Why Your 2026 Financial Plan Needs 3 Scenarios (Not 1)

[00:00:00] Taylor Holiday: And I know that this is the reality for many businesses right now is that this moment, November, December, is when you are building likely with two some culmination moment, whether that's a board meeting, a bank presentation, your company kickoff that you do at the beginning of the year, you are puddling together.

[00:00:17] Everything that you need to build your forecast for 2026. And we spend our entire lives doing this on behalf of brands and so we have come up with a novel way that we think that we could help you with this process better than anybody else in the world right now.

[00:00:34] Lead.

[00:00:35]

[00:01:12] Richard Gaffin: Hey folks. Welcome to the

[00:01:14] Taylor Holiday: You through

[00:01:15] Richard Gaffin: I'm your host,

[00:01:16] Taylor Holiday: meeting today.

[00:01:17] Richard Gaffin: director of Digital Product

[00:01:18] Taylor Holiday: Overview for Start the us.

[00:01:20] Richard Gaffin: I'm joined once again,

[00:01:21] Taylor Holiday: Hello. Really?

[00:01:22] Richard Gaffin: I say I'm joined every time, but it's, it's been a

[00:01:24] Taylor Holiday: It's been a while. Yeah.

[00:01:25] Richard Gaffin: with me. I know. Mr.

[00:01:27] Taylor Holiday, our CEO here at Common

[00:01:29] Taylor Holiday: Progress.

[00:01:29] Richard Gaffin: Taylor, what's going on today, dude,

[00:01:31] Taylor Holiday: Well, you know, today we're gonna take you on a little detour from the expected norm. So don't just tune us out thinking you're just gonna hear about Black Friday, cyber Monday 'cause we are leaving 2025 and we are teleporting into the future today. Richard.

[00:01:44] Richard Gaffin: That's right. Exactly. So, on everybody's minds right now of course is Black Friday, cyber Monday, it's coming up. It's that time, it's the crunch. Uh,

[00:01:52] Taylor Holiday: And 25 those were delivered.

[00:01:54] Richard Gaffin: we hit record

[00:01:55] Taylor Holiday: Um, And so, uh,

[00:01:56] Richard Gaffin: there's something

[00:01:57] Taylor Holiday: need to

[00:01:57] Richard Gaffin: which is

[00:01:58] Taylor Holiday: on second

[00:02:00] Richard Gaffin: And I think part of like

[00:02:02] Taylor Holiday: and then

[00:02:02] Richard Gaffin: approaching this

[00:02:03] Taylor Holiday: like.

[00:02:03] Richard Gaffin: you. Know how to insert yourself into this. C-suite is gonna create a 2026 plan for you without your input, and that's gonna be a problem. So we wanna talk a little bit about how we approach 2026 forecasting and how we kind of help our clients with that.

[00:02:18] So I'll turn it over to you, to Taylor to talk about what we're thinking about right now in these two months leading up to 2026.

[00:02:25] Taylor Holiday: So this moment right now is weird, right? Because it is. Peak execution moment where you have a whole slew of the organization who is thinking about nothing but the present. And their entire job is to make sure that these next four weeks are the most productive of your entire year. And so we have a very active role in that, but like many organizations, it is also the time of year where we are building our 2026 financial plans at CDC as part of a PE-backed platform.

[00:02:52] Now we have a formal board meeting coming up on November 18th.

[00:02:56] Richard Gaffin: Ooh.

[00:02:57] Taylor Holiday: Where we are going to be presenting our 2025 lookback as well as more importantly get, trying to get approval on our 2026 financial goals. And I know that this is the reality for many businesses right now is that this moment, November, December, is when you are building likely with two some culmination moment, whether that's a board meeting, a bank presentation, your company kickoff that you do at the beginning of the year, you are puddling together.

[00:03:24] Everything that you need to build your forecast for 2026. And we spend our entire lives doing this on behalf of brands and so we have come up with a novel way that we think that we could help you with this process better than anybody else in the world right now. Lead.

[00:03:42] Richard Gaffin: Okay, well, a novel way to, to help with this, Taylor. That's fascinating. So tell me a little bit more what's different about the way that we approach it relative to everybody else.

[00:03:50] Taylor Holiday: Well, it's different than everybody else, and it's different right now relative to all the other times of the year, I would say. Is that right now more than any other time of the year. It is important, I think, to do scenario planning, which is to say that this is not about building one plan. It is about it building multiple plans that all serve a different role in function for you as a leader.

[00:04:10] Financial plans often have different objectives. Depending on who they're for. And you have to think about then how to use the tooling and information available to you to scale those plans up and down relative to that purpose. So what do I mean specifically? I call this board budget bonus. It is the three different scenarios that you need to build into your 2026 financial plan.

[00:04:35] Board, you could substitute that for bank. The point is some external governance authority budget, this is the most likely expected scenario that you're gonna use to manage expectations of cash flow. And then bonus the number that you set out in front of your team to get them to chase, to go out where you set the threshold for when they achieve a bonus, right?

[00:04:54] That is the driver for the organization. Each of those have a different function. And at CTC, most of the year we spend time focused on what brands. What is likely to occur, what we would call more of an le, a latest estimate. So we show up in the middle of March and we say, okay, what is gonna happen right now in April?

[00:05:11] And we have to try and be as accurate as possible. And so it's not the time for all this variable scenario planning. It is trying to figure out what is the goal for the next 30 days. It's very short snapshot windows over and over and over again, but this moment, the one where you have to go and present, where you have to lay out a vision, where you have to develop a holistic connected plan and strategy to set a financial goal out in front of lots of people.

[00:05:32] It's critical to understand the variations of inputs and to build these multiple scenarios.

[00:05:38] Richard Gaffin: Okay. Well, so talk us through then, like what's, so what's the key difference here is it's like the most conservative one for the bank and then the most. Kind of out, out there, one for the bonus, or how does that work?

[00:05:47] Taylor Holiday: That's right. And that, that's like an oversimplified version of it. But I think that the key is to understand the core inputs of a forecast and a model. And we forecast billions of dollars in GMV and we're about plus or minus 4% to target for the whole year in a way. So we're highly effective at doing this, in part just because we've screwed it up more than everybody else, like.

[00:06:04] One of the compounding moats that CTC has is repetitions of effort in these areas. So we have just tried to forecast more e-commerce businesses more often than anybody else, and so it develops a pattern of improvement over time to keep getting this better and better. And so, if I think about as the core inputs for our forecasting process, there's multiple models.

[00:06:22] And this is where our, our, our exercise really helps to build unification across your organization. So there are let's start with the retention model, right? So a lot of brands have. This view, it's a cohort specific retention model that allows you to look at the expected value of the existing customers.

[00:06:40] You're gonna walk into 2026 with. So you're going to look at the curve, so the, the, the expected return of every cohort of customers, cohort, just meaning group. And we'll look at every group that you've ever acquired, usually by month, and we'll look at how much value they generate in the future. You sum all of it up.

[00:06:55] You model it for seasonality, you model it based on the expectations of big moments that are coming. You get an expectation of the foundation of your forecast, which is your existing customer revenue. That is like the starting point, and this is important to sort of stop here because your existing customer revenue expectation should also be a thing you take a glimpse at and go do, does my opex, does my returning customer contribution exceed my opex?

[00:07:20] That's like a really important data point for brands to understand when they think about how much fixed costs should exist in the organization. Because that relationship allows me to set the threshold for how aggressive I'm willing to be on the next model, which is the new customer acquisition. So we build a spend and a MER model that sets both the new customer revenue expectation and the media budget.

[00:07:42] This is the relationship of a efficiency of your new customer acquisition, new customer revenue. Plus existing customer revenue equals your total revenue expectation. We layer in all your expectations of your cogs, all your variable expense, all your fixed costs to get a full p and l level forecast for 2026.

[00:07:59] The other thing that we include, and this is where our process, I think is really novel and it's important, is to help you build and develop a. Holistic entire year marketing calendar. So one of the things that we fundamentally believe is that you cannot forecast. If you are doing this exercise and you're alone in finance and you're doing this independent of your marketing calendar, you will not do this effectively.

[00:08:19] Richard Gaffin: Mm-hmm.

[00:08:20] Taylor Holiday: And you need to force your organization into the process of building an initial view of every marketing moment they plan to create in 2026. And then we apply what we call the event effect model. So we look at the relationship of those historical actions. Every email you send, every ad you launch, every promotion you run, every product release.

[00:08:37] And we ask ourselves, what's the effect of those moments on the revenue curve? Both the returning customer revenue, the new customer revenue, the daily pacing, and it's all tied together. So you have a new customer revenue model, a retention model, a event effect model, a full marketing calendar, all of your costs, all of your fixed costs into an next.

[00:08:55] Beautiful, laid out financial expectation. And when we start that process, those models are gonna begin at what we would call the baseline. This is the likely scenario. This is what I would call the budget path. This is what you should plan your cashflow against. It's the median outcome, it's the 50th percentile view of reality.

[00:09:14] It's likely not gonna be the one that you're super excited about. But it's the baseline expectation, and so I think about that as a 50th percentile view. Now we have to go in two different directions as we think about this. When I think about managing a board or a bank, both of which I've had to do and currently have to do, I have to manage lenders.

[00:09:33] I have to manage a board of governors. My job is to under promise and over deliver in those spaces all the time.

[00:09:39] Richard Gaffin: Yeah.

[00:09:40] Taylor Holiday: It's to bring to them with a view of their expectation. Banks want to know they can be paid back. So it's gonna be about your free cash flow that the thing produces. Your board wants. Usually they represent the rights of the shareholders.

[00:09:51] They want some expected return on their investment. You have to have a view of what both of those parties want. So part of what we can do is we can take either your covenants from your free cash flow obligations, your expected internal rate of return from your, your, your investors, and we can use those inputs to help you think about what we need to generate in this process.

[00:10:11] But you want the lowest allowable number that crosses those thresholds so that you can go in the boards and banks are not people that you wanna over promise and under deliver to. You want the opposite, so likely you're gonna take that 50th percentile outcome and you're gonna push it down into the 30th percentile, the 40th percentile, something where your confidence interval of achieving that outcome is really high.

[00:10:31] So now that sets up two scenarios. Now the question is. If we took those models and the beautiful thing about C'S process, and I can even we could even sort of illustrate this right now. Corey, I'm actually gonna pull this up because I think it'd be cool to show exactly how this can work.

[00:10:45]

[00:11:28] Taylor Holiday: Okay. So the beautiful things about our models, as you can see here, this is the spend in a MER model. And if I wanted to forecast, let's just do December for now. The model baseline expectation.

[00:11:40] Is what this curve represents here, and this gives me an output of an expectation of different points on the line and what my efficiency would be at various levels. But if I wanted to be conservative, I can actually reduce this model. So I can say, I want to go to a negative 10% above model, and you'll see that it adjusts.

[00:11:57] The slope of the line to account for a less efficient result. It basically takes the historicals and depresses them a little. Similarly, if I wanted to give myself a chase scenario and I said, well, what does it look like to go 20% above the model? I can start to get to an expectation. So let's just look at the max lifetime contribution margin point.

[00:12:16] At 20% above the model, I can spend 770,000 at a four to 1:00 AM ER. If I go back to the baseline. You can see I can spend 6 68 at 3, 5 5. So if I wanted to spend that similar four, it's like hundreds of thousands of dollars less. And if I depress that model even further, minus 10%. So if it's live on site now, you can see it's six 30 at 3 3 7.

[00:12:38] And so this gives you the ability to instantaneously adjust models in ways that then can spit out the, and effect the entirety of your forecast. So, so often this idea of like, what would it mean to create different scenarios are often just. People making stuff up candidly and just going like, well, let's just take the end result and drop it by 15%.

[00:13:00] Well, no, no, no. Let's actually look at the curve and say, well, what if we actually were worse than this expectation? Or, what if we were better? And what if we were better because X, Y, and Z? And so when you build that bonus plan, you're gonna actually say, Hey, we wanna be 10% above the model, and we're gonna do it by this moment, this moment, this moment, this creative strategy, this plan, et cetera.

[00:13:18] And you're gonna tie together for your organization of. Okay, Hey, here's our Chase goal. And the way we're gonna do it is by being better at existing customer revenue, we're gonna be more efficient on our media. We're gonna spend more volume in these key moments. Whatever you think it is, you can tie together the expectation of the goal done to a series of actions in a specific moment in time, assigned to a specific person, and you can lead the organization towards those goals.

[00:13:42] And then with our system, you can track how you're doing against those expectations. And what's beautiful is that if we go into stats. Okay, I can create multiple scenarios. So you can see here compare, and we could create board budget and bonus as different scenarios to track against because we can build multiple plans, we can build as many different plans as we want.

[00:14:02] And so in the case of what we're describing we would do for you in this moment is to build three plans that you'll have in stylists to be able to track against all your long. Your board plan, your budget plan, and your bonus plan so that every day you can go in and you can click where we're doing against each of those things.

[00:14:16] So you don't have to constantly be building multiple spreadsheets to try and build a hundred columns for each of the different scenarios. It's all right there for you and easy to track so you have a partner. 'cause the other thing, I think one of the reasons I fundamentally be the forecasting is really helpful as an external exercise is because internally you're so prone to bias and optimism, you want things to be true, that the data may not reveal to be true.

[00:14:37] So I think that there's a huge opportunity, especially brands that maybe have missed forecast historically, to bring in an external point of view. And then, look, you can always take our numbers and adjust them to whatever you believe for whatever reason. But we're gonna give you a really thoughtful data-driven orientation around those different around those different expected results at different percentiles, 25th 50th, 70th, 90th percentile.

[00:14:59] What does that look like? What are are the bounds of possibilities for your business?

[00:15:04] Richard Gaffin: Yeah. Well, I mean, I think like, so this is the culmination of, in a lot of ways something that we've been talking about on this pod for a long, long time, which is the idea that having finance and marketing connected is one of the most crucial things that you could do for the success of your business.

[00:15:16] So one thing that you're pointing out here that I wanna highlight is this idea that if, if, let's say you're the CMO or whatever, or head of growth or something, and the CFO is building a forecast and the forecast is based on like, we're gonna do 10% or 20% better or whatever, and it's just sort of arbitrarily. sort of arbitrarily naming that the CFO has no way to understand the set of actions that could contribute to 20% of growth year over year. Right. And so what you're doing is we're putting it into your hands by saying like, we're forecasting this result because we know these set of actions that are exist or that are gonna be put in play in order to bring this result about, rather than it just being sort of this

[00:15:53] Taylor Holiday: That's right. We're gonna, we're gonna force a bunch of things for your organization that are gonna be really helpful. One, we're gonna force communication between marketing and finance. We're gonna force an organization of data in a way that may not exist. We're gonna force planning in a way that probably doesn't exist.

[00:16:06] A full email and SMS calendar going out as far as possible. Every marketing moment that you have planned for the year. A consideration for media budget by channel allocation, an owner, an expectation of IROs, like a, a testing measurement, roadmap. All the things that you would want. We are gonna force your organization to develop them.

[00:16:22] In order for us to complete the task you're gonna hire us to do, you are gonna end up with this set of obligations on yourself that will make your organization better prepared for 2026 than ever before. So like the idea of that right now you could walk in with a board bonus budget or board budget bonus set of scenario plans, a full marketing calendar, expectations of media full spend in a MER models that you can use to build your budget.

[00:16:45] It's a set of tooling. That you can now go, that will be useful for the rest of the year. 'cause we can update it as we go. Adjust the forecast as needed. But you have this baseline expectation where you can say, the number I put down for my organization's goal this year is thoughtful. There's been external validation.

[00:17:00] We've wrestled with some of the inputs. You've got clear on, oh crap, it's actually the thing I want to achieve. There's this big gap. So it's gonna help you to unlock new levels of strategic thinking that might be required. That like, by discovering that, ooh, actually, that we missed new customer revenue by so much this year, that our return in customer revenue is gonna be down.

[00:17:19] So what we thought we could do next year, in order to achieve that, we're gonna have to go take a bigger swing on X, Y, and Z. And that's the other thing that's so important is that to root yourself in reality is the doorway to optionality. Like this is, this is sort of like a, a borrowing on AA a little bit here, right?

[00:17:34] Richard Gaffin: Yeah.

[00:17:34] Taylor Holiday: Reality are the, what's the or consequences are the signpost to reality. Like

[00:17:38] Richard Gaffin: Mm-hmm.

[00:17:39] Taylor Holiday: a, a, a data-driven forecast is the signpost to your present reality that allow you then to make a choice about what you wanna do about it. But when you live in the delusion that it's all just gonna be fine next year for whatever reason, it doesn't force you to actually make the changes in choices you need to get where you wanna.

[00:17:54] Richard Gaffin: Yeah. Well that's one of the, the, you know. I think like the most common indicators of business success is whether or not the person in charge is willing to lie to themselves. And if they lie to themselves, then you know that you're gonna have a problem eventually. Right? But the ones who really succeed are the ones who never lie to themselves, right?

[00:18:11] And sometimes I think you get into a scenario where you're so busy that you don't have a choice but to go ahead and sort of lie to yourself about what's gonna happen next month or next year rather, because you just don't have the time. And part of what this does for you is. we're coming up a black Friday right now your brain is probably in full execution mode and the concept of coming up with like three different really thoughtful forecasts for 2026 just seems insane in terms of the amount of kind of like workload that would put on you if you had to do it yourself.

[00:18:40] And one thing that we offer is you don't have to do that anymore. Like

[00:18:44] Taylor Holiday: That's right.

[00:18:44] Richard Gaffin: plate. You get this like super thought through. Map to the truth basically. And then the map of where you can go from there without, well, you can just still sit down and be kind of head, head to the grindstone, whatever, in this like next couple of months,

[00:18:59] Taylor Holiday: That's right. So, so that's such a good point. So who's this for? Who do I think that this would benefit immensely? Number one is, yeah, if you're overwhelmed and feel like you're behind on planning. But Black Friday, cyber Monday's too important to pick your head up and try something else. We're a resource in the background that costs you no time and energy.

[00:19:14] It allows you to focus on what's most important and be ahead of plan. Like that's a relief. That would feel great. Two is if you're a marketing leader or a finance leader who's having trouble. Getting your CEO to awake to a reality you think exists. We can be the bad guy sometimes. Our data is really useful.

[00:19:29] Similarly, if you're a CEO with a board with unrealistic expectations, we're that reality marker. We're the people that come in externally and say, here is what is true and possible. Three, if you need just help thinking through. How far out could I push my team? What is it like to set at a goal that would be aggressive, that would be hard to achieve?

[00:19:47] Where's that right threshold? And you've had trouble setting incentives or driving your organization to the right bonus points? That's another place. So if any of those things resonate with you, this is gonna be a really useful exercise in just helping you. Create visibility. And then the last one is just like, if you want to connect your planning process to your day-to-day execution in the future, where these don't exist as a spreadsheet that never gets looked at again, but actually weaves its way into your daily operation so that every day you're seeing where you're at relative to that expectation with simplicity and clarity and confidence.

[00:20:18] This is going to give you that system and tooling.

[00:20:20] Richard Gaffin: Right. Alright, well, so I think then, then we should talk a little bit about as, when this comes out, it's gonna be the sixth I believe. So for the next, like, let's say five days, we're offering not only if you sign up for a profit system with us, which is by the way, us constructing this type of plan for you.

[00:20:37] Taylor Holiday: That's right.

[00:20:38] Richard Gaffin: four brands from the seven figure range to the nine figure range,

[00:20:41] Taylor Holiday: That's right.

[00:20:41] Richard Gaffin: all. We are also offering a free Black Friday, cyber Monday hourly tracking report. If you listen to our podcast earlier in the week, you'll have heard a little bit about why we think it's

[00:20:49] Taylor Holiday: So critical

[00:20:50] Richard Gaffin: to be

[00:20:51] Taylor Holiday: thinking about.

[00:20:52] Richard Gaffin: particular days on an hour by hour basis, as opposed to simply a daily basis, which is already pretty granular relative to what most people have.

[00:20:58] We're gonna throw one of those in for free until Tuesday the 11th. So. Go ahead, common thread co.com, hit the hire us button, let us know that you're interested and we would love to hook you up with one of those. But

[00:21:08] Taylor Holiday: Yeah. And, and the re Well, the reason is because in order for us to effectively forecast 2026, we're gonna have to have a point of view on what happens on Black Friday, cyber Monday, such so it, because we're gonna functionally be forecasting 14 months already. We're gonna set you up with the ability to use that forecast, whether we take yours or whether we build one from scratch.

[00:21:26] And it's gonna give you the ability then to take that daily goal for Black Friday and break it down into hours. So the same system of every metric, every day that we use for most of the year, we use in every hour for Black Friday and other peak moments, you'd have it for sale moments. We use hourly tracking in those key areas.

[00:21:41] So we'll give you that for free. So if you do 2026 planning. You come and check it out with us. We'll give you the, the November hourly BFCM goals for free. So, so much, again, this is just resource and tooling. If you're a brand that's wants to grow millions of dollars next year, spending 20 grand to get yourself a clear insight and plan from a thoughtful third party is just the, the potential reward there.

[00:22:03] So outweighs any opportunity for cost and I just, I know as a leader what it feels like to feel prepared, to feel thoughtful about walking into a year going. For, like, it reflects on you as a leader to the whole organization, whether or not people are gonna show up and it's gonna be chaos on day one.

[00:22:19] Or you're gonna go, Hey, we have this very thoughtful, detailed, daily expectation of what you're all here to do. Here's your goal. Here's your KPI, here's your financial incentive. Here's how we as a group, get where we're going. That is your job. And so if we can help you deliver that more effectively as a leader I, I know for me what it feels like when I have that, and we'd love to play a role in giving you that confidence walking into next year

[00:22:40] Richard Gaffin: That's right. Alright folks, well I think that's gonna do it for us. Yeah, again, getting that hourly Black Friday Cyber Monday

[00:22:46] Taylor Holiday: messaging

[00:22:47] Richard Gaffin: Super, super important. Again, through the 11th, that's gonna

[00:22:50] Taylor Holiday: and

[00:22:51] Richard Gaffin: for

[00:22:51] Taylor Holiday: what opportunity.

[00:22:52] Richard Gaffin: system for seven to nine figure brands. We usually don't open necessarily those up to seven figure brands for a lot of these offers, but we are right now because we can make that work for you too.

[00:23:00] So, alright folks, well I think that's gonna do it for us for this week. So until next time, take care and happy Black Friday, cyber Monday. It's coming up, it's getting close. But yeah, we'll, we'll talk to you next time. Yeah, pat.

[00:23:13]