Quick =Forecast() Trick in Excel

If you use Excel as much as I do, you know that forecasting models can be complex and take a fair amount of time to set up. But if you need a quick forecast model, here is a neat trick: use the FORECAST function.

This FORECAST function only works if you have a time series. For example, let’s say you have monthly revenue numbers for the part of the year and you want to forecast the remaining. Assuming revenue is fairly stable over time, you can use the FORECAST function formula without having to calculate the statistical formula.


forecast function

Microsoft has a guide on the the 5 different types of Excel forecast functions.

An advanced version of this function is the Forecast Sheet function which gives a confidence interval table and a pretty graph.

forecast graph

A few words of caution, using linear regression to do a forecast implies the past can predict the future and depending on the correlation of the data to time, it can have varying degrees of results. Also, if you have a limited data sent (less than 15 data points), then you also lose correlation.  I recommend using this trick only as an improvement over doing a run rate based forecast or % growth forecast.*

That said, this trick can be an easy way to impress your boss and coworkers by saying you used a linear regression forecast model 🙂

* For you stat people, yes I know this trick violates most rules of statistical significance, p-values, and other principles of stats if the sample size is too small or if there is not a high enough correlation. It’s a quick trick to be used in a pinch that’s an improvement over a run rate.

Mandatory PTO

Recently Ellen Pao tweeted:

pto tweetMy reply was off the cuff, but given the likes it’s worth exploring a bit more.

Many companies use unlimited PTO as a benefits selling point. At first it sounds great. “Unlimited PTO?! Awesome! I can finally take that 2 week vacation in order to (fill in the blank).” The sad reality is that in many companies the benefit isn’t used at all. In most company cultures it’s hard to ask for time off. For those who have a capped PTO policy (use it or lose it), at least the conversation starter of “hey I’m going to lose some PTO unless I take it” is helpful in getting employees to take time off.

Unlimited PTO is not formally tracked and therefore managers aren’t sure how much time off an employee has taken. Those who do exercise more than a perceived “normal” amount of PTO could experience resentment from others or even be seen as less dedicated employees. If a person does take prolonged PTO, there could even be sense of uncertainty regarding their job security. This incentives employees to actually take less PTO.

By contrast, mandatory PTO solves all of the above issues and even adds more benefits. Not only does it encourage employees to take a break from the grind (the entire point of having PTO), it implicitly forces flexibility in work assignments and having a backup for all crucial tasks. This minimizes risk of a single point of failure and the chance of a rogue employee doing nefarious things. It also limits the company’s financial liability as employees use their PTO instead of sitting on it for years to be cashed out.

If companies really want a benefits selling point about how much they care for their employees, they should adopt a mandatory PTO policy of 2 weeks each year and an additional 2-4 weeks that can be accrued and rolled over. Managers should be held responsible to make sure all of their employees take their PTO.

By aligning the behavior incentives with the actual policy, both employees and companies would benefit.

Online Writers: Who to Read

I’m not a skilled enough writer to have my own newsletter (yet?), but here is a list of online writers I enjoy reading. Many have weekly newsletters. A few have published books (actually valuable business books. So rare!) At the least they are worth following on Twitter.

Ben Thompson at Stratechery – my absolute favorite writer about tech and business models. I’ve been following Ben since his early days of writing. His work has dramatically changed how I think about the tech industry and business models. It’s the only online content I pay for and it’s worth every penny. Even if you don’t subscribe, his free weekly article and podcast (Exponent) are incredibly valuable. Aggregation theory might be the most important theory in tech since the innovator’s dilemma (which he wrote about here). Is that enough fanboyism? Ok I’ll stop now.

Tren Griffin at 25iq –  Tren is a huge fan of Charlie Munger (as am I) and has written about him and Warren Buffett extensively. His back catalog of posts are “Lessons from ___” and are still very valuable reads. He writes a lot about subscription economics and I learned about wholesale transfer pricing from his writing.

Annie Duke at AnnieDuke.com – Annie is best known for success in the poker world, but her book Thinking in Bets and weekly newsletter are great resources on how to think in probabilities and how it relates to decision making.

M.G. Siegler at 500ish.com – M.G. is a former Techcrunch writer and current blogger about the tech industry. His newsletters are tech-centric and include his thoughtful opinions.

Shane Parrish at Farnham Street – Shane is one of those people who are just smart and like to think about how to get smarter. His writing and podcasts are great self-improvement resources (and I’m a big skeptic of anything labeled “self-improvement”).

Mike Dariano at The Waiter’s Pad – Mike is under the radar right now, but his “Mike’s Notes” articles and podcast are great resources for real life business principles.

Dave Kellogg at kellblog.com – Dave is a tech guy through and through. He has a lot of great thoughts on management and is very knowledgeable about SaaS businesses and models. He’ll even post a spreadsheet example if needed.

Adam Grant at adamgrant.net – Dr. Grant is an organizational behavior professor at Wharton. His book Give and Take is a must read. His newsletter has insightful nuggets on human behavior. His podcast Work Life is also great.

Tyler Cowen at marginalrevolution.com – Dr. Cowen is an econ professor at George Mason. His website covers topics from business, econ, law, political science, and many other things. His podcast Conversations with Tyler has some incredible guests.

Morgan Housel at Collaborative Fund – I stumbled upon Morgan when he was writing for the Motley Fool. His writing would be classified as “investing”, but I it’s much more than that.

John Gruber at Daring Fireball – John is the consummate Apple blogger. His opinions on anything Apple are worth reading. His podcast The Talk Show is great as well (although at times a bit lengthy).

Trevor McKendrick at Howitactuallyworks.com – Trevor has a weekly newsletter called  with links to interesting articles and usually a short blog style post.

Nathan Tanner at nathantanner.net – Nathan wrote a book called “Not Your Parents Workplace”. If you are considering a career change or are a young professional, I recommend it. He also publishes a monthly personal development newsletter sharing books and articles.

For fun, I’m a huge sports fan and I visit theringer.com almost every day. I read pretty much anything Bill Simmons writes (which is sadly not as much as it used to be).

ESPP: Just Do It

Does your company offer an Employee Stock Purchase Program (ESPP) as a benefit? If so, you should definitely take advantage of it!

Wealthfront has an excellent write up that covers everything you would want to know about ESPPs. Here is my bullet point answers to common questions:

  • Yes you should do it. There is literally almost no risk due to the discount from the company.
  • It’s all upside with a minimum guaranteed return of the discount (and any appreciation in the stock is all upside!)
  • Yes you can sell it right away (personal opinion: you should).
  • Yeah the payroll deductions can hurt you for 6 months, but look at is as a 6 month savings account with a REALLY high return. You could literally make up the difference with credit cards and come out ahead (although please don’t do that).
  • Sign up as soon as possible especially if the program has a look back (locked in rate for an extended period of time).
  • You can usually decrease your participation at anytime if needed, but I don’t recommend as it resets your look back.
  • Max it out to the limit offered by your company. There is a federal cap of $25k per year.

ESPP is a no brainer. There is absolutely no risk/downside and all upside. It’s a guaranteed MINIMUM semi-annual return of the discounted 15% (over 30% annual return!). If the stock goes up, it’s even more. If it goes down, you still get the 15% discount so there is no risk. The one catch is you have to be able to live without a percentage  of your check for 6 months. Just view it as a savings account. I highly recommend you enroll, especially if you have the option of the 2 year look back rate.

Feel free to hit me up on Twitter with any questions.

Context is King

I recently ran a completely unscientific Twitter poll about which seat would you chose on airplane:

As you can see, everyone chose the aisle or window seat (and I assume the votes for the middle seat were accidental). But let me contrast this with my last flight. I chose the middle seat. On purpose. Why would I do this? I was on a Southwest flight which has no assigned seats. As I boarded, the flight attendant told me the flight was half full (side note: considering it’s a flight, would she be considered an optimist or a pessimist?) so I chose the middle seat and put my stuff on the seats next to me. No one sat next to me so I had the entire row to myself. The situation matters. What if you need frequent visits to the bathroom? Then the aisle seat would be preferable. What if you are flying with a child? Take the middle seat and corner them against the window. There are a variety of factors that influence your choice of seat. Context matters.

In a semi-meaningless regular season NBA game, Steph Curry made a buzzer beating 3 point shot at the end of a half. Curry might be the best 3 pointer shooter in the history of the NBA and has made countless 3 pointers, many of them at the of the half or game. So why should be this one in particular be interesting? Let me add some context. It was against the Oklahoma City Thunder, a heated rival. It was in Oklahoma. About 5 seconds of game time prior to hitting the 3 pointer, there was an “NBA fight” involving him and half the Thunder as they set up for a jump ball. Curry had been jostling for position and there was a lot of pushing a shoving and one can imagine his masculinity was probably called into question. So that 3 pointer wasn’t just any 3 pointer. It was a direct response, in-your-face, I’m-better-at-basketball-than-you, 3 pointer. It also put them up by 20, a nice round number that many announcers use as the line of demoralization. All of these factors made this specific 3 pointer special. Context is about making things special. (And this particular 3 by Steph Curry, is one my favorites.)

Many times in my career in corporate finance, I have seen numbers reported without context. Check out the table below:

Are these good or bad months? We can tell that March was the best month and February the worst, but there is nothing else to put them into context. Now look at this table:

Or this chart:

By adding context to the numbers, we get a better picture of revenue. Now we can see Q1 in more context (in this example, a historical context). We have made it “special”.

An oft familiar finance interview question for college students is “what is the company’s stock price?”. Many students reply with a very specific number like “$30.52”. It’s obvious they memorized it right before the interview in hopes to impress. How much better of an answer would it be if they replied “it’s about $30 which is a 52 week high and up about 10% from the start of the year”? The context is more important than the exact number. Context shows understanding.

One bit of warning, don’t go overboard with context. There is balance to be found between too much context and not enough. The right amount drives the most important point. Once you have decided on the key takeaway, use context to convey your message. We don’t need to know how what Curry had for dinner that night in OKC, or what the revenue was for those months 5 years ago. Context should be relevant.

Context matters, it makes something special, and it shows understanding. By adding relevant context, you make it easier for your audience to understand your message.

(For the record, all else being equal, I choose the window seat. It’s the easiest way to take a nap.)

You can find me on Twitter @rhettweller