Simple financial forecast model
A basic forecast projects revenue, costs, and cash flow over 12–36 months. Keep it realistic and update regularly as you learn.
Core components:
- Revenue forecast: by product line or customer cohort
- Cost of goods sold (COGS): direct costs tied to revenue
- Operating expenses: salaries, marketing, rent, tools
- Cash flow: starting cash, monthly inflows, outflows, ending cash
Steps to build it:
- Start with top-down revenue assumptions (customers x price) or bottom-up (leads x conversion).
- Estimate variable costs per unit and fixed monthly expenses.
- Calculate gross margin and operating margin monthly.
- Include hiring and capital expenses planned for growth.
Practical tips
- Use conservative assumptions for conversion and growth rates.
- Model different scenarios: base, optimistic, and pessimistic.
- Track actuals monthly and adjust forecasts based on real performance.
Why it matters
A forecast helps you understand runway, set fundraising needs, and align team expectations. It’s a planning tool, not a prediction—use it to guide actions and decisions.