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- Into The Lender's Mind #5 The Art of Forecasting
Into The Lender's Mind #5 The Art of Forecasting
Why the way you forecast shapes the way you grow
Adina Fetche
August 17, 2025
A business is a pure strategy game.
Forecasting is about predicting the future. But not only. It’s mostly about creating a future your business can actually deliver. If you’ve ever been in a budget meeting, you’ve seen this play out.
The CEO leans forward, eyes bright:
“Next year, we’ll grow revenue by 20%. Let’s make it happen!”
Across the table, the operations manager frowns at their notes:
“We might manage 5% if we push hard… but 20%? Not unless we clone the sales team.”
And just like that, the forecasting tug-of-war begins.
Two Forecasting Worlds
Top-Down Forecast
This is leadership’s vision. The targets are bold, the ideas are exciting: “We’ll expand marketing, launch a new product, increase sales calls…”
It’s ambitious and inspiring, but often too optimistic. Leaders overestimate revenue and underestimate the resources needed.
Bottom-Up Forecast
This starts in the trenches. Teams build it project by project, cost by cost.
It’s cautious, sometimes too conservative. Teams want to under-promise so they can over-deliver. Instead of saying “We might grow 12%,” they say “Let’s commit to 5%.”
Quick Tip: The gap between top-down and bottom-up is not a problem. It is actually an opportunity for conversation. That’s where finance leaders step in adding the most value.
Which Forecast Should Be Done First?
Some companies start with bottom-up to avoid top-down bias.
Others begin with top-down to set ambition early.
My personal view is that there isn’t a right or wrong way. It depends on your culture.
A hybrid can work well, share part of the top-down to set direction, but leave room for fresh input.
Forecasting Techniques
1. Incremental Approach – “Last Year + X%”
You’ve had a strong year. In planning, someone says:
“We grew 8% last year. Let’s aim for 10% this year.”
And just like that, the forecast is done.
Quick and simple.
But shallow, it assumes tomorrow looks just like yesterday.
Where it works: Stable industries.
Where it fails: Fast-changing markets.
Category | Last Year Spend (£) | % Increase | New Budget (£) | Notes |
|---|---|---|---|---|
Sales & Marketing | £100,000 | +10% | £110,000 | More ad spend |
Operations | £250,000 | +5% | £262,500 | Adjusted for inflation |
HR & Training | £50,000 | +8% | £54,000 | Staff growth |
IT & Systems | £30,000 | +5% | £31,500 | Software renewal |
Other | £20,000 | +5% | £21,000 | — |
Total | £450,000 | — | £479,000 | — |
2. Zero-Based Budgeting – “Justify Every Pound”
You’re the marketing director. A blank spreadsheet lands on your desk:
“Build your budget from zero. Prove every pound you want to spend.”
Every campaign, subscription, and headcount is on trial.
It sharpens priorities and cuts waste.
But it’s draining and can lead to short-term cuts if overused.
Where it works: Resetting priorities or tackling inefficiency.
Where it fails: As an annual punishment exercise.
Expense Item | Proposed Spend (£) | Justification | Business Impact | Approved (Y/N) |
|---|---|---|---|---|
Google Ads | £50,000 | Generates 200+ leads/month | Increases revenue | ✅ |
Trade Shows | £15,000 | Build partnerships, lead gen | Brand visibility | ❌ |
New CRM Software | £12,000 | Improve pipeline management | Higher conversion | ✅ |
Office Lease | £30,000 | Needed for team workspace | Operational continuity | ✅ |
Training Budget | £10,000 | Upskill staff | Higher productivity | ✅ |
Driver-Based Forecasting – “Tie Numbers to Actions”
Sales are flat. In a meeting, someone asks:
“What if we doubled our investment in personal branding?”
Now the discussion shifts to levers: awareness → leads → conversions → revenue.
It links finance to operations and wins leadership buy-in.
But it relies on good data and deep understanding.
Where it works: When you need strategic clarity and alignment.
Where it fails: If your metrics are unreliable.
Business Driver | Current Metric | Target Metric | Linked Action | Forecast Cost (£) | Expected Outcome |
|---|---|---|---|---|---|
Website Traffic | 50k visits/mo | 75k visits/mo | SEO + Ads campaign | £40,000 | 50% more leads |
Sales Conversion Rate | 12% | 15% | Sales training + CRM upgrade | £20,000 | +£500k revenue |
Customer Retention | 70% | 80% | Loyalty program | £15,000 | Higher lifetime value |
Production Efficiency | 85% | 90% | Invest in machinery | £60,000 | Lower unit costs |
Brand Awareness | Moderate | High | Personal branding + PR | £25,000 | Stronger pipeline |
Pro Tip Box:
Use Incremental for speed, Zero-Based for discipline, and Driver-Based for strategy.
The best budgets combine all three depending on context.
Think of these as different camera angles:
Incremental = the wide shot.
Zero-based = the close-up.
Driver-based = the action shot.
Use them together, and you don’t just forecast the future, you design it.
My Advice for Your Next Budget
Next time you sit down to build a budget, don’t just ask:
“What did we spend last year?”
Instead, ask:
“What do we actually need to achieve our goals this year?”
Here’s a simple 3-step checklist you can apply straight away:
Start with your drivers – Identify the 8–15 things that truly move the needle in your business.
Challenge assumptions – Don’t accept last year’s numbers without asking why.
Stress-test the plan – Run at least one conservative and one ambitious scenario to see how resilient your budget really is. Run some “what if” scenarios.
This approach will make your budget more strategic, more realistic, and far more valuable when it comes to decision-making.