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Forecasting: How to do it right

Published by Summit Marketing Team on 26 Feb 2020

The Virtual CPA Success Show for Creative Agencies: Episode 8


A lot of companies out there do budgeting, but not many companies do forecasting. But budgets can often be too static, and they don’t take into account unexpected factors that could impact your ability to stay on track.

In this episode, Jody Grunden, Jamie Nau, and Adam Hale discuss the importance of forecasting and how to implement it into your business. Listen to learn about how forecasting can be used to map out and reach your long-term business goals.

Jamie Nau: Welcome to Episode 8. Today we have a very important topic that I'm not sure everybody out there is doing right now. Today we're going to talk about forecasting. So first off, we're going to talk about some terminology. We know a lot of companies out there do budgeting, but not all companies do forecasting. I'm going to start off with you, Jody. If you want to talk a little bit about the terminology we're going to talk about throughout this podcast. And just for a real introduction here, I do have Jody Grunden and Adam Hale with me again today. So that's the people talking to us about this topic, and they'll really give us some good info. So Jody, start off by talking about kind of the terms we're going to use throughout this podcast.

Jody Grunden: So the first term is budgeting, and budgeting is probably what everybody is familiar with. We start out, or we call it the plan, where you start out at the beginning of the year and figure out, hey, here's what we're going to have in revenue. Here's what we have in expenses. It could be broken out by month. It may not be depending upon the company. And then the very bottom line is here is what we have in cash. So typically a budget is going to be revolving around a profit and loss statement, your typical income statement, With forecasting, it's one step further. You're taking that budget or plan and making it dynamic. So the forecast typically starts with the revenue side where it's adjusted every month based on what actually does happen throughout that year. So for instance at the beginning of the year we may not have saw that we're going to actually hire two new people in February. Now we're doing that, so that number will obviously change in what was in our forecast, we didn't have it in the original budget. So that's more of a dynamic thing, it’s going to change on a monthly basis as it could be drastically different. More than likely it’s going to be drastically different at the end of the year. Resourcing. Adam do you want to go ahead and shoot at resourcing?

Adam Hale: Yeah. Before we jump into resourcing, you know, the analogy that I always like to use with the team and with my clients and everything, you know, as it relates to forecasting versus budget, because those are a lot of times are used interchangeably. But the way I kind of think about it, I personally like to go on vacations and so like anybody else, whenever you need to go somewhere that you've never been before, you kind of have to map out what's the best way to get there. You know, if you were going to hop in the car and take the family to a trip. Sure. You can just keep driving south until you hit the ocean. Hopefully you'll get there. But you really need to have, you know, you plot in the coordinates where you want to go. That's your goal. And you put that in, and that puts out the plan or the budget. That's the static piece. But unless it goes perfectly, which it usually doesn't at least whenever I go on vacation and get in the car. What ends up happening is you get stuck in traffic. People have to pull over. Just life happens once you get in the car. That's what the forecast is for us. So the forecast gives us the ability to reroute, still get us to the goal and kind of estimate, what does that mean? Does that mean it's going to take us longer to get there? Are we going to be able to find a shortcut to get back on our timing? And then we use tools like KPIs, and metrics as kind of like the road signs. They're the ones that either tell us where we're at right now, or what we need to do in order to get the rest of the way. So that's kind of the analogy that I like to think about whenever, you know, whenever I'm kind of comparing the difference between like a forecast, and a static budget.

Jamie Nau: That's a great analogy. So as you say, going back to resourcing, would resourcing be, at least for my family, how are we going to make it to the next gas station? Is that is that kind of the resourcing part of it?

Adam Hale: Absolutely. That's perfect. Yeah, because resourcing is really just, you know, that's what most people do either in an Excel spreadsheet, or they'll use something like Harvest Forecast or something else where you're planning out your people. So you're doing your peopling to figure out who's working on what projects by discipline or whatever. And sometimes people have a longer, you know, they work with bigger projects and they can plan that out for three or four months. And a lot of times it's more of like a week to week kind of change. But they really do fit hand-in-hand because once you have the plan, and you're happy with getting to where We all have a mutual understanding of how we're going to get to this goal and what we need to do to accomplish it, and then of course, when life happens and people change jobs, you know, customers come and go, that kind of thing, and we reroute then we can kind of use that resourcing to understand, you know, how we're going to get to that next milestone. And so totally different concepts, all equally important, but they serve just different, you know, they have a different purpose along that same path.

Jamie Nau: I think what we find is a lot of people do budgeting, a lot people go into the year. I always ask the majority of the companies that we work with before we even start working with them, what is your plan for 2020? They can at least give me a revenue number, maybe a net income number and maybe cash goals. So that would be the budget. And then a lot of companies do the resourcing, they know what the next three months looks like. They know what jobs they have signed. They know who's working on those jobs, and so they kind of do those two parts of it. So the part that we usually come in and fill in is the forecasting, and that's the part that Adam talked about. So Jody do you want to talk about why we do that second part? Why we do the forecasting and why it's so important?

Jody Grunden: For sure. So in taking a step back, we first started delivering virtual CFO services back in 2002 - 2003. Typically, nobody really gave clients the ability to actually forecast, clients didn't typically have that ability. Technology wasn’t there, the advisory services weren't there. So something fairly new. So we started off giving it as more of a budgeting thing. Just like Adam said originally, you know, here's what we're thinking about doing now throughout the year. And then quickly, you know, the clients pretty much smacked us right in the face and said, hey, we don't care about this. It doesn't do us any good to look at this number over and over again because it's not even real anymore. It was like, oh great, we look back and see how great you did at predicting, and that was pretty much it. And they wanted something more and more that they could actually use as a tool to make those business decisions. And so that's where we decided, hey, let's see if we can flip it around and make it more dynamic and do the forecasting. And it wasn't probably until 2004, 2005, we started adding forecasting in it, and that's when everybody's like, wow, this is exactly what we need. And the funny thing is, all the big companies are giving it to their employees, that’s how big companies did it all time. They have entire finance teams and accounting teams on staff that were delivering this type of service in-house. And these smaller businesses, the two, three four million dollar businesses didn’t have that type of expertise. And so once we started giving them that type of insight, when they could actually start making decisions, that's when their businesses started really rocking and rolling. And our business as well, because it's like, wow, this is something so great, we want you to share that with your buddy that you met at the last conference, or that you hang out with all the time. So it was one of those things where we really helped our clients get that insight, and in the same respect, those clients helped us grow to the company we are today. So that's kind of our main thing, teaching a client how to look forward and help make those strategic decisions.

Adam Hale: And I think the important bridge there to, you know, kind of bringing back resourcing into it, is that a lot of times whenever people did go and try to be more dynamic, they were looking at what they have right in front of them. Accounting firms do this, too, like we'll meet with accounting firms, and they don't even really have a dynamic forecast. They're just working with what they have right in front of them. But what they're forgetting about is that common goal that we set at the beginning. The forecast is what you should be doing, resourcing is what you're going to be doing or probably going to be doing, you know, obviously that can ebb and flow a little bit as well. But the forecast should really be like gravity, drawing you back into center so that you can get to that goal place. And so that's kind of the difference, because I think a lot of times, exactly what Jody said, people abandoned the budget. It's worthless. I don't have those same team members. I don't have those same customers. That's for nonprofits. True. But then if you just take resourcing, you might be driving to the worst place possible and you might run out of gas halfway through because you're not paying attention and you're not thinking about where you should be based on the team size. You know, because we build the forecast around what your current team is always, and that's how it stays dynamic. What should you be doing based on how much you charge your customers, how busy your people should be, you know, based on your expectations of them. So I think that's an important distinction.

Jamie Nau: I think the important thing here too, is we've talked a lot about people changes and stuff like that, but also sometimes goals change. And so I think that's an important part of forecasting, you know, you don't want to say, oh, we really want to purchase a new building, but we can't talk about it until budgeting season in November and we're in March. You know, we don't want to have to have those conversations. You want to have those conversations as soon as you’re ready, and if we have an active forecast it's really easy for us to plug something in and say, okay, let's plug it in in September and see what happens. What does it do to our cash? What does it do to our profits? And other stuff depending on what changes. And so I think that's the importance of forecasting. It gives you that real time decision making ability that you don't have if you are only relying on a budget.

Jody Grunden: And I would say forecasting not just for the year, you know, for the December 31 year, but you're always forecasting going forward. I mean, when we look at stuff we do look at the December thirty first, but that's more for tax purposes really if anything else. We're not obligated by financial covenants or anything like that where that's a really important date for us. Really December 30 is for the IRS, if you're in the states. What I will continuously look over the next twelve months, you know, over the next two years, three years and so forth, you know, we're pretty corny—we have our forecasts filled out for the next 10 years. And so we've got a pretty good insight on where we're going to be in 10 years from now, assuming we are making very conservative assumptions along the way. And that's the key there, because you never want to just look too short sighted, you know, the next three months, six months and so forth, you have to look at that for short term reasons. But long term, you know, that's what your business is for. You need to really look and say, hey, where are we going to be? How does this decision really impact two, three years down the road. How is it impacting in a five years? I'd say most of the people listening to this podcast couldn’t tell you how it will impact in a year. And you really should be looking even beyond that and taking it one step further. You know, when you get to retire, when you're going to sell the business, you know, when you go to do whatever. Well, that's all part of the decision making today.

Adam Hale: Yeah, now you're talking my language. I mean, that's exactly what I like to talk about with clients. It's like, hey, what's the end look like here? Cool. You're having fun. Everything's great. That's fantastic. But like, what are we building towards? And then the years, you just break down into micro goals, you know, how you're going to get there if you want to be a ten million dollar agency and you are a two million, well obviously that's not the plan for next year unless things just go crazy. You know, maybe that's a three year build, or a five year build based on pace. And you know what, you can scale at a twenty percent growth rate over the next five years, whatever that looks like. Forecasting gives you the ability to set that longer range plan with very sizeable goals along the way, and be able to see it as they build. You know, if you build it dynamic with metrics, it makes a lot of sense, and you can reason through how you're going to get to ten million dollars.

Jamie Nau: And there's a lot of power of having stuff written down on paper. You know, I think that's one of the things I've noticed in forecasting with clients for the first time, is that just coming up with a plan and a long term goal of having something on paper just gives you the freedom to go out there and do it. Okay, we know you want to become a ten billion dollar company. This is what we need to do, and these are the steps we need to take along the way. If you misstep, Okay, let push it back a month, or two, and then the goal is still there. It just might be a different timeframe. And so I think there is a lot of power on having it on paper, not only the goals, but what you think those micro steps are. And it really gives you that that freedom a little bit to run your business. I think that's really important.

Jody Grunden: Yeah for sure, and to add to that, you know, when you look at your goals you're looking at a profit loss typically. Your goals really are not profit loss, that is like a phantom number out there. Your goals really are how much cash you want to have in the bank, where I want my liquidity to be, or my debt paid off at a certain time. You know, those should be your goals. You know, that's kind of we're shooting for. Your profit loss is how you get to those goals, and so it's important you understand where that's going to hit. So your forecast being dynamic really should have that on display as well. You know, are you going to hit your cash reserve goal by June of next year, or is it going to be July of next year? Can you have that line of credit paid off by the end of the year, or is it going to be more towards January, February? When you're making those decisions it's very important to know what the financial health is of your company at any particular time because it will sway in how those decisions are made. So should I take out distribution now in December, or wait until April for tax? If I take it out in December, I might put myself in a cash crunch in January, February. You need to really know that information before you act on it.

Adam Hale: Yeah, I think the toughest part too, sometimes with forecasting is like, okay, so I can sit down and plan my goal and where I want to be and then, you know, use my metrics and roadmap everything, but then how do you operationalize the forecast, to your point Jamie, putting it on paper? You have a lot of smart people on your team that maybe control different parts of the business. Maybe it's just you and you're wearing a bunch of different hats, but being able to understand what that is, and logic through how you're going to get there. Meaning you understand your metrics, you understand your capabilities, and how you're going to get there. You can then back end marketing plans and marketing strategies. You can put together profit share plans for the team. You can put together sales goals, and commissions for, you know, the biz dev area, those types of things. Without the forecast, it's extremely difficult to operationalize getting somewhere, because you don’t have it on paper where you can kind of show everybody the logic because as Jody said, we have a ten year plan. They're very conservative goals. I'm a pretty conservative person when it comes to that. So what he did, was he walked back the plan and he's like, look, this is how we're going to get there. Do you agree with these steps? Are these possible? And I am like, yeah, these sound doable. You know, it's not pie on the sky stuff, where its like, we're going to get to one hundred million dollars, you know, that kind of thing. It's really tangible, and something that you can look historically back at to kind of prove your ability to forward look at those goals.

Jamie Nau: Yeah, great. Okay. So I'm listening to this podcast. We've convinced them they are ready to do a forecast. How do they start? If I'm starting a forecast tomorrow, where would I start and how would I start on building that forecast?

Adam Hale: It starts with your team's ability. I mean, we're working with obviously service based businesses here. So we're leveraging not a machine, but we're leveraging people. So it comes down to their capacity. And so depending upon, you know, your product and what you're selling, the actual capacity, the employees is going to be different. So I have some agencies that, if they're especially on the SEO, or PPC side, where they're driving it like revenue goals, rather than looking at average billable rates, and things of that nature. So whether you're starting with how much an employee can do in order to get you to a certain spot, you can still walk backwards a little bit. What the utilization of that employee. So even whenever I have clients that don't even track their time, I still just walk into a feasibility study. So great. You have fifteen people on your team. You had a six million dollar sales goal. How are you going to get there? That means each employee has to do this. Well how much do they work a week? You know, after PTO, all that kind of stuff, driving at that net utilization number. Then I'm like, great. That means that you on average charge about seven hundred bucks an hour. Well, now I don't charge seven hundred bucks an hour. I'm lucky if we make a hundred and fifty bucks an hour. Well, then your current team size isn't going to be able to get you to that goal. So what does that mean? Then you go back into the forecast and you scale it up to show them, you know, how many people on the team they need in order to do that. So framing the revenue based on team capacity and abilities is the way to kick off that forecast. Everything else kind of falls in line after that.

Jamie Nau: Yeah. Great. I think a lot of this goes back to, and I know Adam wasn't in on that podcast, obviously he knows this stuff. But it goes back to what we measure. Right? So we're going to build a forecast, and then each month go back and measure it. So a lot of the stuff that Adam just talked about is very similar to what we talked about in our Production podcast. And so once you come up with those production metrics, you know, you want to make sure you're measuring after the fact how you're doing on these goals, because they're going to tell you, oh, we missed our forecasts this month that's going to tell you why. Was it hours? Was it rate? Was it customers? What was the thing that you're measuring as a production that caused you to miss your forecast that month.

Jody Grunden: That's the key part, right? So once you've identified how you created your forecast, whether it's by hours in a billable time, or maybe a non-service based company where it's maybe units, or subscription base where it's, you know, when you know what type of churns the product has, all these different factors that really go into identifying what makes that revenue tick is really important when you're creating. But then measuring it, like what Jamie's saying, along the way is super, super important because then that allows you to make changes along the way. Like Adam mentioned before, you know, the forecast is very dynamic. It's not static. And so if you find that you thought your billable hours was one hundred and fifty dollars per hour, and in reality it came out to one hundred and seventy five, well, then you're underestimating your forecast. Which in some ways some people think, well, that's really conservative. In other ways it's like, well, but then you're not preparing yourself for that crunch because you're people can't handle X amount of dollars. So you might be putting your people in a lot of stress to perform at that level. So you need to be very realistic with it. But the key is constantly looking at those KPIs that you're generating, and making those corrections along the way. You know, if you have the pie in the sky thinking, your utilization is going to eighty percent across the board, that's what you base your forecasts on and find out sixty percent. Well, don't keep it at eighty percent through the rest of the year, it’s distorting your decision making. Bringing it back down to reality is the key there. So consciously monitoring, and managing those KPI is really important part of the forecasting process.

Jamie Nau: So Adam started with the top line. So if I forecast how much I'm going to make, what's my next step? I know how much revenue I'm bringing in. What do I need to determine next?

Jody Grunden: Next thing is you need to figure out how much expenses you have directly related to that revenue, so that’s your production cost. Your production cost, as we talked about in a prior podcast, is the basic direct expenses. So it's the team salary, their burden costs, any direct costs related to production, whether that is software, that's going to be related to the production side. So identifying the people that's going to generate that and inciting that into your forecast on the expense side. So maybe you forecast you are going to be a six million dollar company. Typically production costs will be roughly fifty percent of that. So you should probably be budgeting somewhere in the three million dollars of expenses, and breaking it down specifically to the people that are actually working on the product. And so that's the second part.

Adam Hale: Yeah, I would say we put together a payroll grid, so people are going to be your most expensive. They're going to live everywhere in the P and L, but that's going to by far make up usually about seventy or eighty percent of your cost. So what we do is, we put everybody on the team into whatever their role is. So we break them down between production. You know, if they're working on billable work, even if they're in a non-billable capacity, if their main thing is delivery, then they belong in the production expenses as Jody mentioned. And then other folks will live in admin, and also marketing. So bucketing your team and making sure that their expenses are in the right place is probably the next part. All the benefits and additional costs, like payroll taxes and everything else that go along with the team go into the appropriate bucket. Again, that's going to probably take care of seventy to eighty percent of your expense. Then all you have to do, the next step after that, is just put together a list of the other ten to fifteen hard costs that you have. And again, bucket them in the right way. So if you have, you know, put them in the admin category, if they're admin expenses. If you have a marketing budget or a business development budget, put those into their own little budget facilities. Once you get those all listed out, what I typically recommend clients to do is go back, and look at historic, see what you spent over the last year or two. And that's going to be your starting point. Round up, around, down, look for anomalies, those kind of things. And then, you know, leave yourself like an adjustment column. And then the next column is kind of what you want it to end. So once you put in and filter and all those additional hard costs, what your employee cost is, it's pretty much built at that point in trying to be specific.

Jody Grunden: Try to be specific. If you know that you've got a conference coming up, let's say you take everybody to Drupal Con in May. You allocate that expense to May so that you know, hey, that's going to hit in the month of May. Same thing with subscriptions that you know are going to be a reoccurring thing. If you know they're going to hit during a specific period, allocating that is key. It also happens when we talk about admin costs. We're also talking about the employees that belong in the admin. So if you've got a bookkeeper, if you get an accountant, a CFO, virtual CFO, or in house staff CFO, or if you've got anybody relating to the admin part of that, you know that they would go in the admin bucket. Along with the sales and marketing team, they go in the sales and marketing budget. Obviously, you’re not going to have anyone in facility department, so that's going to be a non-payroll department, but make sure that you don't just lump them all into one area.

Jody Grunden: Why is that key Jamie? Why would you not want to lump them all into one area?

Jamie Nau: I think that the main reason that I would want to do that is so I can compare across the industries. So I think you want to make sure you're comparable, and you want to know exactly what you're doing as well. So one of the things we've talked about in previous podcasts, is a lot of companies will try to go through and allocate those costs into jobs. So they'll go through and say, oh, we have a desk and we're paying this. We're paying for Slack and we're doing this. When I'm looking at job profitability I want to assign those costs to that. But if you have those costs bucket into other areas on the P and L, all I need to look at is my gross profit, and look at the direct costs associated with that because I know, and we talked about this on our last podcast, I know my overhead costs are thirty five percent of my bottom line. So if I'm able to do that math I can say, as long as I hit fifty percent on this job plus a little bit, those costs are okay for me. So as long as I am looking at them separate. It just makes for a much easier conversation than us trying to allocate that out.

Jody Grunden: Adam, what about sales on a non-service based business like some of our product people, or even SEO, SEM people? How would you do the revenue side of those?

Adam Hale: Yeah, we're not selling widgets. So we don't apply to overhead in a service based model, just doesn't make a ton of sense just because it can change with technology, it can change with ebb and flow with sales in a given month, and it just totally changes how you apply the overhead just because sales are low one month, you know, that kind of thing. So yeah, you definitely need to bifurcate, the production expense from the rest of everything.

Jamie Nau: Yeah it defiantly can mess with your margins. Your margins look a lot worse if you're if you're marking up your product by five percent and your margins are only thirty percent, you're like, what's going on here? And then you have to look at that a little bit differently and look at the margin separately. Separate them out for sure.

Adam Hale: Yeah. So a lot of times what ends up happening is we'll get an agency that's like, hey, I'm a twenty million dollar agency. Well no, your flow through ad spend is fifteen million dollars, you’re a five million dollar agency. So all their metrics and everything kind of get thrown off. So the first thing you got to do is just take a look to see if their flow through, or if their markup. So if they're just flow through, they don't even belong on your P and L. They should be running through your balance sheet, because it's just an end in and out of somebody else's money to liability basically whenever you get that cash. So you don't even want that showing up on your P and L. And then whenever it's a percentage and you have the markup, then a lot of times there's a couple different ways to do it. If it's not as big of an example as that twenty million dollars, you can put the whole thing on your P and L and kind of measure it out. But typically, you just want to bring over the markup portion over to the net number over, so that you can kind of see, otherwise it's going to just throw everything off if you're working with a twenty million dollar top line number.

Jody Grunden: Yeah you might have a gross sales number, and then net sales number. That net sales number is just simply the gross sales minus all the expenses that Adam was talking about there. And then you're taking all your percentage than off the net sales. That's the key there for sure.

Jamie Nau: Great. So I've forecasted my revenue. I’ve forecast of my expenses. Am I done now?

Adam Hale: Yeah. I mean, if you're happy with the results, and again that's now what we've done. We built the plan, or the budget. We haven't really built the forecast. So as Jody mentioned, you definitely want to make sure that you put those ebbs and flows that you know of within each month, and you want to build your team capacity based on month as well. Because what will end up happening is you'll get through two months and you'll forget that, you know, it's not like two twelfths of that expense just disappeared. Now if it's like a bank service charge, or something like that, then, yeah, two twelfths is good. You can have those. But other expenses too, just to think about before you get off of the expense side of the build out, is we do things called bucket budgets, and they're extremely important to us. So marketing, for example, is a good one. So if you decide, hey, I've got one hundred and twenty thousand dollars’ worth of you know, these ten accounts that make up a hundred and twenty thousand, that's going to be my marketing budget. What you don't want to do, and you have no idea when you're going to spend that money, what you don't want to do in a forecast. So turning the plan into the forecast. So the plan might, you know, that original budget just at ten thousand dollars a month. When we operationalize this thing and we turn it into the forecast, one key change is going to be, just because January went away and we didn't spend any marketing, it doesn’t mean we just burn off ten thousand dollars of our marketing budget. Try to run that one by your marketing person. Okay, you've only got one hundred and ten thousand dollars to work with now. It's like no, you still have one hundred and twenty. So those are, that's some of the maintenance of turning, and operationalizing your budget, or plan into a forecast. So that'll be important maintenance along the way I think. So you're never really done. Whenever it comes to the forecast side, you're always going to use it to kind of scale the business in, and modify for changes. That's kind of the dynamic part of the forecast.

Jamie Nau: Yes, exactly. I think the other part, too, is oftentimes when forecasting expenses, it takes a couple of cuts at it.. So if I have six million dollars in revenue, and then I go out and reach out to the teams and say, okay, marketing team, send me your original budget, and then you ask someone else to send the original budget, you throw all those expenses into your plan and you might be coming up with a loss. You might say, oh, wow, we're going to have a loss next year. Then you kind of go back to your marketing team and say all right, what can you do without? Let's relook at this budget. Oftentimes when you go through expenses, it takes two or three attempts to get that expense forecast updated and the budget ready to go before it actually is ready to go. So I think that's the big thing, is everybody wants a lot, and so you want to make sure you figure out what your priorities are, and the budgeting is a great time to have that discussion.

Jody Grunden: I think it's important, and I think what you're both alluding to is that when you're creating this, you make sure that you're not just creating internally with your CEO, and the CFO, you should be creating it with all the departments. Marketing should have a say in what's going on, production, as well as technology, all the different areas should actually have some sort of influence in this budget because they have to live by the budget. So what you don't want to do is say, well, hey, I would've done this had you budgeted more money. It's like, why didn’t you mentioned you needed this in the first place? We could have done something back then. So it's really important to include everybody, and especially as a CFO, you should be really involved in all the different departments helping create these budgets and keeping everybody at task.

Adam Hale: So that's why we typically, I mean, at least I try to work with a lot of my clients in October. I think that's pretty standard for all of our clients here at Summit. October seems to be the time where you have enough clarification, where you're working with three quarters of information, and you kind of have a flow and a rhythm of how things are going. So at that point, you can look into Q4 and use the entire Q4 to do exactly what you're saying. Just kind of hammer out the details.

Jamie Nau: Yeah, for sure. I think the biggest thing that's been throughout this, and I think this is what I'm learning throughout the podcast. I think I've always known this. But like our number one job is to be a conversation starter. Everything we do is to start conversations throughout the team. It's like, you know, even the forecasting process. It is important to have a forecast. It is important to have goals written down. But the conversations that are started throughout the forecasting processor are key to any business. I think that's one of the most rewarding parts of being in finance is like, you're involved in everything. You can hear a lot of the conversations, and see what conversations make a business tick.

Adam Hale: Yeah, I think one of the more sobering moments is whenever you look to see how the plan was built and what percentage they're going to be at, and then you go back to them and say, hey, like we actually built this thing for a loss, we've got to do some tweaking. Or you go to the biz dev team and you say, hey, based on the people we have on the team and everything, we should be an eight million dollar company, we're doing five million dollars. So one question is, how do we get to eight million dollars? Or do we need trim back? And if we trim back again, if seventy, eighty percent of your cost is people, guess what that means? So now you've got kind of rescale and reorganized the team a little bit, and that comes up a lot whenever we do this planning. I think, you know, we're here to help clarify direction. I mean, the owner and leadership is coming up with where they want to get, and they obviously are going to craft how they want to get there. But it's our job to kind of, you know, map it all out and lead the way.

Jamie Nau: So I think we've done a nice job helping people start a forecast here, or at least have an idea how to start. So if anyone has any questions, we do have an e-mail address for this podcast. It’s:vcfo@summitcpa.net. You can ask questions, and one of the three of us will reach back to you. And also, if you want to be a guest, or you have any recommendations for topics, please send e-mail to that address. Again it's: vcfo@summitcpa.net. So before we end the podcast, Jody, any final thoughts on the forecasting process that we didn't touch?

Jody Grunden: No, I think the key is just making sure to understand that the forecast is always dynamic. It's something that you want to change on a regular basis. Don't feel like you set it in stone and that you've got to abide by it all the way through. It's a dynamic situation. So it's something that you've got to be able to create in that dynamic mode and then manage it dynamically, meaning that you've got to know the KPIs that drive that forecast. That's really key. And then using it for strategic decisions is really important. And then like I said, just looking not only at the profit loss, but looking at your balance sheet, or your cash position, or your debt position, and so forth, and manage your forecast around it.

Jamie Nau: Well, thank you, Adam. Thank you, Jody, for joining us. I think a lot come out of this podcast. And on our next episode, we hope to talk about recurring revenue. I know this is a topic near and dear to us because this is our model, and I think it's a model that is really helpful for any company. So that's our next topic. Look forward to talking you guys again soon. Thanks for joining.


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