How to Better Manage Your Forecast Planning From a CEO’s Perspective

Q4. It’s here!

And for a lot of us, that means the final push toward planning for the coming year. My advice: Break the exercise down into manageable segments. This is my approach and the segments I use:

  • Revenue
  • Cost of goods sold
  • Labor
  • Expenses

You’ll be done in no time! But, let me give you some detail and a few more helpful hints as I see them.


When it comes to this category, you may want to break it down even further into your business divisions, products, services, etc. No matter your approach, BE REALISTIC. Use historical trends to build your baseline. Don’t forget to evaluate any new products and services you added since your last budget process. Factor in attrition. And, most importantly, evaluate your sales process and team. Have you changed your sales approach over the past few months? What will your strategy and tactics be for the coming year and how will they impact your revenue?

Cost of Goods Sold

Make sure you have a handle on the external costs needed to create the revenue you project. There are two things here you need to take a look at:

  • Evaluate the processes you follow to produce your goods and/or services. Can you find any efficiencies here?
  • Maybe it’s time to initiate a few RFPs (request for proposal) to find cheaper alternatives.


Once you have your revenue determined, you should be able to back into your labor. Determine the number of full-time equivalents (FTE) you will need to support your revenue number. Can you hire freelance or part-time staff to cover the increase in revenue?

Once you determine the number of employees and the positions you need to have filled, you can look at wages. Do you know what the industry average is for salaries in your area? Can you afford to give raises? How much? We use a few different external references to help determine what the market is paying for wages.


Consider using zero-based budgeting—all expenses must be justified—for this important phase of your planning process. It’s like starting over from the year before. Once you’ve determined the expense is justified, then it’s time to evaluate the real costs:

  • Can you renegotiate some of your contracts?
  • Maybe it’s time to take a look at different vendors for some of your supplies, maintenance, etc.
  • Again, an RFP might be in order for some of your bigger third party expenses.
  • Do you know when all your contracts/leases expire? Do you want to cancel any? If so, what is the notification date in the contract? Make sure this date is noted on your calendar for future reference. Word of warning: Watch for automatic renewals!
  • You may want to factor in a standard percent increase for some of your generic expenses, like utilities and office supplies, for example.
  • What expenses are variable? Are they tied to revenue? If so, have they been adjusted to align with your revenue number?

Final Words of Wisdom on Financial Planning…

Now, it’s time to pull your figures together and compare your financial plan to last year’s. Ask yourself these questions:

  • Are there any areas you should dive a little deeper into?
  • What type of bottom line are you expecting? Does your plan meet those expectations?
  • What changes do you need to make to meet those expectations?

Don’t forget to evaluate your cash flow. How much cash do you expect to generate? Are there any loan covenants or other banking requirements that need to be met?

I always suggest doing a break-even analysis. Ask yourself: If something unexpected happens, what is the required revenue needed to just cover expenses? This exercise will help you understand your bottom threshold.

Finally, once you finish the forecasting process, measure against it every month. For a holistic view, you will also want to measure against your forecast on a year-to-date basis.

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