What’s Coming Down the Pipe: Forecasting for Calm Confidence

In engineering, I learned a lot about entropy: how everything naturally moves toward chaos. It doesn’t take much to push a predictable system into total disorder.

We’ve all heard of the butterfly effect, where one butterfly flapping its wings in Brazil eventually leads to a hurricane in the Atlantic. Or alternately, sticking with the weather theme, we all know deep down inside what the math proves out about weather predictions: anything outside of 1-2 days and it’s total guesswork.

You know I’m going to tie this back to your business, so while you’re probably thinking I’m going to say your business is an example of chaos theory (which it is) … I’m actually going to talk about understanding the predictable cycles your business experiences and how to bolster your forecasting.

Don’t be afraid of the word, we’re not dealing in absolutes and I won’t try to hold you to specific annual projections.

Feeling Blindsided

Don’t forget that this month we’re talking about Stage 3: Cash Flow Confidence. Last week we talked about the need for visibility, rhythm, and separation. Once you have embraced those three tenets, you have no excuse to continue avoiding forecasting.

When you only look at the bank balance at a moment in time, you have no awareness of what’s coming. Your bills, your taxes, client payments, none of them hold hands and walk through the door in an orderly fashion. They arrive like five-year-olds leaving class for recess, coming at you pell-mell, bouncing off of solid objects and each other, knocking over chairs, tables, and each other …

The mismatch of when they arrive, the timing of it all compared to the timing of your single glance at your single account … that is where the stress and confusion comes from. Without having identified the pattern, everything is a surprise.

BUT! There’s a big but here … I can’t lie …

But if you have visibility, you’ve identified the rhythm, and you’ve embraced separation, you will start to see the patterns emerge. The chaos suddenly has an order to it and it can be predicted to some extent.

Predictability

Nobody is saying you need to predict the weather 6-8 weeks from now. That’s absurd. Remember, we’re not dealing in absolutes or in perfectly ordered systems. Clients come, clients go, some pay on time, others less so. Taxes can be extended, vendors may be lenient with their terms, you can take a paycheck or avoid it when things are rough. That’s a lot of moving parts. Far more inputs than would be necessary to throw any organized system into chaos.

Ultimately though, all of this is predictable *enough* that you can look 6-8 weeks out and develop a clear enough idea of what’s coming to plan and prepare.

You’ve been separating your finances like we discussed, and it’s clear what’s coming in, what’s going out, why, when, where, and to whom. You’re looking at these accounts every week or two and you have visibility into the natural ebb and flow of your business.

Can you do those things and not be able to see what’s likely going to happen in the next 6-8 weeks?

That’s a rhetorical question. You absolutely can and will. (And you’ll sleep better to boot)

Every week you update the 6-8 week forecast, and every week the fog lifts and you’re making informed decisions and driving your business forward.

Forecasting

Don’t worry about complex math or in-depth financier work. Here’s what you do:

1.  Look back
   • What came in, what went out since you last checked?
2.  Look ahead
   • What are you expecting to come in and go out?
3.  Spot the anomalies
   • Is anything unusual coming up that will change the expected rhythm?
4.  Think about changes
   • Do you need to save more to cover the coming expenses?
   • Do you have extra bandwidth for more work? Need to drive more sales?

Basically, look at what’s coming down the pipe and figure out if you’ll be okay when it gets here. There shouldn’t be any surprises because you’re seeing everything almost two months out. If your specific business needs a longer window to prepare for the natural ebb and flow of your business cycle, by all means adjust to match what you need.

Going through this exercise regularly forces you to constantly know what’s going on. There’s no confusion. There are far fewer surprises. Frankly, there’s just confidence.

And just so we’re on the same semantic page here, when I say confidence I don’t mean confidence that your business is suddenly on top of the world with profits you always dreamed of. I mean that you finally have confidence that you know what’s going on in your business and that you’ve planned for everything you can.

Business can still be bad, you can still struggle, but at least you’ll be prepared.

The Shift

I know you’ve heard this before but you’re moving from reactionary to strategic. You will be making decisions with all the information at hand. You won’t lie awake at night worrying about all the unknowns because there just aren’t that many of them anymore.

The real shift comes from clarity, knowing what’s coming in the next 6–8 weeks, seeing how your choices shape what happens next, and feeling confident that you’re steering instead of flying by the seat of your pants.

Next week, we’ll talk about how that clarity becomes stability — when you pay yourself an appropriate salary and turn consistency into confidence.

Take Action

When you’re looking at your account balances this week, set aside 15 minutes to create a forecast like we talked about. It will be a living document that gets updated regularly. Look eight weeks out. Ask: What will be coming in, what will be going out, and what’s missing? Nobody’s going to hold you to your forecast. It’s for you and your leadership team.

Like anything else in life, the more you do it the better your forecasts will get.

Confidence doesn’t come from control, it comes from clarity.

Don’t shoot for perfect, shoot for prepared.