Most business owners say they “have a budget.”
But ask how often they review it, and you’ll hear silence.
That’s because budgets, the way most companies use them, don’t work. They’re static, forgotten documents — built once, filed away, and never updated. Worse, they make people feel like they’ve been given permission to spend.
If you want real control over your finances, you need something better:
A living, rolling forecast that drives decisions — not excuses.
1. Budgets Are a License to Spend
Traditional budgets are backward-looking. They start with “What did we spend last year?” and add a small percentage on top for inflation or growth.
That’s not planning — that’s guessing.
Budgets create a false sense of discipline. Teams treat them like entitlement limits:
- “It’s in the budget, so we can spend it.”
- “We still have $20k left this quarter, let’s use it.”
Sound familiar?
That’s why I prefer forecasts.
Budgets look in the rearview mirror.
Forecasts look through the windshield.
2. Forecasts Start With Profit, Not Expenses
A good forecast doesn’t start with what you’ll spend. It starts with what you want to earn.
When I sit down with a founder, we start with a clear profit goal.
Then we work backward up the income statement to figure out what the business can afford to spend while still hitting that target.
This approach is called bottom-up forecasting.
Instead of saying, “Here’s what we plan to spend,” we ask:
“Here’s the profit we need — what do we have left to spend?”
That’s how you flip the conversation from reactive to strategic.
3. Forecasting Creates Guardrails
Every business should have caps — not “budgets.”
Caps define the upper limit for spending, based on your model and goals.
For example, in high-performing agencies we typically see:
- 30% Cost of Goods Sold (COGS) — labor, contractors, direct delivery
- 40% Overhead Cap, broken into:
- 10–15% Sales & Marketing
- 15% Management & Admin
- 10% Operating Expenses
- 30% Profit Target
If you hold these caps, you’ll maintain healthy margins at scale.
And when something goes over, you’ll know exactly where the leak is — and whether it’s justified.
4. The Anatomy of a Great Forecast
A good 12-month forecast has five defining traits:
- It’s simple.
Align it with your chart of accounts — the same four-bucket structure:
Sales & Marketing, Management & Admin, Operating Expenses, Payroll Taxes & Benefits.
Don’t bury yourself in hundreds of line items. - It’s rolling 12 and rolling 3.
It’s measured looking on a rolling 12 and rolling 3 basis, not just monthly. - It’s dynamic.
Update assumptions based on reality — revenue trends, hiring plans, or cost increases. - It’s reviewed monthly.
A forecast is useless if it sits idle. Every month, compare actual vs. forecast. - It ties to cash.
A profit forecast without a cash flow view is half a plan. Always connect your forecast to a 12-month cash model.
When you treat your forecast as a living system, it becomes the heartbeat of your business.
5. Forecast vs. Actual: The Monthly Discipline
Each month, your CFO or finance partner should walk you through a simple rhythm:
| Step | Purpose | Key Question |
| 1. Review results | See where you actually landed | What’s different from forecast? |
| 2. Analyze variance | Identify cause | Overspending or intentional investment? |
| 3. Take action | Adjust next month’s plan | Do we cut, reclassify, or double down? |
If spending went up because you hired ahead of revenue or invested in a marketing test, that’s fine — if you’re tracking the return.
If it went up because of sloppy spending, you fix it fast.
This rhythm builds financial accountability into the culture.
You can’t fix what you don’t review.
6. Forecasts Make Accountability Measurable
You can’t hold someone accountable for a “budget” they didn’t build. But you can hold them accountable for a forecast they helped create.
That’s why we build forecasts bottom-up with department heads.
Each team owner defines their spending plan — within the company’s overhead caps — and commits to staying inside it.
We then tie spending limits directly to virtual credit cards (Ramp, Float, Pleo) so that once a department hits its cap, spending stops automatically.
This turns cost control from a policing exercise into a system.
No nagging, no chasing — just structure.
7. Forecasts Also Reveal “Launch Capital”
Not all spending is bad spending. Some costs are investments — what Greg Crabtree calls Launch Capital in Simple Numbers 2.0.
Launch capital is non-routine spend designed to generate future revenue — new services, markets, or marketing initiatives.
In your forecast, these should be tagged and tracked separately from ongoing expenses.
The key question:
“Will this spend generate at least a 50% return?”
For example, if you spend $100,000 on a new marketing campaign, your forecast should model at least $150,000 in incremental profit over the next year.
That way, every growth dollar has accountability attached to it.
8. Common Forecasting Mistakes
Even good operators fall into these traps:
- Too much detail. Forecasting isn’t bookkeeping. You don’t need 300 rows of data — you need directional accuracy.
- Ignoring cash flow. Profit doesn’t equal cash. Forecast cash inflows/outflows to see timing gaps.
- One-time planning. A forecast that isn’t updated monthly will always drift off reality.
- Delegating it away. A forecast built by your accountant isn’t enough — the leadership team needs to understand and own it alongside your CFO.
Forecasts only work when they’re part of the management rhythm — not an annual exercise.
9. Forecasts Protect Against Overhiring
One of the biggest drains on agency profitability is reactive hiring.
Without a forecast, founders hire when they “feel busy.”
With a forecast, they can see when capacity truly maxes out, and model what new hires will do to profit margins.
For example:
If your forecast shows your direct labor efficiency at 4.0. The new hire will bring you back down to 3.3, so you have a greenlight on the hire since you maintain 70% gross margins.
If that hire brings you below 3.3, then you need to reconsider how to deliver your services at a higher margin before pulling the trigger on the new hire.
10. Forecasts Keep You Ahead of the Curve
Here’s what happens when you forecast properly:
- You spot margin erosion early — before it hits cash.
- You can plan hiring and marketing based on data, not gut.
- You stop “finding out” about bad months after they happen.
- You make profitability predictable.
And when profit becomes predictable, your business value compounds.
Remember — EBITDA drives enterprise value.
Every percentage point of profit adds leverage to your eventual exit multiple.
11. Forecasts vs. Budgets — The Summary
| Budget | Forecast | |
| Purpose | Set limits | Drive decisions |
| Created | Once a year | Updated monthly |
| Owner | Finance team | Leadership team |
| Focus | Spending | Profitability |
| Behavior | “Can we spend it?” | “Should we spend it?” |
| Lifespan | Static | Rolling 12 months |
Budgets are for accountants.
Forecasts are for CEOs.
12. Final Thought
If your business is doing over $2M in revenue and you still don’t have a forecast, you’re flying blind.
The goal isn’t to predict the future perfectly — it’s to give your team the visibility and discipline to adjust before things go wrong.
Because in finance, the companies that win aren’t the ones with the biggest budgets.
They’re the ones with the clearest forecasts.
About Argento CPA
Argento CPA partners exclusively with high-performing marketing agencies that want clarity, strategy, and profitability — not just compliance.
We specialize in fractional CFO services, financial strategy, and profit improvement systems that help agencies link performance with profit.
Our team helps agencies:
- Track and improve LER by department and role
- Build training and incentive systems tied to profitability
- Design bonus plans linked to financial performance
- Establish feedback and reporting rhythms that sustain growth
- Align personal development with agency financial goals
Our approach is practical, fast, and collaborative — built for agency founders who want to scale sustainably with a high-performance team.