How to Build Your Pro Forma in a Fast-Changing World
Most retailers and restaurants won't approve a new store without a pro forma, and most of those pro formas run for 5 years, 10 years, and sometimes 15. That's a long way out. Predicting your sales, expenses, and profitability over that horizon was never easy, and right now it's harder than it's been in a long time.
What makes a good store pro forma? A good store pro forma doesn't just project one expected outcome. It should test what happens when things go wrong and make sure you're prepared to manage potential future risk. That means sensitivity tables for key assumptions like sales and expenses. It means modeling occasional cost spikes instead of smooth growth lines, at least one recession over a 10-year horizon, realistic remodel and maintenance costs, and a hurdle rate that rises when uncertainty does.
Why long-term pro formas are harder than ever
Cost of capital
We don't know where interest rates will be in five years, let alone ten. That affects what you pay to finance a store and the discount rate you use to calculate its NPV. A small change in the discount rate can turn an approved project into a rejected one.
Inflation
Since COVID, inflation has been structurally higher. From 2015 through 2019, consumer prices rose about 1.6% a year on average. Inflation peaked near 9% in mid-2022, and since mid-2023 it has averaged about 3% and hasn't dropped below 2.3%. In August 2026 it was 3.4%.
Consumer Price Index, percent change from a year ago.
Source: U.S. Bureau of Labor Statistics via FRED, Federal Reserve Bank of St. Louis.
Labor
If inflation stays higher, you have to assume wages rise with it. But labor is also the cost most likely to change shape. Automation, robotics, and artificial intelligence are improving fast, and within a few years it may be normal to see them handle some lower-skill jobs. Over a 10-year pro forma, you could see labor costs rise per hour and fall per transaction at the same time.
Fuel, transportation, and distribution
Rising costs flow through fuel, freight, and your warehouse and distribution network. We're seeing it right now: U.S. diesel prices hit a record $6.53 a gallon in September 2026, more than 70% higher than a year earlier.
Building and repair costs
Every store needs maintenance, and the trades aren't getting cheaper. HVAC, plumbing, and electrical work all cost more than they did a few years ago, and a 10-year model will see plenty of service calls and replacements.
How to build a pro forma that holds up
1. Build in sensitivity tables
Sensitivity tables are crucial. What if labor costs come in 20% higher than you expected? What if sales are 10% lower? What if both happen? Build those scenarios directly into the model so you can see how returns change and make sure the store still works when a few assumptions miss.
Scenario | What you're testing |
Base case | Your best estimate of sales and costs |
Labor +20% | Can the store absorb a tight labor market? |
Sales −10% | Does the store still clear your hurdle if demand is softer than forecast? |
Labor +20% and sales −10% | The downside case. Is the investment still worth it? |
2. Model spikes and resets, not straight lines
Costs don't rise smoothly. They spike and then settle back. Fuel is the obvious example. On a 10-year horizon, you might build in two fuel spikes, each followed by a return to a more normal level. Apply the same thinking to any expense that's historically volatile.
3. Bake in at least one weak sales year
Costs don't rise smoothly and neither do sales for most businesses. That means a 10-year pro forma should include at least one year with lower sales, instead of assuming steady growth the whole way. This can happen for a variety of reasons.
Recessions
Economic downturns happen regularly. Since World War II, U.S. economic expansions have lasted a little over five years on average before the next recession began, according to the National Bureau of Economic Research. Some businesses will be more sensitive to this than others.
Competition
A quality competitor opening up down the street is a quick way to lose sales that you could have never forecasted. Very few businesses are immune to competitive pressure.
The Unknown
Bad weather. Road Construction. Your best employees quitting right before the Holidays. I could name about 30 things here. Things will happen in the course of your business operations that are out of your control.
4. Be realistic about remodel and maintenance costs
It's easy to underestimate what a store will need over 10 years. Budget for the remodel you know is coming and for maintenance that rises as the building ages, at today's higher trade costs.
5. Raise your hurdle rate when uncertainty is high
The simplest lever is your approval threshold. If you normally approve projects at a 10% IRR, and the outlook feels more uncertain, raise it to 15%. A new store is a large investment. A higher hurdle protects your working capital and leaves room for the things your model didn't predict.
Quick reference
Risk | How to model it |
Interest rates and cost of capital | Test a range of discount rates and financing costs |
Inflation | Use higher-than-2% base assumptions and test a range around them |
Labor | Sensitivity tables (e.g., +10%, +20%), and consider automation offsets later in the horizon |
Fuel and distribution | Periodic spikes followed by resets |
Building and repair | Realistic maintenance that rises with building age, plus a planned light remodel |
Sales weakness | At least one weak sales year in a 10-year model |
General uncertainty | A higher IRR hurdle (e.g., 10% → 15%) |
Don't get lazy with it
The most common mistake is the easy one: forecast an optimistic sales number and tell yourself you'll keep expenses in check, then grow everything by 2% a year for a decade. Almost nothing in life grows at a steady 2% a year. There are peaks and valleys, and it's okay to have nuance in your financial projections. In the end, a pro forma is a risk management tool. Build it to show you what could go wrong, not just what you hope will go right.
Need help with your pro forma?
Retail Gravity builds customized Excel pro forma templates for individual sites as an add-on to our Individual Site Package, and we offer financial analysis from general pro forma building to detailed sensitivity scenarios. Contact us at support@retailgravity.com or 520-314-6094.