs: quantified assumptions, sources of information on patients, the competitors, the healthcare environment, the internal product profile and approximate resources available
Master your forecasting environment: know who can help you with the forecast, the model, the inputs and who you need to engage and present the forecast to and in what organisational context (high growth, profit focus, portfolio considerations)
Keep it simple, logical and patient-based: apparently 80% of complex Excel business models have been shown to contain logic or numerical errors that would fundamentally affect senior management decision-making. So, I’d recommend creating a straightforward, patient-based forecasting model without complex macros and hundreds of input boxes that can confuse the user and approver
Use different techniques: ideally use different sources and methods for creating your forecast and see the different results – this can help you identify any areas of bias in your input research or in your models
Keep it flexible: document your base case assumptions and then create at least two other scenarios with assumptions and with the resulting impact on your sales forecast so that you can understand and communicate the risk profile of your brand or portfolio in your market
Check your figures: don’t forget to check your forecasting models, graphs and presentations again and again – one little numerical error can completely derail a team or senior management presentation and undermine confidence in all your good work.
Now let’s look at a stepwise approach to creating your forecast, albeit this can be a rolling activity driven by the
financial calendar in your company.
Step 1: Assemble your forecasting team – finance, market research, business operations and marketing and set out what you need to deliver, by when and what success will look like
Step 2: Collate your inputs to your forecast – current assumptions, current forecast, what will change, new research, new patient, payer or physician insights
Step 3: Agree your forecasting methodology – is there a model you are encouraged to use? Do you use trend analysis? Do you need to benchmark vs market analogues or the competition?
Step 4: Create your forecast – sit together as a team in a room and work through all key assumptions; populate your forecast model, test sensitivities, create alternative scenarios and encourage discussion and debate
Step 5: Pressure-test your forecast – using different methodologies, check in with your senior management, with other countries or global/regional teams and then use this pressure-testing to build your forecasting story to be able to present your forecast with confidence
Step 6: Present your forecast – create a simple story flow of quantified assumptions and rationale, scenarios, key graphs and charts to show the entire market/therapeutic class not just your brand(s). Anticipate any questions or objections and be ready to handle them with any back-up charts. Show how your forecast relates to your SWOT and brand strategy.
Of course, there are many different types of forecasts that will determine exactly how you work through these steps. A manufacturing forecast may need much more detail by month and by pack, formulation or strength.
A five-to-ten year forecast for a brand will need a higher-level set of assumptions on indications, competitive dynamics and product life cycle decisions. A launch forecast may need a great deal of information on the likely regulatory label, national and local pricing, access and reimbursement assumptions and speed of prescriber uptake.