How far ahead should I plan?

Thirteen weeks is the common horizon for cash because it is far enough to act and near enough to be more than guesswork. Longer than that becomes a story about the future.

Is it wrong to hold a large cash reserve?

Holding a buffer is what lets you pay people through a slow month and refuse work that would compromise you. That is not hoarding, it is capacity to keep commitments.

What if the numbers say stop and I feel I should continue?

Both are information. But make the decision knowing what the numbers say rather than avoiding them, and say it out loud to someone who is not depending on you for a wage.

← Answers

Is it a lack of faith to plan and forecast?

No. Diligence and trust are not opposites, and "it will work out" is not a cash-flow plan. The tradition this question comes from is full of counting costs before building and storing grain before a famine. Planning is what makes it possible to keep your word later.

Presumption is not faith

Taking on an obligation on the assumption things will work out — and calling that trust — is the failure worth naming. It is the reason an owner signs for equipment he cannot service and then has to choose between the payment and payroll. Nobody is served by that, least of all the people relying on the wage.

A forecast is a promise-keeping tool

Knowing week nine is tight is what lets you tell a supplier early, or not take a job you cannot resource. Owners without a forecast do not avoid those problems; they meet them later, with fewer options and usually with somebody else absorbing the surprise.

What planning cannot do

It cannot tell you what happens. A thirteen-week forecast is a set of assumptions, and the honest version says which ones it rests on — that June collections land like May's, that the big invoice does not slip. Planning does not remove uncertainty; it makes it visible early enough to do something.

Where the worry usually comes from

Owners who ask this have often been told that detailed planning shows a lack of trust. It is worth asking who benefits from that idea. An owner who does not look closely at his numbers is easier to sell things to.

Also asked

How far ahead should I plan?: Thirteen weeks is the common horizon for cash because it is far enough to act and near enough to be more than guesswork. Longer than that becomes a story about the future.
Is it wrong to hold a large cash reserve?: Holding a buffer is what lets you pay people through a slow month and refuse work that would compromise you. That is not hoarding, it is capacity to keep commitments.
What if the numbers say stop and I feel I should continue?: Both are information. But make the decision knowing what the numbers say rather than avoiding them, and say it out loud to someone who is not depending on you for a wage.

Written for your trade

This is the kind of thing Solomon works through with owners using their own numbers. See how it works →