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Budgeting Best Practices

Business Budgeting and Baseball: More in Common Than You Think


The buzz of excitement in the ball park…the cheering crowds…the smell of hot dogs…the crack of the bat…doesn’t it all just remind you of your company’s budgeting and forecasting process?

Wait, what?

Yep, believe it or not, budgeting and baseball actually have a lot in common. Especially when your business is using data gathered from previous years’ budgets to plan for the upcoming year.

So how is this like baseball?

If you’ve ever read the book or seen the movie Moneyball, you might already have an inkling of what we’re talking about. The story featured the general manager of the Oakland A’s, and the plan he came up with in 2002 to make the most of the team’s limited financial resources by using statistical analytics and driver-based planning to choose which players to recruit.

Conventional baseball wisdom says that signing players with high batting averages and high numbers of runs batted in and stolen bases is the way to win games. Thus, those players are the most highly sought after by teams – and the most expensive to sign.

But when the general manager analyzed the data to determine which factors actually contributed most to the success of a team, he found that on-base percentage and slugging percentage were much better indicators of performance. Based on this analysis of the drivers of team success, he was able to put together a team that made it to the playoffs two years in a row – and that while paying 65% less in player salaries than an average MLB team.

So how can this be applied to your own business budgeting and forecasting activities?

Simple. By using a budgeting and forecasting solution that allows you to analyze what the true drivers are for your company’s success, and then basing your future plans on those drivers.

See, here’s the thing. Most companies use outcomes-based planning. This type of forecasting often predicts a certain percentage increase over the prior year’s numbers, and uses that to develop a budget. But with so many variables in play in the world of business, outcomes are almost impossible to control. Businesses can predict what might happen, but this sort of forecasting gives them no way to actually work towards those outcomes in a strategic way. It’s like predicting your team will win more games without having a data-driven strategy to help you get there.

Driver-based forecasting

Driver-based forecasting, however, is the exact opposite. It focuses attention on the things a business can control – the drivers. When you know which factors are important to your success, you can target those things specifically, and work in a strategic way towards the outcomes you want. That is what made the Oakland A’s so successful.

True Sky is a budgeting and forecasting solution that allows businesses the insight into their data that they need in order to identify key drivers, and then focus on creating a strategy for success that takes those drivers into account. Contact us today for more information about how we can help your company knock it out of the park!