Demand and Benefit Forecasts by the Numbers

About this book

A business case for new capacity is usually decided by one forecast more than any other: how much work will come, how fast it will arrive, and what it will earn once it does. Cost estimates get checked line by line against quotes. Volume forecasts rarely get the same treatment, because they are built from conversations with customers, judgement about a market and a sponsor’s confidence, and because the people who prepare them often need the project to go ahead. The published evidence on demand forecasts for large projects shows errors that are large, mostly in the optimistic direction and not improving over time.

There is an old argument that this does not matter much. In 1967 the economist Albert Hirschman proposed the Hiding Hand: planners who underestimate a project’s difficulties also underestimate their own ingenuity, so that ignorance leads people into projects they would otherwise have avoided and then manage to rescue. Later research tested the claim against large samples and found that cost overruns and benefit shortfalls usually arrive together, while critics argued that the tests missed what Hirschman meant. This book takes the debate seriously and asks the practical question for a smaller business: when the forecast for a new facility is optimistic, what does the record say will happen, and how should the forecast be built, checked, tracked and reviewed so that the decision rests on evidence rather than hope?

It works through building a demand forecast from its drivers and testing each driver against the business’s own records, modelling the ramp-up to full volume, measuring forecast error and reading base rates, turning those into a forecast range, and finding the switching values and scenarios that decide the case. It then follows the investment into operation: tracking benefits against a phased plan with leading indicators, treating an upside surprise honestly, and running the post-completion review that feeds the next decision. Each chapter carries one running case, includes a plausible error and how it was found, and ends with an exercise and its worked answer.

It is for owners, general and finance managers, sales and operations managers and board members in Australian businesses. It assumes spreadsheet arithmetic and simple discounting; S-curves, error measures and a small simulation are introduced where they are needed.

The running case

Every chapter follows one fictional decision. This is an illustration. A contract-canning business near Geelong in Victoria has run two mobile canning rigs since 2018, visiting craft breweries to fill and seam their beer on site. In February 2024 its board considered a fixed canning plant in a leased industrial unit: one line rated at 200 cans a minute, with depalletiser, filler and seamer, tunnel pasteuriser, coder, packer and cold room, at a capital cost of A$5.4 million excluding GST. The plant would can for four kinds of customer: craft brewers without their own line, ready-to-drink and seltzer brands, non-alcoholic drinks such as kombucha, cold brew and functional drinks, and overflow work from larger brewers.

The managing director’s business case forecast 25.32 million cans a year from the third year, reached through a ramp-up of 70 per cent of that volume in the first year and 95 per cent in the second, and a contribution of about A$3.2 million a year against fixed costs of A$1.3 million. An independent reviewer tested the forecast against the business’s six years of mobile-canning budgets, its record of converting letters of intent into customers, and the ramp-up of its second rig. The plant opened in January 2025, and the book follows it to September 2026, its twenty-first month, through a shortfall in some segments, an unexpected surge in another, and a proposal for a second line.

The business, its customers, its records and every number in the case are invented. None describes KEVOS® work, a real business, a real brand or a real project.

How to use the book

Read Chapter 1 first: it sets out the Hiding Hand argument and the evidence that the rest of the book tests on the case. Chapters 2 to 4 build the forecast from drivers, test the drivers and model the ramp-up, and are best read in order. Chapters 5 to 7 cover forecast error, the corrected forecast range and the scenarios that decide the case. Chapters 8 to 10 follow the plant into operation: benefit tracking, an upside surprise and the post-completion review. Every calculation in the book was checked by running it, and the KEVOS® tools linked in the chapters reproduce the appraisal arithmetic.

The book is one of a series of KEVOS® Library books on planning and delivering projects, written to be read alongside each other. Reference Class Forecasting by the Numbers corrects cost and schedule estimates with the outcomes of similar past projects, and this book applies the same outside view to volumes and benefits. Front-End Planning by the Numbers covers the work done before approval that a reliable forecast depends on, Stage Gates and Stopping Rules by the Numbers covers how to set the conditions under which a business case is revisited or stopped, and Outcome-First Projects by the Numbers covers defining the result a project must deliver before deciding how to deliver it.

Source limits and professional responsibility

The methods are established and the sources are listed with what each was used for. Where the book quotes published results, they are attributed, they come from the studies’ own summaries, and they describe mostly large public projects; their relevance to a small private investment is discussed where they are used. The case’s customers, volumes, prices and costs are teaching values, not market data, and a real forecast must be built from real, checked records. This book is general information about forecasting and business cases. It is not financial, investment, legal or tax advice. Decisions about real investments, finance, contracts with customers and the production of food and beverages are matters for the people accountable for them, with professional advice and the applicable regulatory requirements where the stakes require it.