A forecast that held for a full quarter, on flat revenue
A marketing agency with two service models, direct and white label
Fractional CFO and forecasting
- Forecast held a full quarter
- People cost -3 pts
Revenue roughly flat year over year, profitability up, and a forecast that came in nearly identical to actuals for a full quarter.
3 months
Consecutive months of consistent operating profit
-3 pts
Rolling average people cost as a share of revenue
Flat
Revenue year over year, with better profitability
1 quarter
Forecast, actuals and prior year came in nearly identical
2 models
Service lines split so each one's true margin was visible
Percentages, multiples, counts and timeframes only. Client revenue, profit and cash figures stay private.
The short version
- Two owners, two service models, and a busy year that left no margin for company growth.
- We built the year's forecast from the bottom up, split by service model and account size, and modelled losing the largest account.
- Q1 landed with forecast, actuals and prior year nearly identical.
- Revenue flat, profitability up, people cost down about 3 points.
Forecasting off last year plus a percentage?
There's a better way to do it, and it takes about a month to build.
The situation
The agency runs two service models: direct client work and white label work for other agencies. Two owners, both deep in delivery.
At the end of 2025 the honest assessment was that a very busy year had left "zero margin for company growth."
The owners needed to step out of daily operations for the company to become more valuable. No amount of working harder solves that.
The tension most case studies leave out
A leaner team made cash flow more predictable. It also made bandwidth thinner and the work heavier. As one owner put it, having almost no employees looks good on paper and increases the workload. Both were true at once.
What we did
Built the forecast from the bottom up
Not a growth rate applied to last year. Recurring revenue split by service model, each model split into small and large accounts by customer count and average price. Project revenue forecast separately.
Why the structure matters more than the number
It makes the forecast arguable. When the owners disagreed with an assumption, they could point at the assumption instead of at the total.
Modelled losing the largest account
One large direct account had a new decision maker shopping for something cheaper. Rather than note the risk and move on, we modelled the year with that revenue gone. If it happens, the plan exists. If it doesn't, the downside case cost an afternoon.
Re-scoped project revenue to the months it closes
The prior year's project total was inflated by a large pass-through expense, which made the base look better than it was. We cut the projection and squeezed project work into a March-to-October window.
Forecasting it evenly across twelve months had been building a miss into every Q1.
Picked the conservative acquisition assumption
The owners were aiming for a net new direct customer every month once the new staffing structure was in.
We modelled net one per quarter to start, ramping to one a month from Q2, because January and February are reliably slower. Two new small white label customers a quarter, with a marketing spend line alongside.
Split cost of goods sold by service model
Direct and white label work have different economics, and blended COGS hides which one carries the business. Splitting it made each model's real margin visible.
Reforecast when the facts changed
The forecast was rebuilt around client cancellations and a compensation change. We benchmarked a new account manager role across pay bands before anyone posted it.
We also pulled a vendor and software expense list for line-by-line review. Least glamorous item on this page, one of the most useful.
Want a forecast you can argue with?
Built bottom-up from your own accounts, so a disagreement lands on an assumption.
Where it landed
Q1, against Q1 last year
Revenue roughly level, with slightly more invoicing and meaningfully better profitability. Three months in a row of consistent operating profit and positive cash profit. The rolling average share of revenue going to people came down about 3 points.
The forecast itself is the quieter result. Plotted against actuals and against the prior year, all three lines came in nearly identical for the quarter. A forecast that holds for a quarter is one you can make decisions against.
The line that stuck with us came while we were sizing a future support hire against the model, and it was not about the model.
we waited too long to start doing this.
At the end of that same session: "this was wildly helpful." The other owner made the more precise point. They would have got to splitting the two service models eventually, he said, but seeing the numbers "makes it very tangible for us."
That is the argument for a bottom-up forecast. It rarely tells you something you could never have worked out. It makes the thing you half-suspected concrete enough to act on this quarter instead of next year.
What this maps to
- Service: fractional CFO for agencies
- OS module: Team Pay System, for people cost as a share of revenue
- OS module: Agency Profit Engine, for operating profit by revenue band
Questions
The ones people actually ask on the first call
Is flat revenue a good outcome?
It is when profitability improves and the forecast holds. Revenue came in level year over year while operating profit stayed consistent for three months, which means the same top line produced more money and did it predictably.
What makes a bottom-up forecast better than a growth rate?
You can argue with it. Splitting recurring revenue by service model and then by account size means a disagreement lands on a specific assumption, like how many new accounts a quarter, instead of on a total you can't interrogate.
Why model losing your biggest client?
Because modelling it costs an afternoon and being surprised by it costs a year. Here a large account had a new decision maker looking at cheaper options, so the year was modelled with that revenue removed.
Why does project revenue get forecast separately?
Because it does not arrive evenly. Spreading project work across twelve months builds a miss into every slow quarter. Here it was re-scoped into a March-to-October window, which is when that work closes.
How much of this is the forecast and how much is the cost cuts?
Both, and they are hard to separate. Bringing people cost down about 3 points produced the margin. The forecast is what made the owners willing to make those calls, because they could see what each one did to the year first.
Next step
Thirty minutes, and you'll know where you stand
Bring last month's P&L. We'll tell you what it's actually saying about your margin, your owner pay and your next hire. If we're not the right people to fix it, we'll say so on the call.
You bring
Last month's P&L. That's it. No prep, no forms.
We do
Read it live and tell you what it says about margin, owner pay and your next hire.
You leave with
The two or three things worth fixing first, whether or not you hire us.
No deck, no pitch. If we're not the right people for it, we'll say so on the call.