Reliability of projections

Since before the First World War, it has been possible to predict with considerable precision where an artillery shell will land, based on factors such as projectile weight, ballistic coefficient, elevation, and firing angle. With the aid of modern technology, this precision has only improved. The underlying principle is that, in such systems, inputs and variables are known and largely measurable—making the outcome reliably predictable.

No such predictability exists when it comes to small and mid-sized businesses. Forecasting precise financial outcomes five to seven years into the future is not only inherently speculative—it is often misleading. Any party asserting detailed knowledge of every financial metric that far ahead should be met with healthy skepticism.

The gap between projection and outcome is often so large that the original assumptions appear less like analysis and more like fiction. Indeed, the predictive power of such models over a five to seven horizon is roughly on par with attempting to forecast the weather for a specific day seven years into the future.