John Briggs shows how to build a monthly financial forecast using a free spreadsheet template. Set up revenue by service and pricing, then forecast expenses tied to that revenue, including payroll and contractor costs. Track cash flow month by month to catch negative months, and use Keith Cunningham's nine questions to evaluate whether each expense actually acquires or retains customers.
Chapters
What is the best way to forecast financials for next year? So we have a tool. It is free. Email us, we will get you a copy of this. This is the tool that we use in our business to forecast financials, and the steps are pretty simple. You're gonna look at your revenue, and then you're gonna look at your expenses. It's not It doesn't need to be more complicated than that. We do add in our process a cash flow analysis on our forecasted financials. So let me walk you through what I would do. So you have a template here. You would list your income items here. Notice it is formatted like a profit and loss statement. And so you have income items here. You would type in the different income items you have. If you have any cost of goods sold, we put common expense categories that we have here on the left-hand side, opportunity for you to list out more. And then this area down here, if you're gonna have any loan payments, you would put that in this box. If you have any assets that you're gonna purchase, you'd put that in these boxes. And then as you take owner distributions, you'd put that here. And then each column represents each month. You are going to start with forecasting your revenue by month. Now, I did a whole training on a wealth-building framework. Forecasting your expenses is one step of that framework. But I want to show you— so when I did the presentation, here are some questions you can consider. When you're looking at what is your revenue going to be like for next year. You're gonna wanna list out all of the services or products that you currently sell or want to sell in the upcoming year. And you're gonna use that Google Sheet. I'll show you an example in just a second. So ask yourself also, like, so are you offering any new services? If you are, when are those gonna be ready? Are you going to rearrange any type of existing services? Are you gonna stop them altogether? And then how many units of each service do you think you're gonna need to sell and what's your price gonna be on those? So if you look at this example, it's a simplified example of a client actually, but so their services, the way they were set up, they're pretty consistent about at about $100,000 a month in revenue. For the sake of the example, they decided they're going to add a self-directed course, but it won't be ready until August. And so they forecasted out the revenue by month. And again, you can see based on when your new service is going to start, you would put that in the appropriate month. After that, now you're going to look at expenses. You're first gonna look at expenses directly related to revenue, just those expenses. So if I was doing $100,000 a month in services, like, well, my current payroll is $25,000 a month, that's handling the existing service level, so that's probably gonna stay the same. So I would fill out that line before any other line. Okay. If I look at new revenue, I need to think through what are my expenses going to be leading up to that new revenue. So it's a digital course, there's probably some contractor payments that maybe I'm gonna have before we are actually ramping up. It's important to forecast these out in the months that are gonna happen before you have the revenue so that you can see where your cash balance is. 'Cause as you notice at the bottom, You would put in your beginning cash balance, and then based on how you forecast, we're going to be able to determine, are there any months where, based on what you're wanting to do, are you negative cash flow, which means we got to readjust our forecast. That's why forecasting is super important, because we do it all on paper first. After I look at expenses that are directly related to my revenue forecasted items, I'm now going to go back and look at my historic expenses. What I am not going to do is take an average of my historical expenses and put them in my forecast. That is not forecasting. That's not even budgeting. That's just not good. Don't do that. What you're going to look at is your expenses, and you're going to take the time to determine, does this expense help me keep customers, or does it help me get new customers? That's an idea I got from a book written by Keith Cunningham. We do have 9 questions that we often will use to look at expenses to determine is it productive or not productive. But from a simple lens, Keith Cunningham's purchase— his perspective of get customers, keep customers, I really like for simplicity purposes. So you're going to do that with your historical expenses. Then you're gonna plug it in. That's how you forecast your financials for the upcoming year. This does take time. It is going to be some of the most worthwhile time you put into running your business though, because then you're gonna have a roadmap of what you wanna accomplish, and you don't stop forecasting and making changes to your forecast Until you're happy with the result. You're happy with the net income it's gonna offer, you're happy with your take-home pay it's gonna offer, you're happy with the growth. You do all that on paper first, and now you have this roadmap so that each month you can compare, how did I do to what I wanted to do? Forecasting is important, and profit also is important. So remember, profit is a choice. Have the courage and wisdom to choose it.
