Brad Feld talked about a company that blew away his expectations for financial results and in the process he asked how we as entrepreneurs manage budgets and forecasts. Here is what I told him:

I do annual budgets based on the most likely known data and then show where the upside might occur and when. I’m very conservative by nature and, partly due to being raised without much money, always worried about cash. I adjust these numbers based on new data on a monthly basis, which means by the time I reach any given quarter, my estimates are stronger. Since I budget the current year and the next fiscal year, those changes give me a long-term window as well, so I have a pretty decent idea of where things lay over a longer window. As a part of my annual budgeting process, I look back over the previous year to see how close I was at the beginning versus where we ended up. This hones my prediction skills.

I traditionally have been very good at budgeting and watch the cash very closely. I’d like to be surprised on the upside, though, for a change!