How to build a financial plan (part 2 of 2)

This is part two of a two-part series on financial planning.

“You’re moving the goal posts on us,” my board member said.

“The plan is the plan.”

What did he mean?

The slide on the screen clearly said our revenue was “on pace.”

He went on. “The financial plan doesn’t change after we approve it in January. No matter what your outlook is for the year. Only if we officially re-forecast.”

Plan? Outlook? Forecast? Re-forecast? Now I was really confused.

I stopped the Board Member after the meeting.

“Hey, do you mind giving me a quick tutorial on all the financial plan language you were using?”

He said absolutely and we headed out for a drink. Over the next hour he gave me a financial masterclass I still remember today.

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Can you guess what I did wrong?

I’ll tell you at the end.

But first, here are ten questions about financial plans. Some from that conversation with my Board Member. Some from the mistakes that followed. All will make you a better operator.

Need help with your financial plan? I created an hour-long masterclass that goes through every step in detail. It’s available through Highland Academy (just start with a one-week free trial for access).

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1. What are “actuals” and how often do I update them?

A financial plan starts as a 12-month forecast. Then, as you close out each month and quarter, your team updates the plan with your actual results (called “actuals”) and compares them to your original forecast. As a rule, you want your actuals to beat your original plan. This means you and the team are exceeding expectations. The companies that struggle are the ones that let months slip by without comparing the original forecast to reality.

2. What is a quarterly or annual outlook?

An outlook is updated guidance you share after each quarter closes. It combines your year-to-date actuals with your view on how the remaining periods will turn out. For example: “After seeing Q2 profit, our outlook for the rest of the year has increased by 10% compared to our original forecast.” You should have a new outlook for revenue, expenses, profit, and cash after each quarter closes. An outlook is not a formal change to your plan. It’s your current read on how future quarters, and the full year will land.

3. When presenting to my Board, should I show my original forecast or my current outlook?

Both. Always show your original forecast alongside actuals (after the month or quarter closes). The original financial plan is what you committed to. Your actuals show reality. Then you can show your outlook next to your original forecast (for any month or quarter that hasn’t closed yet). This gives your Board of Directors the full picture.

4. How do I set forecasts that are ambitious but achievable?

Most leaders miss forecasts because the numbers were never realistic. They were overconfident, didn’t understand the business deeply enough, or caved to Board pressure. Your forecast should be something you and the team can actually hit. Not sandbagged, but conservative enough to build momentum. Budgets should be set against these more conservative numbers.

5. How do my financial plan numbers differ from team-facing goals like sales bookings, revenue, and profit?

Your financial plan is your firm commitment to the Board. It should be credible and conservative. Team-facing goals can be more aggressive. Many operators set internal targets 20% above the financial plan to create a buffer. For example, the sales team gets a bookings target that’s 20% above the financial plan forecast. This way, if the team misses their goal, you still hit the financial plan and you’re not in serious financial danger.

6. What’s the difference between a slight miss and a big miss?

A slight miss means coming in under 10% of forecast, or missing a component while still hitting your top-line numbers. You can usually recover from a small miss the following month or quarter. A big miss means missing top-line revenue, expense, or cash targets by more than 10%. Big misses are hard to recover from and erode confidence across the organization.

7. How do I communicate a miss to the Board?

Own it immediately and specifically. Don’t bury it in slides or soften the language. State what you missed, by how much, and why. Then share your action plan to correct it. Boards respect leaders who face misses head-on. They lose trust in leaders who spin or deflect.

8. What is a re-forecast and how is it different from an outlook?

A re-forecast is a formal revision to your original financial plan. It signals that the original numbers cannot be hit and the company needs a new baseline to operate against. If your Board approved the original plan, a re-forecast likely needs their approval too. You only re-forecast when something fundamental breaks: significant underperformance, a market shift, or a strategy pivot. An outlook updates your guidance. A re-forecast changes your commitments.

9. What do I do when I realize mid-year that we can’t hit our original forecast?

First, identify exactly where you’re off and why. Then decide: can you recover by year-end, or is this a structural miss that requires a re-forecast of the original plan? If you can recover, communicate that plan to your team and Board with specific actions. If you need to re-forecast, ask the Board to review and approve one. But never delete the original numbers. Show them alongside the re-forecast.

10. How transparent should I be with employees about the financial plan?

Share the important metrics (much of the summary tab), not the full model. The complete file contains salary data and complexity that doesn’t help most employees. I pull key info from the Summary tab into a company-wide dashboard: targets, actuals, growth rates, key health metrics. Transparency builds trust, and context drives stronger performance.

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Now back to my mistake.

The quarter before, I had lowered our outlook for the year because sales weren’t as strong as we hoped. When I presented our Q2 results to the Board in the next meeting, I compared our results to the lowered outlook, not the original financial plan. I said we were “on-pace”, but that wasn’t true.

My Board member was right. The plan is the plan. You can share your outlook, but you’re still accountable to the original numbers. Mixing them up without being explicit about it looks like you’re moving the goal posts.

Lesson learned. The hard way. Here’s a link to the full article:

How to build a financial plan (part 2 of 2)

Till next time,

Never say die 🏴‍☠️

Scot