Was this email forwarded to you? Sign up here!
A Common Thread
Most founders build financial forecasts with the best of intentions.
However, across various industries (SaaS, CPG, consulting, hardware, and health tech), the same mistakes show up again and again.
Not because founders are careless, but because forecasting is counterintuitive.
After reviewing dozens of early-stage models (including one this week that inspired this piece), here are the six traps that consistently mislead operators, and how to avoid them.
The Linear-Growth Trap
The Fixed-Margin Myth
The Hidden-Volatility Problem
The Premature Hiring Spiral
The Cash-Timing Blind Spot
Misunderstanding Tax on Losses
Below, I’m diving into three of them.
If any of these resonate with you or you'd like to explore the other three, please send a reply. I’d love to share the rest.
The Reality Checks Every Model Needs
Forecasting is supposed to calm you. Let’s get you there.
1️⃣ The Linear-Growth Trap
Most forecasts assume smooth growth:
Month 1 → Month 2 → Month 3 → up and to the right.
But real businesses grow in steps, not curves:
A new distribution channel opens.
A sales hire ramp.
A product update accelerates conversions.
A marketing campaign unlocks demand.
Better approach:
Model events that drive growth, not arbitrary percentages. Then build forecasts around:
Conservative case
Base case
Upside case
Investors trust scenarios more than optimism
2️⃣ The Fixed-Margin Myth
Founders love fixed margins. “Gross margin = 65%, next line.”
But in reality… margins move.
Across industries:
SaaS margins shift with customer onboarding cost.
Professional services change with the seniority mix.
CPG shifts with freight and discounts.
Hardware shifts with scale-driven cost efficiencies.
Better approach:
Model margin sensitivity:
Pricing
Discounts or promotions
Customer mix
Supplier cost swings
Volume tiers
You don’t need perfect precision. You need to see the risk.
3️⃣ The Premature Hiring Spiral
Too many models assume: CRO, CMO, CFO, COO …all early.
However, early-stage teams rarely require all these roles to be filled full-time. Every early hire compounds burn and accelerate the cash-out date.
Better approach:
Link hiring to measurable triggers:
Revenue targets
Customer volume
Region or territory expansion
Product demand spikes
Build a hiring plan that drives business growth.
Final Thought
A forecast is not a prediction. It’s a tool for thinking.
Its purpose is to expose assumptions, identify failure points, and help you make the business harder to break.
If you can build a model that:
Flexes
Responds to uncertainty
Reveals risks early
Shows cash timing
…you’re already ahead of most operators.
Community Note
You’ve now seen the six traps that quietly warp early-stage forecasts.
But here’s the good news: once you spot the traps, you can steer around them.
Forecasting stops being guesswork and becomes a navigational tool.
If you’ve ever fallen into one of these forecasting pitfalls (or barely dodged one), hit reply and share the short story:
What happened?
What surprised you?
What did you change afterwards?
Your experience (messy, funny, painful, or triumphant) will help another founder avoid the same cliff. We’ll weave the best lessons into the NestLedger Playbook so everyone gets sharper together.
|
🪺 Resources 📚
Verizon Small Business Digital Ready $10K Grant
Complete two eligible Digital Ready courses or events between July 1 and December 10, 2025, to unlock the $10,000 grant application.
Who’s eligible:
For-profit small businesses in the U.S., Puerto Rico, or the U.S. Virgin Islands. Non-profit organizations are not eligible.
One application per business
Applicant must be 18+
How to apply:
Finish any 2 qualifying courses or events
Submit your grant application by Dec 10, 2025, at 11:59 PM PST