When it comes time to sell your company, buyers don’t just care about what you’ve done — they care about what’s next.
They’re asking:
“Can this company perform in the future the way it says it can?”
And the only way to answer that question credibly is with a well-built forecast.
At Legacy Advisors, we’ve seen again and again how founders who use forecasting strategically are better able to control the narrative, defend their valuation, and reduce structure in the deal.
In this article, I’ll walk you through exactly how to use forecasting — not just as a financial function, but as a deal-making weapon that supports your exit from start to finish.
The Forecast Is the Future You’re Selling
When buyers underwrite a deal, they’re not just acquiring past revenue and EBITDA — they’re betting on your ability to perform moving forward.
A strong forecast:
- Helps buyers underwrite valuation
- Creates a clear path to ROI
- Justifies a stronger multiple
- Reduces the need for earnouts or escrows
- Builds trust early in the process
A weak or unrealistic forecast, on the other hand, is a red flag — and often leads to retrading, heavier structure, or lost deals.
In The Entrepreneur’s Exit Playbook (available here), I emphasize: “Valuation is a function of confidence — and confidence is built through forecast discipline.”
What a Great Forecast Looks Like
Here’s what buyers want to see in your forecast:
- Tied to historical performance with explainable variance
- Driven by bottom-up inputs, not just top-down growth goals
- Inclusive of KPIs like CAC, LTV, churn, margin, and sales pipeline coverage
- Broken out monthly (not just quarterly or annually)
- Includes assumptions, drivers, and scenario sensitivity
In short: a great forecast isn’t just a spreadsheet. It’s a strategic storytelling tool that connects your past to your future in a way that inspires belief.
How Forecasting Supports the Exit Narrative
Let’s break down how forecasting can be used across every stage of the M&A journey.
1. Positioning Your Company
The first thing we do with Legacy Advisors clients is help them shape their exit narrative — the story that will be told to buyers.
Your forecast plays a central role:
- Where is growth coming from?
- What markets or products are scaling?
- How does team or tech investment impact margin?
- What are the key inflection points?
Your forecast should reflect the vision of what buyers are stepping into. When that story is backed by numbers — not just ambition — the narrative becomes powerful.
2. Justifying Valuation
Many founders anchor on a multiple (e.g., “We’re worth 10x EBITDA”) — but buyers need to see how you get there.
A forecast shows:
- How recurring revenue expands
- When gross margin improves
- What hiring drives productivity
- How CAC efficiency trends
- Where EBITDA scales faster than headcount
Buyers will model their valuation based on your forecast — so give them a forecast you can defend, one that shows consistent, scalable, profitable growth.
3. Supporting Structure Negotiation
Forecasting impacts deal structure more than most founders realize.
Why?
Because when buyers feel risk, they offset it with:
- Larger earnouts
- Longer escrows
- Lower upfront cash
- More rep & warranty protections
But when a founder can clearly walk a buyer through a realistic forecast — with supporting assumptions, sales pipeline, and backlog — buyers often loosen structure and increase certainty.
4. De-risking Buyer Concerns
All deals come with objections.
Common ones include:
- “This growth isn’t sustainable.”
- “Margins are too thin.”
- “Customer concentration is risky.”
- “Founder is too involved.”
Your forecast allows you to proactively address these concerns.
For example:
“Yes, customer concentration is 40% now — but here’s how that drops below 20% over the next 12 months, with new client wins already in the pipeline.”
This kind of forecasting turns objections into opportunities.
Forecasting Frameworks We Recommend at Legacy Advisors
To support a strong exit narrative, we help founders build:
Monthly Financial Forecast
Includes revenue, COGS, gross profit, OpEx, EBITDA, net income.
KPI Dashboard
Tracks CAC, LTV, retention, churn, pipeline conversion, and margin.
Scenario Planning
Base, upside, and conservative models — with key driver assumptions.
Cash Flow Forecast
Especially important if working capital is tight or seasonal.
Cohort Analysis
Shows customer behavior over time — key for recurring revenue businesses.
Forecasting Red Flags That Kill Deals
Let’s talk about what not to do.
🚫 Top-down, arbitrary growth goals with no bottom-up backing
🚫 Margin expansion that lacks explanation
🚫 Forecast that’s never been updated or stress-tested
🚫 “Hockey stick” revenue models unsupported by pipeline or product
🚫 No link between sales hiring and revenue growth
🚫 Cost structure that scales ahead of revenue
These errors shake buyer confidence and force deal re-pricing or delays.
Case Study: Forecasting That Won the Deal
We advised a founder with $3.2M EBITDA and ~30% YoY growth.
During buyer Q&A, one concern arose:
“This growth looks strong, but can you sustain it without more sales hires?”
Our client pulled up their model:
- Pipeline by rep
- Sales velocity by stage
- Hiring timeline
- Ramp curves
- CAC per channel
- Closed/won bookings vs. forecast
The buyer team nodded. Their next comment?
“This forecast is one of the best we’ve seen. It de-risks the ramp.”
That deal closed quickly — with 85% cash at close, a shortened escrow, and zero earnout.
Tying Forecasting to Team Accountability
A forecast isn’t just a tool for buyers — it’s an internal alignment mechanism.
When used properly, it:
- Sets clear targets across sales, product, ops, and finance
- Creates accountability around inputs, not just outcomes
- Surfaces gaps in team execution early
- Encourages collaboration across departments
Your exit is a team event. And the forecast is how you align everyone to the final outcome.
Using Forecasting to Strengthen the Data Room
Your forecast becomes a critical part of your buyer data room.
We recommend including:
- Forecast summary (PDF)
- Full Excel model (with inputs clearly labeled)
- Forecast vs. actuals for last 12 months
- Cohort retention models
- Pipeline reports with weighted coverage
- Commentary around assumptions and drivers
This shows buyers that you’re prepared, thoughtful, and investor-grade.
Legacy Advisors Podcast Insight
On Episode 8 of the Legacy Advisors Podcast, Ed Button and I talked about how deals slow down — or fall apart — when founders “wing it” during forecast review.
One key takeaway:
“Buyers want to believe — but founders have to give them the numbers that justify the faith.”
Forecasting builds that bridge.
What I Teach in The Entrepreneur’s Exit Playbook
In The Entrepreneur’s Exit Playbook, I devote a full section to using forecasting to lead the deal narrative — not just react to buyer requests.
Because in a competitive M&A process, the company with the best forecast often gets the best terms.
It’s not just about how fast you’ve grown.
It’s about how clearly you can show what happens next.
Founder Mindset Shift: From Reactive to Proactive Forecasting
Most founders forecast reactively — to appease a board, to apply for a loan, to check a box.
But the best founders treat forecasting as a strategic advantage.
They use it to:
- Drive investor confidence
- Model leverage and capital efficiency
- Align teams
- Create exit leverage
- Eliminate buyer friction
Forecasting isn’t just math — it’s storytelling with numbers.
And it’s one of the few levers founders truly control.
Final Thoughts
If you’re thinking about selling in the next 12–36 months, now is the time to build a forecasting muscle.
Because the closer you get to exit, the less time you’ll have to fix it — and the more important it becomes.
A well-built, defendable forecast:
- Increases buyer confidence
- Justifies higher valuation
- Reduces deal structure
- Speeds up diligence
- Creates alignment across your leadership team
- Turns your business into a deal-ready machine
And remember:
Buyers don’t buy your past. They buy your future.
Your forecast is the roadmap that makes them believe it’s worth the price.
Frequently Asked Questions About Leveraging Forecasting to Support Your Exit Narrative
Why is forecasting so important when preparing to sell a company?
Because forecasting gives buyers a clear, credible roadmap of the future performance they’re investing in. When buyers assess your company, they’re not just paying for what you’ve done — they’re underwriting what comes next. A well-built forecast demonstrates that you understand your business drivers, can predictably scale, and have a disciplined approach to financial planning. As Kris Jones explains in The Entrepreneur’s Exit Playbook, forecasting turns your growth story from speculative to strategic. Without a strong forecast, buyers fill in gaps with skepticism — and that costs you leverage, valuation, and trust.
What makes a forecast “buyer-ready”?
A buyer-ready forecast includes:
- A detailed monthly financial model with revenue, margins, and EBITDA
- Key assumptions for growth (e.g., sales headcount, CAC, churn, customer LTV)
- Scenario planning (base, upside, downside) with clear variable drivers
- Forecast vs. actual comparisons to establish credibility
- Cohort data, pipeline metrics, and sales velocity
- Commentary that explains not just what, but why
Most importantly, it ties back to historical performance in a way that’s believable and supportable. Buyers don’t expect perfection — but they expect logic, structure, and realism.
How far in advance should a founder build out forecasting discipline?
Ideally, 18 to 24 months before initiating an exit process. That gives you time to:
- Establish a cadence of forecasting and tracking actuals
- Identify gaps in KPI reporting or financial systems
- Refine assumptions and business drivers
- Train your leadership team to contribute to forecasting inputs
- Build a track record that proves accuracy
Last-minute forecasts during diligence feel like guesswork. Buyers discount them heavily. But a two-year history of disciplined forecasting creates confidence — and confidence drives valuation.
How does forecasting influence deal structure, like earnouts or escrows?
When forecasting is vague or unconvincing, buyers tend to add more structure to protect themselves. That could mean:
- Earnouts: Future payouts based on hitting forecasted performance
- Escrows: Money held back post-close in case your forecast misses
- Lower upfront cash: To hedge the buyer’s perceived risk
- More restrictive terms: Including reps, warranties, and covenants
But when a founder presents a solid, believable forecast — backed by clear inputs and a defensible growth story — buyers are more likely to pay more upfront, reduce structure, and move faster through diligence. Forecasting earns you both money and momentum.
What role does forecasting play internally before exit?
Internally, forecasting aligns your entire leadership team around the goal of becoming a buyer-ready company. It:
- Establishes targets and accountability for each department
- Reveals where resource allocation isn’t driving ROI
- Exposes weaknesses in unit economics
- Drives strategic decisions on hiring, pricing, and product roadmap
- Gets everyone focused on exit-aligned performance, not just growth for growth’s sake
As Ed emphasizes at Legacy Advisors, “A great forecast isn’t built in Excel — it’s built through alignment, iteration, and execution.”