Yadhu Gopalan is the CEO of Esper, which builds device management infrastructure for companies running fleets of dedicated field devices across Android, iOS, Windows and Linux. I’ve been on Esper’s board since Yadhu and Shiv Sundar formed the company, and in that time Yadhu and I have developed a particular way of presenting the company’s plan and forecast. At a recent meeting, he pulled up the latest version and referred to it as “Sunil’s favorite slide.”

It’s a waterfall update, a standard finance methodology that shows both where the business stands against its original plan and how the forecast has evolved over the course of the year. I see startup CEOs use it rarely, despite how useful it can be for everyone around the table.

In our latest Ubiquity University session, Yadhu walks through how he uses the waterfall at Esper and how the approach has evolved over the years.

What a waterfall update actually is

Most board updates compare actual results against the plan set at the beginning of the year. That plan is important on January 1, but it becomes progressively less useful as we get deeper into the year. You know more about the business in June than you did in January.

The waterfall preserves the original plan in place while allowing the team to update their forecast each quarter given what they’ve learned. When Q1 closes, you enter the actual results and still get to revise your expectations for Q2 through Q4 alongside the original expectation.

Yadhu creates a separate waterfall for six key business metrics: ARR, net new ARR, revenue, new pipeline, opex, and cash balance. Time moves from left to right across the columns, while each row preserves the forecast presented at that quarter’s board meeting. The six tables show how the business fits together. Start with cash and work backward: cash funds opex, opex helps generate pipeline, pipeline turns into revenue and net new ARR, and net new ARR adds to the company’s existing ARR. Reading the dashboard this way makes it easier to see how a change in one part of the business affects everything downstream.

Why boards respond to it

The waterfall separates the fixed board plan from the current forecast. If you miss a target, you don’t rewrite the plan, but you also don’t spend the rest of the year presenting a forecast you no longer believe. Instead, the board can focus on what changed and what it means for the remaining quarters.

Over time, the waterfall also rewards improved forecasting. Yadhu describes it this way:

“You can look back and say, ‘I said this, but it was really this, and here’s where I went wrong.’ Each year you get a little better.”

How to build a waterfall board update

The waterfall structure is straightforward:

1. Set the annual board plan before January 1. Choose the metrics you want to track and set quarterly targets for the year. Once the board agrees on the plan, leave it alone.
2. Add actuals as each quarter closes. When Q1 ends, enter the actual results alongside the original Q1 target.
3. Update the forecast for subsequent quarters. Revise your expectations for Q2 through Q4 based on what you know now. Repeat the process each quarter.
4. Keep every prior forecast visible. This is what creates the waterfall. The board can look at any quarter and see how your expectations for it changed over time.

We created an editable version of this waterfall slide based on Yadhu’s approach, with a six-metric dashboard and a detailed ARR waterfall you can duplicate for other metrics.

See (and make a copy of) the Google Slides template here →

The forecast can change, but the board plan cannot. Keeping the original plan fixed preserves accountability while allowing the forecast to reflect what you honestly expect now.

If Q1 ARR comes in below plan but you think you can make it up later in the year, show that. If you outperform and now expect a stronger Q4, show that too. The forecast should reflect what you actually expect to happen at that point in time.

For very early-stage companies, Yadhu recommends including headcount alongside or instead of opex. Early on, headcount makes up much of your cost structure, so it can be an easier way to show the board how you’re planning to grow the team and how hiring is tracking against that plan.

The important part is updating the forecast honestly every quarter. You don’t lose accountability when the forecast changes because the original board plan is still sitting right there next to it.

The investor lens

When a founder walks me through a waterfall, I’m looking for two things:

• Do we understand the sources of under- and over-performance vs plan?
• For underperforming areas, what actions should we immediately take to course correct mid-quarter?

Yadhu has used this approach since Esper’s earliest days. Today, he says Esper’s quarterly forecasts are usually within 10% of actual results. Having the earlier forecasts in front of him helps him see steer the business to success.

Watch the full session on Ubiquity University

In the full session, Yadhu explains how he structures the waterfall, handles large misses, and introduces the format to a board that’s used to something simpler.

Watch Here