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Estimating a Vision...by Mary Mershein
by Mary Mershein
On May 16, 2008, it was announced that major renovations, including a new retractable roof, would begin on BC Place Stadium at an estimated cost of $150 million. The BC Place Stadium was re-opened in September 2011 with actual cost of repairs a whopping $563-million.
On March 5, 2012 The BC teachers went on strike asking for a 3% increase in salary. The B.C. Teachers' Federation estimates this increase will cost $1.3 billion over 3 years. The B.C. Public School Employers' Association estimates $2.1 billion. In three years the actual costs will be known. Will they bear any resemblance to either of these estimates?
The dictionary defines an estimate as a calculated approximation which is USABLE. Is an estimate which varies so much from actual usable?
Wall Street estimates the new Apple iPad will sell 1 million units on March 16, 2012, the day it is scheduled to go on sale. If it sells more than 1 million will that mean Apple management did a great job or that they under estimated sales with bad data?
John Sculley was CEO of Apple from 1983 to 1993. Under his management sales at Apple increased from $800 million to $8 billion, in constant growth that exceeded all estimates. Steve Jobs did not work for Apple during this period of spectacular growth. He left Apple in 1985 and did not return until 1997.
When Jobs took over Apple in 1997 as CEO, Apple had revenues of $7 billion. Five years later, revenues were down to $5 billion. All estimates predicted this was the end of Apple and Steve Jobs.
But it was actually just the beginning.
From 2002 to 2012 Apple revenues exploded to $108 billion. This is achieving more than 10 times the growth of John Sculley. Today Apple is now more profitable than Microsoft with half the number of employees. Who estimated this? Who predicted in 2002 when Apple was a money loser on the brink of bankruptcy that it was actually on the brink of spectacular growth? Perhaps it was Steve Jobs. He did not estimate sales and profits. He estimated a vision of amazing products that the world wanted. It was this vision that made Apple.
It is a requirement under the rules of accounting to disclose estimates made by management in financial statements. However, vision, the most important of estimates, does not appear in financial statements.
What kind of vision do the leaders of your organization have? Do you have a vision that can grow a company from bankruptcy to $100+ billion in 10 years?
Mary Mershein, CA is a professional accountant with a master’s degree in management who believes common sense is our greatest financial analysis. Additional common sense can be found at www.moosemoney.wordpress.com.