Forecasting for Growth: A Simple Framework That Works

Most agency founders don't forecast because they think it's complicated, time-consuming, or pointless ("things always change anyway"). But here's the truth: forecasting isn't about predicting the future perfectly, it's about making better decisions today.

Why Forecasting Matters

Without a forecast, you're flying blind. You can't answer basic questions like:

• Can we afford to hire someone next quarter?
• What happens if we lose our biggest client?
• Do we have enough cash to invest in that new tool or campaign?
• Are we on track to hit our revenue goals?

A good forecast gives you the confidence to make these decisions and the early warning system to avoid disasters.

The Rolling 12-Month Forecast

The best forecasting framework for agencies is a rolling 12-month model. Here's how it works:

• Rolling: Every month, you update the forecast and add a new month to the end
• 12 months: Long enough to plan ahead, short enough to stay realistic
• Updated monthly: You refine your assumptions based on what actually happened

What to Include in Your Forecast

Keep it simple. You need three main sections:

1. Revenue Forecast

• Existing retainers (the easy part)
• Expected project work (based on pipeline)
• New business assumptions (be conservative)

2. Cost Forecast

• Payroll (including taxes and benefits)
• Contractors and freelancers
• Software and tools
• Office and overheads
• Marketing and business development

3. Cash Flow Forecast

• When you'll actually receive payments (not when you invoice)
• When you'll pay expenses
• Tax payments
• Any large one-off expenses

How to Build Your First Forecast

Start simple. Here's a step-by-step approach:

1. Start with what you know: List all confirmed retainers and projects
2. Add likely revenue: Include projects in your pipeline with a probability weighting
3. Map out fixed costs: Payroll, rent, software, the things that don't change
4. Estimate variable costs: Contractors, marketing, travel
5. Build in cash timing: When will clients actually pay? When are expenses due?
6. Review monthly: Compare forecast vs. actual and adjust

Common Forecasting Mistakes

• Being too optimistic: Assume 70-80% of your pipeline will close, not 100%
• Forgetting about timing: Revenue and cash are not the same thing
• Not updating regularly: A forecast is only useful if it's current
• Making it too complex: Start simple and add detail as you go

Using Your Forecast to Make Decisions

Once you have a forecast, use it to:

• Plan hiring: Can you afford a new team member in Q2?
• Manage cash: Will you have enough cash to cover a slow month?
• Set targets: What revenue do you need to hit your profit goals?
• Scenario planning: What happens if you lose a big client or win a major project?

The Bottom Line

Forecasting doesn't have to be complicated. Start with a simple 12-month model, update it monthly, and use it to guide your decisions. The confidence and clarity it provides are worth the effort.

Want to learn more about agency financial management? Explore which key metrics to track monthly, the most common cash flow mistake to avoid, and when to hire a finance partner.