Predictive Modeling

  

Categories: Metrics

See: Predictive Analytics. Same idea.

You financially model the data, hoping you can have a better window into where you should put your/your clients' dough. When they confirm your gut, they're worth listening to. When they don't, well...at least you proved you can do math. And that's worth something. Sorta.

Related or Semi-related Video

Finance: How do you forecast earnings?4 Views

00:00

and finance Allah shmoop How do you forecast earnings All

00:07

right we'LL ask an old Wall Street warhorse and you'LL

00:10

get the joke about first putting on blindfolds spinning around

00:13

three times and sniffing for a donkey's butt Yeah but

00:16

the process really isn't that opaque You own a football

00:22

stadium a small one seat seven thousand people and caters

00:26

to a large pacifist organisation that loves the game but

00:30

wants to see tackles replaced by light feathery taps You

00:34

have football if you can still call it that in

00:37

the fallen winter Baseball in the summer a few concerts

00:40

weddings and bar mitzvahs Owen A rodeo or two You

00:43

only sell seeds for anything about one hundred days a

00:46

year like you don't sell many Tuesday nights in the

00:49

winter And City Ordinance doesn't allow you to sell tickets

00:52

in the summer when the weather forecast is supposed to

00:54

be over one hundred degrees because your power grid usage

00:58

would then blow out the city's electricity Your average seat

01:01

ticket net to you is thirty bucks net because you

01:04

pay five dollars commission to StubHub Ticketmaster and while other

01:07

vendors to market your local wears so they retail for

01:10

thirty five each but you keep thirty and on average

01:13

when you do sell a night you sell five thousand

01:15

tickets The stadium is rarely sold out so it plunks

01:19

along with a total of one hundred nine times five

01:21

thousand seats on average sold which is a total of

01:24

El half A million seats Seat units sold per year

01:27

at an average ticket price of thirty bucks to you

01:30

Well revenues last year were about fifteen million dollars In

01:33

addition you sell recycled but boiled horse hooves which you

01:37

call hot dogs along with Coke Fear popcorn and Candy

01:40

Floss which is actually floss you can use to get

01:43

those horse hooves out of your teeth They really stick

01:45

in there at another two million bucks in revenue for

01:48

all that stuff And that's what you had in revenues

01:50

last year Well what about costs Well when you had

01:52

your light hitting baseball in football teams you had to

01:55

pay licensing fees for them Tio you know show up

01:58

of three million dollars a year for the other events

02:01

like concerts and weddings and bar mitzvahs He only had

02:04

incremental cleanup costs for beer spillage and vomit of about

02:08

two million dollars And your quote food unquote costs were

02:11

another million You had insurance electricity legal and well other

02:16

bills totaling another million box You had total expenses then

02:20

of seven million dollars and made pretax ten million dollars

02:24

So you had total expenses of seven million box He

02:26

had seventeen million of revenue with seventeen money Seven Its

02:29

pretax ten million dollars on the set of calculations is

02:33

a kind of forensic starting place in forecasting future earnings

02:36

And you start with a spreadsheet This thing like Well

02:39

what happens to pre tax profits if you can average

02:42

thirty four dollars a ticket instead of thirty a ticket

02:45

Well there you go What if you average fifty eight

02:47

hundred seats sold instead of five thousand OK well we're

02:51

trying to forecast earnings here So is that what you

02:53

think you'LL actually earn Or just what you hope you'LL

02:57

earn Well forecasting earnings is all about being real not

03:00

hopeful Meaning you try to be porridge Not too hot

03:04

not too cold but actually accurate So if you're suddenly

03:07

going to grow from five thousand to fifty eight hundred

03:11

seats on average sold over one hundred ninety year than

03:14

What changed Did Amazon build a new warehouse in the

03:17

neighbourhood Do you expect many tall women to be attending

03:20

ballparks now Is Oprah showing up to every event and

03:24

giving out free human days What happened Maybe there's a

03:27

new popular glow in the dark cotton candy that actually

03:29

makes you glow in the dark It doesn't glow but

03:32

it makes you glow You make another mil for selling

03:35

it or you think you will Maybe Well how do

03:37

you forecast What data do you put in What assumptions

03:40

did you make Well in this sense the qualitative factors

03:43

that make up your predictions are everything in that the

03:46

numbers well that you just randomly type in could be

03:49

almost anything But if they're not accurate numbers or reflective

03:52

of well the nation's new love affair with pickled horses

03:55

or whatever is driving you to new heights and profitability

03:58

well than it best there just hopes Nay pipe dreams 00:04:02.493 --> [endTime] Yeah don't do that

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Finance: What is forecasting?
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