My partner, Josh Kopelman, has just put up a wonderful post on forecasting using the waterfall method. I'd like to make these forecasts de rigeur for all early stage companies, since they are the clearest way for people who are either too optimistic or too pessimistic to get the constant feedback required for them to mend their ways. It's hard to fix what you can't measure - and so many companies hide, from themselves as much as from their investors, their inability to forecast.
Since Josh was thoughtful enough to provide a templated .xls file as well, I think I'm going to require it of those companies on whose boards I sit.
Great post, Josh!