The Difference Between a Pro Forma and a Plan

A pro forma is neat. A plan is not.

In commercial real estate, pro formas are essential. They help evaluate opportunity, test assumptions, and establish expectations. But they’re often mistaken for something they’re not: a roadmap.

A pro forma is a snapshot. A plan is a living process.

Why Pro Formas Break

Most pro formas don’t fail because they’re careless. They fail because they’re static.

They assume leasing timelines, expense behavior, capital markets, and tenant decisions will follow a linear path. In reality, those variables move independently—and often unpredictably.

When markets shift, a model built on fixed assumptions becomes less useful by the day.

Planning Begins Where Modeling Ends

A real plan starts after underwriting.

It accounts for uncertainty rather than ignoring it. It prioritizes decision-making over precision and adaptability over optimization. It leaves room for course correction without abandoning the original strategy.

In practice, planning means asking different questions:

• What decisions matter most in the first 12 months?

• Where do we have flexibility if assumptions change?

• Which risks are acceptable, and which are not?

These are questions a spreadsheet can’t answer on its own.

Precision vs. Judgment

There’s comfort in detail. Decimal points imply control.

But precision without judgment creates false confidence. The goal isn’t to predict every outcome, it’s to be prepared for the ones that matter most.

Strong plans recognize that information arrives unevenly. They allow for imperfect data while still supporting decisive action.

Where Plans Create Advantage

When a plan is clear, execution improves.

Teams move faster. Tradeoffs are easier to evaluate. Adjustments don’t feel like failures—they feel like informed responses to new information.

This is especially important in dynamic markets like Texas, where growth creates opportunity but also introduces variability across submarkets and asset types.

Models Inform. Plans Perform.

Pro formas will always be part of the process. They provide discipline and a common language for evaluating deals.

But performance depends on what happens after the model is built.

The investors who outperform over time understand this distinction. They use pro formas to inform decisions, but they rely on planning to navigate reality.