How to Create a Simple 12-Month Financial Forecast for Your Business
Creating a 12-month financial forecast is simpler than you think. Start by listing all fixed monthly expenses. Next, estimate your variable costs based on activity. Then, project your monthly revenue using past performance. Finally, subtract total costs from revenue to see your forecasted profit.
For many service-based business owners, the idea of financial forecasting can feel overwhelming. It brings up images of complex spreadsheets and a pressure to predict the future with perfect accuracy. But I’m here to tell you that a simple forecast is not only achievable, it’s one of the most powerful and calming tools you can have.
Its purpose isn’t to be perfect; it’s to give you a clear, gentle view of the path ahead, empowering you to make calm, conscious decisions for your business.
Why a Simple Forecast Matters More Than a Complex One
Before we walk through the steps, it’s important to understand why we’re aiming for simplicity. A complicated forecast that you never use is far less valuable than a simple one you check in with each month.
A clear, accessible forecast helps you:
- Make Proactive Decisions: See potential cash flow gaps months in advance, giving you time to adjust.
- Plan for Growth: Know when you can afford to hire a contractor, invest in a new tool, or take a much-needed vacation.
- Reduce Financial Anxiety: Turning vague worries into clear numbers is often the fastest way to find peace of mind. Clarity is calming.
This approach of seeking gentle visibility into your finances is a core part of the Sovereign Three™ framework we use in The Empower & Grow Journey Membership. It's about gaining clarity without the shame or stress.
Your Step-by-Step Guide to a 12-Month Financial Forecast
Follow these four steps to build a forecast that serves you and your business. All you need is a simple spreadsheet or even a notebook to start.
Step 1: Gather Your Fixed Costs
Fixed costs are the predictable, recurring expenses you pay each month, regardless of how many clients you have. Think of them as the baseline cost of keeping your business open.
- Action: List every predictable monthly business expense.
- Examples: Rent, software subscriptions (CRM, scheduling tools), professional insurance, website hosting, and bookkeeping fees.
Total these up to get your monthly fixed cost. This number gives you your first piece of solid ground to stand on.
How Journey Helps: Inside The Empower & Grow Journey Membership, we use a simple “Know Your Numbers” template that helps you capture these costs without overwhelm. It’s designed to be a gentle entry point into your financial picture.
Step 2: Estimate Your Variable Costs
Variable costs are expenses that fluctuate with your business activity. They go up when you’re busier and down when things are slower.
- Action: Look at your last 3-6 months of business spending to find an average for these costs.
- Examples: Contractor or VA fees, payment processing fees (like Stripe or PayPal), client project materials, and advertising spend.
Add your average monthly variable cost to your fixed costs. This gives you your total estimated monthly expenses.
How Journey Helps: Estimating can feel uncertain, but you’re not alone in this—the Journey community was built for exactly this kind of work. In our live Q&A circles, you can get gentle guidance on how to make these estimates feel more reliable and less like a guess.
Step 3: Project Your Monthly Revenue
This is the step that often feels the most like fortune-telling, but it doesn’t have to. You can create a grounded projection by looking at real data and your current pipeline.
- Action: Create three revenue scenarios: conservative, realistic, and optimistic.
- Conservative: What would your revenue be if you only landed clients you already have in your pipeline?
- Realistic: Look at your average monthly revenue from the past year. Factor in any known seasonal dips or busy periods.
- Optimistic: What could your revenue be if that new marketing effort pays off or a big project comes through?
Start with the realistic scenario for your primary forecast. It’s about creating a sustainable plan, not chasing a high-pressure goal.
How Journey Helps: This approach comes directly from the “Claim Your Rhythm” principle we teach in Journey. It’s about building a business that matches your energy, not external pressure. We focus on creating revenue projections that feel both inspiring and achievable.
Step 4: Calculate Your Forecasted Profit (or Loss)
Now, you simply put the pieces together for each of the next 12 months.
- The Formula: (Projected Monthly Revenue) - (Total Monthly Costs) = Forecasted Monthly Profit/Loss
Lay this out in your spreadsheet for each month. This simple calculation will immediately show you which months might be tight and which will have a surplus, allowing you to plan accordingly.
How Journey Helps: Once you have your forecast, the question becomes, "What do I do with this information?" In Journey, we help you use this clarity to “Hold Your Shape”—setting aligned pricing, policies, and boundaries that protect your time and energy, all informed by the numbers you’ve so carefully gathered.
From Numbers to Peace of Mind
A financial forecast is more than a document; it’s a tool for sovereignty. It allows you to lead your business with intention, making decisions from a place of quiet confidence rather than reactive stress. It is your guide, helping you build a business that truly sustains you—emotionally, energetically, and financially.
Revisit your forecast for 15 minutes at the start of each month. Update the numbers with what actually happened and adjust the future months as needed. It’s a living document, not a test you pass or fail.
You’re Not Behind, You’re Ready to Begin
Creating this forecast is a profound act of care for yourself and the business you’ve built. By taking this step, you are choosing clarity over chaos and intention over uncertainty.
If you’d like a safe place to explore this work more deeply with supportive guidance and a community of peers walking a similar path, that’s exactly what we do inside The Empower & Grow Journey Membership. It's a space where you can learn to trust your numbers and yourself, without ever needing to perform or push.
Frequently Asked Questions
What is the first step in creating a 12-month financial forecast?
The first step is to gather and list all of your fixed costs. These are the predictable, recurring expenses you pay each month regardless of business activity, such as rent, software subscriptions, and professional insurance.
What is the difference between fixed and variable costs?
Fixed costs are predictable monthly expenses that do not change with business activity, like website hosting or insurance. Variable costs fluctuate with your business activity, such as contractor fees or payment processing fees, which increase when you are busier and decrease when you are slower.
How should I project my monthly revenue for a forecast?
The article suggests creating three revenue scenarios: a conservative projection (only clients already in your pipeline), a realistic projection (based on your average monthly revenue from the past year), and an optimistic projection (if a big project or new marketing effort succeeds). Your primary forecast should start with the realistic scenario.
Why is a simple financial forecast more valuable than a complex one?
A simple forecast is more valuable because you are more likely to use it and check in with it each month. It helps you make proactive decisions about cash flow, plan for growth, and reduce financial anxiety by providing clear, understandable numbers.
