Have you ever poured hours into a ‘solid’ business plan, only to check in six months later and wonder how it all went off track? Do you find yourself avoiding forecasting because it feels like trying to predict lottery numbers?
What if forecasting didn't have to feel like guessing?
At Patrick Accounting, we've watched business owners struggle with this exact challenge for over 20 years. Creating a useful business forecast doesn't require a crystal ball or an MBA. It just requires a practical framework and the willingness to start, even when you don't have all the answers.
That’s why we want to help you understand exactly how to create your first business forecast without getting paralyzed by the "what ifs." More importantly, you'll see how this process can give you real control over your business's future instead of leaving you constantly reacting to financial surprises.
Why Most Business Owners Avoid Forecasting
We know that creating your first business forecast can feel like flying in the dark. You're supposed to predict the future when you can barely keep up with what's happening today. That fear of the unknown stops many business owners before they even start.
But the cost of avoiding planning is always higher than the discomfort of doing it imperfectly.
We once had a client who came to us after avoiding forecasting for years. When we finally sat down and projected their current trajectory forward 12 months, the conversation got uncomfortable fast. We had to say to them: "If you don't change anything, when do you want to file bankruptcy? Because that's where we're heading."
It was a tough conversation, but it was also a wake-up call. They were making short-term decisions—like borrowing money they couldn't afford—that were compounding their problems. Without looking ahead, they couldn't see the train wreck coming.
That's the real danger of avoiding forecasts. You end up making today's decisions without understanding tomorrow's consequences.
The Two-Lever System for Financial Planning
Before we dive into the mechanics of forecasting, let's simplify this whole thing. When it comes to improving your business finances, you have exactly two levers you can pull:
- Lever #1: Get more money coming in
- Lever #2: Get less money going out
That's it. There's no magic third option. And honestly? That should feel liberating, not limiting.
Every financial decision you make, whether it's hiring someone new, investing in equipment, or cutting expenses, falls into one of these categories. When you understand this, forecasting becomes less about complex formulas and more about answering a simple question: "Which lever am I pulling, and how will it affect my bottom line?"
This same principle applies to your personal finances, by the way. Want to retire in 10 years? You either need to earn more, spend less, or some combination of both. The clarity is powerful.
Start With Your Goals, Not Your Trends
Many businesses get forecasting wrong because they look at last year's numbers, add 15%, and call it a plan. But that's just math.
Real forecasting starts with your goals and works backward.
Instead of asking "What did we do last year?" start with "Where do we want to be in five years?" Maybe you want to make a million dollars. Maybe you want to open a second location. Maybe you want to build a business you can eventually sell.
Once you have that vision, you can work backwards: What would need to be true for me to hit that five-year goal? What would year three look like? What about next year?
This approach forces you to think strategically instead of just extrapolating from the past. It also helps you spot problems early. If your five-year goal puts you in a position of managing 200 employees but you hate managing people, you might want to reconsider that goal…or at least plan for it differently.
A Simple Forecasting Framework That Works
After two decades of helping businesses forecast, we've developed a simple framework that works:
Step 1: Identify Your Knowns
These are your non-negotiables. The expenses you've already committed to. We’re talking about rent, existing salaries, loan payments, software subscriptions, utilities. Write them all down. These numbers aren't changing anytime soon, so they're your foundation.
Step 2: Set Your Target
This is your bottom-line goal. How much profit do you want to make this year? This number should connect to your longer-term vision, not just be a random hope.
Step 3: Plan for the Unknowns
What separates good forecasts from useless ones? You have to budget for stuff you can't predict. Your air conditioner may break. You may need new tires for the delivery van. An employee will quit at the worst possible time. You don't know what will happen, but you know something will happen.
Step 4: Bridge the Gap
Now you have your knowns, your targets, and a cushion for surprises. The remaining space is where you make decisions about hiring, marketing, equipment purchases, and growth investments.
We work through this line by line on a profit and loss statement, but the concept is simple: Know what you can know, plan for what you can't, and make intentional decisions about everything else.
When Reality Doesn't Match Your Dreams
Sometimes this exercise reveals uncomfortable truths. We've seen business plans that projected $4 million in first-year revenue for restaurants. When we dig into the numbers (i.e., average check size, seats available, realistic customer traffic), it becomes clear that those projections aren't even remotely possible.
That's not a failure of the forecasting process. That's the process working exactly as it should.
It’s better to discover unrealistic expectations on paper than in your bank account. When your forecast shows a problem, you have two choices: adjust your goals or change your actions. Both are valid responses, but you have to pick one.
We've worked with business owners who looked at their projections and said, "You know what? I don't actually want to grow that fast. I'm happy with where we are." That's a perfectly reasonable response, as long as it's an intentional choice and not an accident.
The Special Challenges of Forecasting for New Businesses
If you've never done this before, or if you're starting a new business, forecasting can feel especially daunting.
What we’ve seen work is to be conservative with your optimism and generous with your timeline.
New business owners often underestimate how long things take and overestimate how quickly revenue will ramp up. If you think you'll be profitable in six months, plan for 12. If you think you'll land 10 new customers in month one, plan for five.
This is actually a strategic approach. It's much easier to accelerate from a conservative base than to scramble when overly optimistic projections don't materialize.
Making Your Forecast Work in Real Life
Contrary to what some business owners may think, your forecast doesn't have to be perfect. And it's not set in stone.
Think about your personal budget. You probably budget a certain amount for groceries each month, but sometimes you spend more (hello, unexpected dinner party) and sometimes less. This isn’t an indication that the budget is failing. It’s actually giving you information to help you make better decisions.
Your business forecast works the same way. Review it monthly. When reality differs from your projection, ask why. Did market conditions change? Did you make different decisions than you originally planned? Use that information to adjust going forward.
The goal isn't to follow your forecast religiously. The goal is to make informed decisions based on where you're trying to go.
The Vision Exercise of What Success Actually Looks Like
One of the most valuable parts of forecasting is painting a picture of what success actually looks like…beyond just the money.
If you want to grow your business by 30% next year, what does that mean for your team? How many people will you need? What roles? What skills? What about your physical space? Your technology systems? Your daily routine as the owner?
We work with restaurant owners who dream of opening multiple locations. But when we walk through what that actually looks like—managing inventory across sites, hiring and training staff, maintaining quality control—some realize they'd rather have one really successful location than three mediocre ones.
That doesn’t mean you’re giving up on growth. It means you’re getting clear on what kind of growth you actually want.
Getting Started with Your First Forecast Action Plan
So, are you ready to create your first forecast? Here's how to begin:
- Start with what you know. Gather your fixed costs, your current revenue trends, and your growth goals. Don't worry about perfection; work on getting something on paper.
- Work backwards from your vision. Where do you want to be in three to five years? What would need to be true for that to happen?
- Build in cushion. Things will go wrong, opportunities will arise, and markets will shift. Plan for it.
- Review and adjust regularly. Your forecast should evolve as you learn more about your business and your market.
- Get help when you need it. Forecasting is a skill that improves with practice, but you don't have to figure it out alone.
Making Your Forecast Work for You
Forecasting isn't about predicting the future perfectly. Your goal should be to take control of your business's direction. Yes, things will change. Yes, you'll be wrong about some things. But you'll also spot opportunities earlier, avoid problems faster, and make decisions with confidence instead of crossing your fingers and hoping for the best.
At Patrick Accounting, we've seen the difference this makes. Business owners who forecast regularly avoid surprises and create opportunities. They invest strategically, hire proactively, and build businesses that thrive instead of just survive.
Your business deserves that kind of intentional leadership. And you deserve the peace of mind that comes from knowing where you're headed, even when the path isn't perfectly clear.
Ready to take control of your business's future? The first step is always the hardest, but it's also the most important. Start with what you know, plan for what you don't, and remember: Good enough today beats perfect someday.
If you’re ready to build a forecast that actually works for your business, we’d love to help. At Patrick Accounting, we simplify the financial side so you can focus on running and growing your business.
Curious what it’s like to work with us?
Take a look at the Patrick Accounting Client Journey to see how we guide small business owners every step of the way.
