You Know Your Numbers Cold. So Why Can't Buyers Trust Your Future?
Why historical data without reliable forecasts costs you valuation—and how to fix it before you go to market.
A founder came to me after a failed acquisition. The deal had been moving forward—LOI signed, due diligence underway, both sides optimistic. Then the buyer's team started asking questions about forecasts.
The founder could produce historical data without breaking a sweat. Revenue by month, by quarter, by year. Margins. Customer counts. Churn rates. Five years of clean financials, all organized and ready to go.
But when the buyer asked how the company planned to hit next year's targets—and what assumptions were built into those projections—the conversation stalled. The founder didn't have a real forecasting model. He had last year's numbers with a growth percentage tacked on. When the buyer pressed on capacity constraints, unit economics, and the specific drivers behind projected growth, there wasn't much to say.
The deal didn't collapse immediately. But the buyer's confidence eroded. Questions multiplied. Timelines stretched. Eventually, the buyer walked away—not because the business was bad, but because they couldn't get comfortable with what the future looked like. That's when the founder called me.
I call this the Rearview Mirror Problem—the pattern where founders have perfect visibility into where they've been but can't show buyers where they're going. It's one of the most common exit readiness gaps I see, and it's particularly dangerous because founders don't realize they have it until a buyer exposes it.
What the Rearview Mirror Problem Looks Like
The most obvious version is when there's nothing at all. No forecast. No projections. Just historical financials and a general sense that "next year will be better." This is rare among companies serious about selling, but it happens.
The more common version looks like forecasting, but it isn't. The founder takes last year's revenue and adds 20%. Maybe they adjust a few line items based on gut feel. They put it in a spreadsheet that looks professional. But there's no real model underneath—no logic connecting inputs to outputs, no way to stress-test assumptions, no explanation for why 20% instead of 15% or 25%.
When I dig into these forecasts with founders, the gaps become obvious quickly. They can't explain their unit economics—what it actually costs to acquire and serve a customer, and how that changes at different volumes. They don't distinguish between incremental capacity (adding one more customer to existing infrastructure) and step-function capacity (needing to hire a new team or build a new facility). They haven't mapped where they have underutilized capacity versus where growth will require significant new investment.
The financial review meetings tell the story. If your monthly or quarterly reviews are backward-looking report-outs—"here's what happened"—rather than forward-looking planning sessions—"here's what we expect and why"—you're driving by looking in the rearview mirror. That might work when you're running the business. It won't work when you're selling it.
Why Founders Fall Into This Trap
The first reason is that historical data is concrete and forecasts are uncertain. Founders are often precise, detail-oriented people. They're uncomfortable making claims about the future that they can't guarantee. So they focus on what they can prove—the past—and treat the future as inherently unknowable.
But buyers don't expect certainty. They expect rigor. They want to see that you've thought through the assumptions, built a model that reflects how the business actually works, and can articulate why your projections are reasonable. The goal isn't to predict the future perfectly—it's to demonstrate that you understand your business well enough to make informed projections.
The second reason is that many founders have never needed real forecasts. When you're running a business, you can adjust in real time. If Q1 comes in light, you pivot in Q2. You don't need a detailed model because you're making decisions continuously based on what's actually happening. The business runs on operational intuition, not financial modeling.
The third reason is that building a real forecasting capability takes time and discipline. It requires understanding your cost structure at a granular level—separating COGS from overhead, identifying variable versus fixed costs, mapping capacity constraints. Most founders are too busy running the business to build these systems, so they keep kicking the can down the road until someone forces them to deal with it.
What This Pattern Costs Your Business
The immediate cost is valuation. Buyers pay for predictability. When they can't see a clear path to future performance, they discount their offer to account for uncertainty. I've seen deals where weak forecasting cost founders 15-20% of the purchase price—not because the business was performing poorly, but because the buyer couldn't get comfortable with forward projections.
The deeper cost is deal risk. Due diligence is stressful enough without having to build forecasting capabilities while buyers are asking questions. When you're scrambling to create models and explain assumptions under time pressure, you make mistakes. You look unprepared. Buyers start wondering what else you haven't thought through. The power dynamic shifts against you.
There's also the cost of lost leverage. Strong forecasting doesn't just satisfy due diligence requirements—it gives you ammunition in negotiations. When you can walk a buyer through exactly how the business will grow, what investments are required, and what returns they can expect, you control the narrative. When you can't, you're at the mercy of whatever assumptions they choose to make.
Finally, there's the personal cost. The founder who came to me after the failed deal wasn't just disappointed—he was embarrassed. He'd built a successful business over fifteen years. He knew it was valuable. But he couldn't demonstrate that value in a way that gave buyers confidence. That's a hard realization after decades of work.
What Real Forecasting Looks Like
Effective forecasting starts with understanding your unit economics. What does it cost to acquire a customer? What does it cost to serve them? What's the lifetime value? How do these numbers change at different volumes? You need to be able to answer these questions with data, not guesses.
From there, you build a model that reflects how your business actually grows. This means separating the different drivers of revenue and mapping each one to specific assumptions. If you're projecting 25% growth, where is that coming from? More customers? Higher prices? Better retention? Each driver should have its own logic and its own supporting data.
Capacity planning is critical. Growth isn't linear. At some point, you hit constraints—you need more salespeople, more production capacity, more infrastructure. A real forecast identifies where those step functions are and what investments they require. It shows buyers that you understand the relationship between growth and the resources required to achieve it.
Good forecasting also means scenario planning. What happens if a key assumption doesn't hold? What if customer acquisition costs rise 20%? What if your largest customer leaves? Buyers will stress-test your projections. If you've already done that work and can show how the business performs under different scenarios, you demonstrate sophistication and reduce perceived risk.
Finally, forecasting needs to be a practice, not a one-time exercise. The companies that command premium valuations have been forecasting quarterly or monthly for years. They have a track record of projections versus actuals. They can show buyers how accurate their forecasting has been historically, which gives those buyers confidence in forward projections.
How to Know If You Have This Problem
The simplest test is to ask yourself: if a buyer asked me to walk through next year's projections line by line and explain the assumptions behind each number, could I do it confidently? If the answer is no—or if you'd need a week to prepare—you have this problem.
A more challenging test is to look at your forecasting track record. Have you been making formal projections and comparing them to actuals? If you've never done this, you don't really know how accurate your forecasting is. And if you have done it and the variance is consistently large, that's a red flag buyers will find.
Ask your CFO or financial lead how they build projections. If the answer involves taking last year's numbers and applying a growth rate, that's not forecasting—that's extrapolation. Real forecasting requires a bottom-up model that connects operational drivers to financial outcomes.
Where to Start
Begin with unit economics. Map out exactly what it costs to acquire a customer and what it costs to serve them. Get granular—separate variable costs from fixed costs, direct costs from allocated overhead. This foundation will inform everything else.
Next, build a simple driver-based model. Identify the three to five key drivers of your revenue and connect each one to specific assumptions. Don't try to model everything at once. Start with the biggest levers and add complexity over time.
Implement a monthly forecasting rhythm. Every month, project the next quarter. Every quarter, project the next year. Compare your projections to actuals and analyze the variance. This builds the muscle memory of forecasting and creates a track record you can show buyers.
The most common early mistake is over-engineering. Founders who finally commit to forecasting often try to build overly complex models that capture every variable. These models are hard to maintain and hard to explain. Start simple. A clear, defensible model beats a sophisticated one that nobody understands.
Questions for You and Your Team
Before moving on, take a few minutes to reflect on these questions. The goal isn't to have perfect answers—it's to surface whether this pattern might be affecting your exit readiness.
If a buyer asked you to explain the assumptions behind next year's revenue projection, could you walk through the logic in detail? This isn't about having a polished presentation—it's about whether you've actually thought through how growth happens and what it requires.
What's your forecasting track record? How do your projections from twelve months ago compare to actual results? If you don't know, that's a problem. If you do know and the variance is large, that's useful information about where your model needs work.
Do you understand the step-function investments required at different growth levels—where you have the capacity to grow incrementally versus where growth requires significant new investment? Buyers will ask this question. Your answer reveals whether you're thinking like an operator or like an owner preparing for transition.
Take the Next Step
If you want to see where your financial visibility stands relative to other exit-ready companies, take the Exit Readiness Assessment. It's a free 20-minute diagnostic that scores your business across six dimensions buyers scrutinize during due diligence, including KPIs & Forecasts.
Take the Exit Readiness Assessment
If you'd like help building forecasting capabilities that will stand up to due diligence scrutiny, I offer a free 60-minute consultation.
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About the Author
Bruce Eckfeldt is a strategic business coach and exit planning advisor who helps founder-CEOs of growth-stage companies scale systematically and exit successfully. A former Inc. 500 CEO who built and sold his own company, he brings real-world operational experience to strategic planning and leadership development. He's a certified ScalingUp and 3HAG/Metronomics coach, Certified Exit Planning Advisor (CEPA), an Inc. Magazine contributor, and host of the "From Angel to Exit" podcast. Bruce works with growth companies in complex industries, guiding leadership teams through growth challenges and exit preparation. Reach him at bruce@eckfeldt.com with any questions or if you want more information or to book a call with him.
