The StitchCrew Guide to Finances: Understanding Assumptions

Running a business requires making decisions with imperfect information. You may not know exactly how many customers you’ll get next month, what people will consistently pay, or how much it will cost to bring in each new sale. But that doesn't mean you have to guess blindly. It just means you need a starting point.

That's where assumptions come in.

What an Assumption Actually Is

Let’s just start off by making one thing clear. Almost no one understands how to forecast the future of a business. If somebody tells you they have a scientific model to precisely forecast the future... they’re lying!

Think of assumptions as the numbers you use to help you make decisions before you have the full picture. They're meant to give you something to work from so you can make better decisions and adjust as you learn more. You're actually already making assumptions when you ask questions like:

• How many people will actually buy my product?

• How much will they spend?

• What will it cost to deliver my service?

• How much can I afford to spend to bring in a new customer?

Once you name your assumptions, things start to get a lot clearer. You’re no longer just hoping the business grows, you’re looking at the numbers that would actually make that growth possible. That lets you ask smarter questions, like, “What needs to happen for this to work?” and “Which number matters most right now?”

How Assumptions Connect To Your Numbers

This is where assumptions start to become useful instead of just philosophical. Once you have a few starting numbers, you can begin connecting them and seeing how they shape the bigger picture of the business. You’re no longer just saying, “I think this could work.” You’re starting to see why it could work, what has to happen for it to work, and which number could throw the whole thing off.

Our goal is to figure out how many conversions actually translate into paying customers. A conversion is just a general term for some sign that a potential customer has moved closer to buying. Depending on your business, that could mean a sale, a lead, a booked call, a trial signup, an install, a test drive, or whatever action most closely connects to revenue.

What matters is that once we have that final conversion number, we’re not just staring at a spreadsheet for fun. We can use it to start estimating what the business might actually bring in.

Let’s say this business makes sales by getting people to the website and having them buy directly there. Nice and clean. If your business has more steps in the process you may just need to layer in a few more assumptions. But the goal is still the same: figure out how many real, paying customers we can expect to end up with.

So before we start doing the math, let’s put a few assumptions on the table.

The numbers in blue are the starting assumptions. Everything else is a calculation based on those assumptions.

In this example, with a $1,000 marketing budget and an assumed cost per visitor of $0.50, we estimate a total of 2000 visitors.

Marketing Budget ÷ Cost Per Visitor = Total Visitors

From there, we can use the next assumption. If our conversion rate is 3%, then we can estimate that 60 of those visitors will actually turn into paying customers.

Total Visitors x Conversion Rate = Total Conversions

If these assumptions hold true, then $1,000 in our marketing budget would generate 60 paying customers.

And this is where the spreadsheet starts to earn its keep.

Because now we’re no longer stuck saying, “I have no idea how many customers we could get.” Now we can say, “If these numbers are true, here’s what the business could do.” We no longer have to stress about every single number at once. We know which assumptions are doing the heavy lifting. The real work is managing the assumptions that get us there.

Can we actually get traffic for $0.50 per visitor? Can we actually convert 3% of those people into customers?

That’s where the attention needs to go. Because once those assumptions are in place, the rest is just math.

Not All Assumptions Carry the Same Weight

Some assumptions will have a much bigger impact on your numbers than others. A small shift in the wrong place can change everything. That’s why it helps to know which assumptions are doing the heavy lifting and which ones are just along for the ride.

Some assumptions are a little more within your control. Things like how you're packaging your offer can affect how much people are willing to pay and how easy it is for them to say yes. A small change in how you bundle your service or price your product can have a real impact on sales. The same goes for fulfillment costs. You may not be able to control every expense, but you can usually make decisions that affect how efficiently the work gets done like tightening up your process or finding a better vendor.

Then there are the assumptions that like to humble you a little. These are the numbers that can move fast, change without much warning, and remind you that customers and markets are going to do what they want. That includes things like

• Conversion rate: The percentage of people who actually take the action you want. It can change fast depending on how strong your offer or how confusing your website.

  
  

• Cost per Click: What you pay to get someone’s attention online, and it has a funny way of creeping up the second the internet decides your audience got expensive.

  
  

• Repeat Purchase Behavior: How often people come back and buy again, which usually depends on whether they liked what you sold them the first time and whether or not they were given a reason to return.

  
  

• Demand Shifts: This is what happens when the market starts acting different, customer priorities change, or people suddenly stop caring about the thing they cared about three months ago.

  
  

These numbers can feel a little more slippery because they are influenced by customer behavior, the market, competition, timing, and a whole bunch of things that do not always listen when you ask nicely.

That said, “less controllable” does not mean “completely out of your hands.” You may not be able to force people to buy, control what the market charges for attention, or guarantee people come back, but you can absolutely improve the odds. Better messaging, a clearer offer, a better customer experience, or more consistent follow up can all move those numbers in the right direction.

That distinction matters because when a number changes, you need to know whether it's a lever you can pull or a signal you need to respond to. If it's a lever, you can work on improving it directly. If it's a signal, it may be telling you that something bigger is changing and your strategy needs to adjust. Assumptions don't just help you estimate what might happen. They help you see where to focus when reality starts doing something different than you expected.

Putting Assumptions to Work

Once you start putting assumptions on paper you can stop treating growth like some mysterious thing that either happens or does not happen, and start looking at the specific numbers that shape it. Assumptions are there to give yourself a way to think more clearly about the business you're trying to build. They help you spot where the pressure points are, where your margins may be tighter than you thought, and where a small shift in one number could change a whole lot more than you expected. But some assumptions carry more weight than others, which is why knowing where to focus can make the difference between chasing every number and actually understanding what is driving the business.