Most managers think forecasting is about predicting an uncertain future. In reality, a reliable forecast is built on four concrete components that describe not only what might happen, but also what has already happened and what is already in motion.
Together, these components form the PATH Model, a clear structure that helps managers understand where future results will actually come from.
P – Produced / Past / Present
The first component of any forecast is the easiest to understand: what has already happened.
This includes all results generated from the beginning of the forecasted period until today — projects delivered, revenues booked, costs incurred.
Its uncertainty is 0%, because these results are already realized.
But why include past results in a forecast if forecasting is about the future?
Because when forecasting a period (like the full year), the year has already started.
If you’re in September estimating the year-end P&L, the performance of the first eight months forms the foundation of your forecast.
Ignoring it would distort the picture entirely.
Past results are the anchor, the starting point for everything else.
A – Agreed / Allocated / Assigned
The second component includes all contracted work that will generate results in the forecast period.
These are the revenues and costs linked to signed agreements, allocated teams, or confirmed deliveries.
The uncertainty is low, but not zero.
Contracts can be delayed, cancelled, or reduced. Resources can shift. Clients can change their minds.
Still, this component gives the forecast a strong, predictable backbone.
It tells you what is already secured.
T – Trade Pipeline
The third component is the pipeline currently under discussion, opportunities or commitments that are not yet signed but are actively progressing.
This includes:
- Sales pipeline from your CRM (expected revenues)
- Supplier contracts under negotiation (expected costs)
- Recruitment pipeline (future personnel costs or capacity additions)
Uncertainty is higher here, but still predictable enough to model through:
- probabilities
- weighted pipeline
- pipeline maturity assessments
This is the “fluid” part of the forecast, not guaranteed, but not random either.
If managed well, it becomes one of your most powerful forward signals.
H – Hypothesized (Management Judgement)
Finally comes the Hypothesized component, the most misunderstood and most misused part of forecasting.
This is not blind optimism.
This is management intent, backed by reason and monitored closely.
The H component fills the gap between:
- what you already produced (P)
- what is already agreed (A)
- what is likely to come from the pipeline (T)
… and the results you actually need to achieve.
If your P+A+T total is below your planned results, the H component captures the additional actions, accelerations, or corrections management will undertake to close that gap.
It is not passive estimation.
It is active commitment that must be tracked, challenged, and adjusted.
Putting the P.A.T.H. Together
A forecast becomes reliable only when all four components are visible and understood:
- P tells you where you already are
- A tells you what is already secured
- T tells you what is progressing toward closure
- H tells you what actions are taken to close remaining gaps
This structure brings transparency, clarity, and accountability.
It transforms forecasting from a guessing exercise into a practical leadership tool.
When managers know their PATH, they know exactly where the future results will come from and what they must do to achieve them.