You need cash forecasts.
One forecast isn’t enough.
You need three scenarios.
You need conservative, realistic, and aggressive.
Three cash forecasts. Multiple scenarios. Range of outcomes. Your planning.
This guide shows you how.
Conservative forecast. Realistic forecast. Aggressive forecast. Your preparation.
Read this. Build three forecasts. Plan for range.
Key Takeaways
- Conservative forecast—assume lower revenue, higher expenses, and slower collections for worst-case planning
- Realistic forecast—use expected revenue, normal expenses, and typical timing for base-case planning
- Aggressive forecast—assume higher revenue, lower expenses, and faster collections for best-case planning
- Use all three—compare scenarios to understand range of outcomes and plan accordingly
- Update regularly—revisit all three forecasts monthly as actual results come in and assumptions change
Table of Contents
Why Three Forecasts
Three forecasts show range.
What happens with one forecast:
- Single point estimate is often wrong
- Range of outcomes is unknown
- Planning is based on assumptions
- Surprises are common
What happens with three forecasts:
- Range of outcomes is visible
- Planning accounts for uncertainty
- Decisions are more informed
- Surprises are anticipated
The reality: Three forecasts enable better planning.
Conservative Forecast
Build conservative forecast:
Lower Revenue Assumptions
What assumptions to use:
- 10-20% below expected revenue
- Slower customer acquisition
- Lower average deal size
- Higher churn rates
Why it matters: Conservative revenue shows worst case.
Higher Expense Assumptions
What assumptions to use:
- 10-20% above expected expenses
- Unexpected costs included
- Higher cost of goods sold
- More overhead
Why it matters: Higher expenses show worst case.
Slower Collections
What timing to assume:
- Longer payment terms
- More late payments
- Higher bad debt
- Slower cash conversion
Why it matters: Slower collections reduce cash.
Pro tip: Build conservative forecast. Lower revenue, higher expenses, slower collections. Use our Cash Flow Forecast Calculator for easy modeling. See our cash flow scenario planning guide for comprehensive modeling.
Realistic Forecast
Build realistic forecast:
Expected Revenue Assumptions
What assumptions to use:
- Based on historical trends
- Expected growth rates
- Normal customer acquisition
- Typical deal sizes
Why it matters: Realistic revenue shows base case.
Normal Expense Assumptions
What assumptions to use:
- Based on historical spending
- Expected cost increases
- Normal operating expenses
- Typical overhead
Why it matters: Normal expenses show base case.
Typical Collections
What timing to assume:
- Standard payment terms
- Normal collection rates
- Typical bad debt
- Expected cash conversion
Why it matters: Typical collections show base case.
Pro tip: Build realistic forecast. Expected revenue, normal expenses, typical collections. Use our Cash Flow Forecast Calculator for easy modeling.
Aggressive Forecast
Build aggressive forecast:
Higher Revenue Assumptions
What assumptions to use:
- 10-20% above expected revenue
- Faster customer acquisition
- Higher average deal size
- Lower churn rates
Why it matters: Higher revenue shows best case.
Lower Expense Assumptions
What assumptions to use:
- 10-20% below expected expenses
- Cost efficiencies realized
- Lower cost of goods sold
- Less overhead
Why it matters: Lower expenses show best case.
Faster Collections
What timing to assume:
- Shorter payment terms
- Fewer late payments
- Lower bad debt
- Faster cash conversion
Why it matters: Faster collections increase cash.
Pro tip: Build aggressive forecast. Higher revenue, lower expenses, faster collections. Use our Cash Flow Forecast Calculator for easy modeling.
Using All Three
Use all three forecasts together:
Compare Scenarios
What to compare:
- Cash positions across scenarios
- Runway differences
- Funding needs
- Risk levels
Why it matters: Comparison shows range.
Plan for Worst Case
What to plan for:
- Conservative scenario as baseline
- Ensure survival in worst case
- Build buffers
- Prepare contingencies
Why it matters: Worst-case planning prevents failure.
Optimize for Best Case
What to optimize for:
- Aggressive scenario as stretch goal
- Plan for growth opportunities
- Scale resources
- Capture upside
Why it matters: Best-case planning enables growth.
Pro tip: Use all three. Compare scenarios, plan for worst case, optimize for best case. See our cash flow scenario planning guide for comprehensive modeling.
Updating Regularly
Update all three forecasts regularly:
Monthly Updates
What to update monthly:
- Actual results vs. all three forecasts
- Adjust assumptions based on reality
- Revise future months
- Improve accuracy
Why it matters: Regular updates maintain relevance.
Track Accuracy
What accuracy to track:
- Which scenario was closest
- Patterns in variances
- Areas needing improvement
- Better assumptions
Why it matters: Tracking improves future forecasts.
Refine Assumptions
What assumptions to refine:
- Revenue assumptions
- Expense assumptions
- Collection timing
- Other key drivers
Why it matters: Refinement improves accuracy.
Pro tip: Update regularly. Monthly updates, track accuracy, refine assumptions. See our monthly financial review guide for routine.
Your Next Steps
Build three forecasts. Compare scenarios. Update regularly.
This Week:
- Review this guide
- Build conservative forecast
- Build realistic forecast
- Build aggressive forecast
This Month:
- Compare all three scenarios
- Plan for worst case
- Optimize for best case
- Update with actual results
Going Forward:
- Update all three monthly
- Track accuracy
- Refine assumptions
- Use for decisions
Need help? Check out our Cash Flow Forecast Calculator for easy modeling, our cash flow scenario planning guide for comprehensive modeling, and our monthly financial review guide for routine.
Stay informed about business strategies and tools by following us on X (Twitter) and signing up for The Initiative Newsletter.
FAQs - Frequently Asked Questions About Three Cash Forecasts Every Founder Should Maintain: Conservative, Realistic, and
What are the three cash forecast scenarios every founder should maintain?
Conservative (worst case), realistic (base case), and aggressive (best case) forecasts that together show your full range of possible cash outcomes.
Learn More...
The conservative forecast uses 10-20% lower revenue, 10-20% higher expenses, and slower collection timing to model your worst-case scenario.
The realistic forecast relies on historical trends, expected growth rates, normal operating expenses, and standard payment terms for your base-case plan.
The aggressive forecast assumes 10-20% higher revenue, lower expenses from cost efficiencies, and faster cash conversion to capture best-case upside.
Why isn't a single cash forecast enough for planning?
A single forecast gives one point estimate that is often wrong, leaving you blind to the range of possible outcomes and unprepared for surprises.
Learn More...
One forecast hides uncertainty because it presents a single number as if it's certain, when reality could land anywhere in a wide range.
Three forecasts make the range of outcomes visible, so you can plan for the worst case while still optimizing for the best case, leading to more informed decisions.
How do you build the conservative cash forecast?
Assume 10-20% below expected revenue, 10-20% above expected expenses, and slower collection timing with higher bad debt.
Learn More...
For revenue, use slower customer acquisition, lower average deal sizes, and higher churn rates to model a pessimistic sales picture.
For expenses, include unexpected costs, higher cost of goods sold, and additional overhead above your normal projections.
For collections, assume longer payment terms, more late payments, higher bad debt, and slower cash conversion cycles.
What assumptions go into the aggressive cash forecast?
Assume 10-20% above expected revenue, 10-20% below expected expenses, and faster collections with lower bad debt.
Learn More...
Revenue assumptions include faster customer acquisition, higher average deal sizes, and lower churn rates compared to the realistic scenario.
Expense assumptions factor in cost efficiencies being realized, lower cost of goods sold, and reduced overhead from operational improvements.
Collection assumptions use shorter payment terms, fewer late payments, and faster cash conversion to model the best possible liquidity.
How should you use all three forecast scenarios together for decision-making?
Compare cash positions across all three to understand your range, plan for survival in the worst case, and prepare to capture upside in the best case.
Learn More...
Comparing scenarios reveals differences in cash runway, funding needs, and risk levels, giving you a complete picture of potential outcomes.
Use the conservative forecast as your baseline to ensure the business can survive the worst case by building buffers and preparing contingencies.
Use the aggressive forecast as your stretch goal to plan for growth opportunities, scale resources, and capture upside when conditions are favorable.
How often should you update your three cash forecasts?
Update all three forecasts monthly by comparing actual results to each scenario and adjusting assumptions based on what actually happened.
Learn More...
Monthly updates keep forecasts relevant by incorporating actual cash receipts and payments compared to what each scenario predicted.
Track which scenario was closest to reality each month to identify patterns and improve the accuracy of your assumptions over time.
Refine revenue assumptions, expense assumptions, and collection timing based on real data so future forecasts become increasingly reliable.
What should you compare when reviewing your three forecast scenarios side by side?
Compare cash positions, runway differences, funding needs, and risk levels across conservative, realistic, and aggressive scenarios.
Learn More...
Cash position comparison shows how much money you'd have in the bank under each scenario, revealing the range between best and worst outcomes.
Runway differences highlight how many months of operations each scenario supports, which is critical for timing funding decisions.
Funding needs comparison shows whether you need external capital under the worst case and how much runway you gain if things go well.
Sources & Additional Information
This guide provides general information about maintaining three cash forecasts. Your specific situation may require different considerations.
For cash flow forecasting, see our Cash Flow Forecast Calculator.
For cash flow scenario planning, see our Cash Flow Scenario Planning Guide.
For monthly financial reviews, see our Monthly Financial Review Guide.
Consult with professionals for advice specific to your situation.
