A confident founder walks into a pitch meeting. The presentation looks sharp. The story is strong. Then comes the big moment—the numbers.

“The market is worth $4 billion,” they say. “If we capture just 2.5%, we’ll hit $100 million in revenue in four years.”

The room goes quiet. Investors nod, ask a few questions, and end the meeting with, “We’ll be in touch.” But as the founder leaves, they feel something went wrong. It wasn’t the ambition or the product. The mistake was in how the forecast was presented.

The Common Forecasting Mistake

The founder used a top-down forecast—starting with total market size and working backward to estimate revenue. On paper, it sounds logical. In reality, experienced investors see it as a red flag.

Forecasting shouldn’t be based on big dreams. It should reflect what your business can actually achieve. That’s where bottom-up forecasting makes the difference.

Why Bottom-Up Forecasting Works

A top-down forecast begins with the entire market and guesses what share a startup might get. But it skips the hard questions: How will you get customers? How much will you charge? What resources do you have?

Bottom-up forecasting starts with what’s real. It asks:

• How many customers can we sign?
• At what price?
• With our current team and budget?

Then it builds the numbers from there. This isn’t just more practical—it’s more credible.

The Mistake Investors Notice Right Away

Saying “we’ll get just 1% of a $10 billion market” isn’t impressive. It shows a lack of understanding. Investors want to see that you know your customer acquisition cost, lifetime value, churn rate, margins, and how fast your team can grow.

A bottom-up model gives them that. It shows you’ve thought through your business operations, not just your potential.

Why Bottom-Up Forecasting Is Smarter

Top-down models are often rigid. They assume growth will follow a straight path. But business rarely works that way. Things change—your budget, your sales team, your conversion rates.

A bottom-up forecast can adapt. It lets you test different scenarios. What if you raise more money? What if churn improves? A solid bottom-up model can answer those questions on the spot.

The Only Time to Use Top-Down

If you include a top-down forecast at all, let it serve one purpose: a quick check to make sure your bottom-up numbers don’t exceed your total market size. That’s it. Anything more, and you risk making a mistake that could turn off serious investors.