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How to Prepare a Financial Plan for Startup Business (w/ example)

Financial Statements Template

Free Financial Statements Template

Ajay Jagtap

  • December 7, 2023

13 Min Read

financial plan for startup business

If someone were to ask you about your business financials, could you give them a detailed answer?

Let’s say they ask—how do you allocate your operating expenses? What is your cash flow situation like? What is your exit strategy? And a series of similar other questions.

Instead of mumbling what to answer or shooting in the dark, as a founder, you must prepare yourself to answer this line of questioning—and creating a financial plan for your startup is the best way to do it.

A business plan’s financial plan section is no easy task—we get that.

But, you know what—this in-depth guide and financial plan example can make forecasting as simple as counting on your fingertips.

Ready to get started? Let’s begin by discussing startup financial planning.

What is Startup Financial Planning?

Startup financial planning, in simple terms, is a process of planning the financial aspects of a new business. It’s an integral part of a business plan and comprises its three major components: balance sheet, income statement, and cash-flow statement.

Apart from these statements, your financial section may also include revenue and sales forecasts, assets & liabilities, break-even analysis , and more. Your first financial plan may not be very detailed, but you can tweak and update it as your company grows.

Key Takeaways

  • Realistic assumptions, thorough research, and a clear understanding of the market are the key to reliable financial projections.
  • Cash flow projection, balance sheet, and income statement are three major components of a financial plan.
  • Preparing a financial plan is easier and faster when you use a financial planning tool.
  • Exploring “what-if” scenarios is an ideal method to understand the potential risks and opportunities involved in the business operations.

Why is Financial Planning Important to Your Startup?

Poor financial planning is one of the biggest reasons why most startups fail. In fact, a recent CNBC study reported that running out of cash was the reason behind 44% of startup failures in 2022.

A well-prepared financial plan provides a clear financial direction for your business, helps you set realistic financial objectives, create accurate forecasts, and shows your business is committed to its financial objectives.

It’s a key element of your business plan for winning potential investors. In fact, YC considered recent financial statements and projections to be critical elements of their Series A due diligence checklist .

Your financial plan demonstrates how your business manages expenses and generates revenue and helps them understand where your business stands today and in 5 years.

Makes sense why financial planning is important to your startup, doesn’t it? Let’s cut to the chase and discuss the key components of a startup’s financial plan.

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how to write a financial forecast for a business plan

Key Components of a Startup Financial Plan

Whether creating a financial plan from scratch for a business venture or just modifying it for an existing one, here are the key components to consider including in your startup’s financial planning process.

Income Statement

An Income statement , also known as a profit-and-loss statement(P&L), shows your company’s income and expenditures. It also demonstrates how your business experienced any profit or loss over a given time.

Consider it as a snapshot of your business that shows the feasibility of your business idea. An income statement can be generated considering three scenarios: worst, expected, and best.

Your income or P&L statement must list the following:

  • Cost of goods or cost of sale
  • Gross margin
  • Operating expenses
  • Revenue streams
  • EBITDA (Earnings before interest, tax, depreciation , & amortization )

Established businesses can prepare annual income statements, whereas new businesses and startups should consider preparing monthly statements.

Cash flow Statement

A cash flow statement is one of the most critical financial statements for startups that summarize your business’s cash in-and-out flows over a given time.

This section provides details on the cash position of your business and its ability to meet monetary commitments on a timely basis.

Your cash flow projection consists of the following three components:

✅ Cash revenue projection: Here, you must enter each month’s estimated or expected sales figures.

✅ Cash disbursements: List expenditures that you expect to pay in cash for each month over one year.

✅ Cash flow reconciliation: Cash flow reconciliation is a process used to ensure the accuracy of cash flow projections. The adjusted amount is the cash flow balance carried over to the next month.

Furthermore, a company’s cash flow projections can be crucial while assessing liquidity, its ability to generate positive cash flows and pay off debts, and invest in growth initiatives.

Balance Sheet

Your balance sheet is a financial statement that reports your company’s assets, liabilities, and shareholder equity at a given time.

Consider it as a snapshot of what your business owns and owes, as well as the amount invested by the shareholders.

This statement consists of three parts: assets , liabilities, and the balance calculated by the difference between the first two. The final numbers on this sheet reflect the business owner’s equity or value.

Balance sheets follow the following accounting equation with assets on one side and liabilities plus Owner’s equity on the other:

Here is what’s the core purpose of having a balance-sheet:

  • Indicates the capital need of the business
  • It helps to identify the allocation of resources
  • It calculates the requirement of seed money you put up, and
  • How much finance is required?

Since it helps investors understand the condition of your business on a given date, it’s a financial statement you can’t miss out on.

Break-even Analysis

Break-even analysis is a startup or small business accounting practice used to determine when a company, product, or service will become profitable.

For instance, a break-even analysis could help you understand how many candles you need to sell to cover your warehousing and manufacturing costs and start making profits.

Remember, anything you sell beyond the break-even point will result in profit.

You must be aware of your fixed and variable costs to accurately determine your startup’s break-even point.

  • Fixed costs: fixed expenses that stay the same no matter what.
  • Variable costs: expenses that fluctuate over time depending on production or sales.

A break-even point helps you smartly price your goods or services, cover fixed costs, catch missing expenses, and set sales targets while helping investors gain confidence in your business. No brainer—why it’s a key component of your startup’s financial plan.

Having covered all the key elements of a financial plan, let’s discuss how you can create a financial plan for your startup.

How to Create a Financial Section of a Startup Business Plan?

1. determine your financial needs.

You can’t start financial planning without understanding your financial requirements, can you? Get your notepad or simply open a notion doc; it’s time for some critical thinking.

Start by assessing your current situation by—calculating your income, expenses , assets, and liabilities, what the startup costs are, how much you have against them, and how much financing you need.

Assessing your current financial situation and health will help determine how much capital you need for your startup and help plan fundraising activities and outreach.

Furthermore, determining financial needs helps prioritize operational activities and expenses, effectively allocate resources, and increase the viability and sustainability of a business in the long run.

Having learned to determine financial needs, let’s head straight to setting financial goals.

2. Define Your Financial Goals

Setting realistic financial goals is fundamental in preparing an effective financial plan. So, it would help to outline your long-term strategies and goals at the beginning of your financial planning process.

Let’s understand it this way—if you are a SaaS startup pursuing VC financing rounds, you may ask investors about what matters to them the most and prepare your financial plan accordingly.

However, a coffee shop owner seeking a business loan may need to create a plan that appeals to banks, not investors. At the same time, an internal financial plan designed to offer financial direction and resource allocation may not be the same as previous examples, seeing its different use case.

Feeling overwhelmed? Just define your financial goals—you’ll be fine.

You can start by identifying your business KPIs (key performance indicators); it would be an ideal starting point.

3. Choose the Right Financial Planning Tool

Let’s face it—preparing a financial plan using Excel is no joke. One would only use this method if they had all the time in the world.

Having the right financial planning software will simplify and speed up the process and guide you through creating accurate financial forecasts.

Many financial planning software and tools claim to be the ideal solution, but it’s you who will identify and choose a tool that is best for your financial planning needs.

how to write a financial forecast for a business plan

Create a Financial Plan with Upmetrics in no time

Enter your Financial Assumptions, and we’ll calculate your monthly/quarterly and yearly financial projections.

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Start Forecasting

4. Make Assumptions Before Projecting Financials

Once you have a financial planning tool, you can move forward to the next step— making financial assumptions for your plan based on your company’s current performance and past financial records.

You’re just making predictions about your company’s financial future, so there’s no need to overthink or complicate the process.

You can gather your business’ historical financial data, market trends, and other relevant documents to help create a base for accurate financial projections.

After you have developed rough assumptions and a good understanding of your business finances, you can move forward to the next step—projecting financials.

5. Prepare Realistic Financial Projections

It’s a no-brainer—financial forecasting is the most critical yet challenging aspect of financial planning. However, it’s effortless if you’re using a financial planning software.

Upmetrics’ forecasting feature can help you project financials for up to 7 years. However, new startups usually consider planning for the next five years. Although it can be contradictory considering your financial goals and investor specifications.

Following are the two key aspects of your financial projections:

Revenue Projections

In simple terms, revenue projections help investors determine how much revenue your business plans to generate in years to come.

It generally involves conducting market research, determining pricing strategy , and cash flow analysis—which we’ve already discussed in the previous steps.

The following are the key components of an accurate revenue projection report:

  • Market analysis
  • Sales forecast
  • Pricing strategy
  • Growth assumptions
  • Seasonal variations

This is a critical section for pre-revenue startups, so ensure your projections accurately align with your startup’s financial model and revenue goals.

Expense Projections

Both revenue and expense projections are correlated to each other. As revenue forecasts projected revenue assumptions, expense projections will estimate expenses associated with operating your business.

Accurately estimating your expenses will help in effective cash flow analysis and proper resource allocation.

These are the most common costs to consider while projecting expenses:

  • Fixed costs
  • Variable costs
  • Employee costs or payroll expenses
  • Operational expenses
  • Marketing and advertising expenses
  • Emergency fund

Remember, realistic assumptions, thorough research, and a clear understanding of your market are the key to reliable financial projections.

6. Consider “What if” Scenarios

After you project your financials, it’s time to test your assumptions with what-if analysis, also known as sensitivity analysis.

Using what-if analysis with different scenarios while projecting your financials will increase transparency and help investors better understand your startup’s future with its best, expected, and worst-case scenarios.

Exploring “what-if” scenarios is the best way to better understand the potential risks and opportunities involved in business operations. This proactive exercise will help you make strategic decisions and necessary adjustments to your financial plan.

7. Build a Visual Report

If you’ve closely followed the steps leading to this, you know how to research for financial projections, create a financial plan, and test assumptions using “what-if” scenarios.

Now, we’ll prepare visual reports to present your numbers in a visually appealing and easily digestible format.

Don’t worry—it’s no extra effort. You’ve already made a visual report while creating your financial plan and forecasting financials.

Check the dashboard to see the visual presentation of your projections and reports, and use the necessary financial data, diagrams, and graphs in the final draft of your financial plan.

Here’s what Upmetrics’ dashboard looks like:

Upmetrics financial projections visual report

8. Monitor and Adjust Your Financial Plan

Even though it’s not a primary step in creating a good financial plan, it’s quite essential to regularly monitor and adjust your financial plan to ensure the assumptions you made are still relevant, and you are heading in the right direction.

There are multiple ways to monitor your financial plan.

For instance, you can compare your assumptions with actual results to ensure accurate projections based on metrics like new customers acquired and acquisition costs, net profit, and gross margin.

Consider making necessary adjustments if your assumptions are not resonating with actual numbers.

Also, keep an eye on whether the changes you’ve identified are having the desired effect by monitoring their implementation.

And that was the last step in our financial planning guide. However, it’s not the end. Have a look at this financial plan example.

Startup Financial Plan Example

Having learned about financial planning, let’s quickly discuss a coffee shop startup financial plan example prepared using Upmetrics.

Important Assumptions

  • The sales forecast is conservative and assumes a 5% increase in Year 2 and a 10% in Year 3.
  • The analysis accounts for economic seasonality – wherein some months revenues peak (such as holidays ) and wanes in slower months.
  • The analysis assumes the owner will not withdraw any salary till the 3rd year; at any time it is assumed that the owner’s withdrawal is available at his discretion.
  • Sales are cash basis – nonaccrual accounting
  • Moderate ramp- up in staff over the 5 years forecast
  • Barista salary in the forecast is $36,000 in 2023.
  • In general, most cafes have an 85% gross profit margin
  • In general, most cafes have a 3% net profit margin

Projected Balance Sheet

Projected Balance Sheet

Projected Cash-Flow Statement

Cash-Flow Statement

Projected Profit & Loss Statement

Profit & Loss Statement

Break Even Analysis

Break Even Analysis

Start Preparing Your Financial Plan

We covered everything about financial planning in this guide, didn’t we? Although it doesn’t fulfill our objective to the fullest—we want you to finish your financial plan.

Sounds like a tough job? We have an easy way out for you—Upmetrics’ financial forecasting feature. Simply enter your financial assumptions, and let it do the rest.

So what are you waiting for? Try Upmetrics and create your financial plan in a snap.

Build your Business Plan Faster

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Frequently Asked Questions

How often should i update my financial projections.

Well, there is no particular rule about it. However, reviewing and updating your financial plan once a year is considered an ideal practice as it ensures that the financial aspirations you started and the projections you made are still relevant.

How do I estimate startup costs accurately?

You can estimate your startup costs by identifying and factoring various one-time, recurring, and hidden expenses. However, using a financial forecasting tool like Upmetrics will ensure accurate costs while speeding up the process.

What financial ratios should startups pay attention to?

Here’s a list of financial ratios every startup owner should keep an eye on:

  • Net profit margin
  • Current ratio
  • Quick ratio
  • Working capital
  • Return on equity
  • Debt-to-equity ratio
  • Return on assets
  • Debt-to-asset ratio

What are the 3 different scenarios in scenario analysis?

As discussed earlier, Scenario analysis is the process of ascertaining and analyzing possible events that can occur in the future. Startups or businesses often consider analyzing these three scenarios:

  • base-case (expected) scenario
  • Worst-case scenario
  • best case scenario.

About the Author

how to write a financial forecast for a business plan

Ajay is a SaaS writer and personal finance blogger who has been active in the space for over three years, writing about startups, business planning, budgeting, credit cards, and other topics related to personal finance. If not writing, he’s probably having a power nap. Read more

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how to write a financial forecast for a business plan

How to Create a Financial Forecast

Bryce Warnes

Reviewed by

July 15, 2022

This article is Tax Professional approved

Maybe your goal is world domination. Maybe you just want a sustainable side hustle. Either way, financial forecasting helps you understand the steps you need to take—and the numbers you need to hit—to make growth happen for your business.

I am the text that will be copied.

Plus, if you ever go looking for more funding, you’ll need financial forecasts to prove that your business is on track for growth.

Here’s everything you need on hand, and the steps you can take, to produce a reliable financial forecast.

What is a financial forecast?

A financial forecast tries to predict what your business will look like (financially) in the future. Pro forma financial statements are how you make those predictions somewhat concrete.

Pro forma statements are just like the financial statements you use each month to see how your business is performing. The only difference is that you prepare pro forma statements in advance, for future months and years.

There are three key pro forma statements you should be familiar with:

  • The Income Statement
  • The Cash Flow Statement
  • The Balance Sheet

Helpful resource: How to Read and Analyze Financial Statements

Depending on your goals, these statements will cover different time spans. If you’re creating a financial forecast for your planning purposes, you should create pro forma statements covering six months to one year in the future.

If you’re presenting your forecast to a lender or investor, though, you should create pro forma statements covering the next one to three years.

Financial forecasting vs. budgeting

When you create a budget for your business , you plan to set aside money for certain costs, taking into account your income and expenses. The budget you make may be based on info from your financial forecast, but it’s distinct from the forecast itself.

Think of financial forecasting as a prediction, and budgeting as a plan. When you make a financial forecast, you see what direction your business is headed in, based on past performance and other factors, and use that to anticipate the future.

When you make a budget, you plan how you’re going to spend money based on what you expect your finances to look like in the future (your forecast).

For instance, if your financial forecast for next year says you’ll have an extra $5,000 in revenue, you might create a budget to decide how it will be spent—$2,000 for a new website, $1,000 for Facebook ads, and so on.

Three steps to creating your financial forecast

Ready to peer into the crystal ball and see the future of your business? There are three steps you need to follow:

  • Gather your past financial statements. You’ll need to look at your past finances in order to project your income, cash flow, and balance.
  • Decide how you’ll make projections. Besides past records, there’s other data you can draw on to make your projections more accurate.
  • Prepare your pro forma statements. Pour a coffee and get ready to crunch some numbers.

Step one: Gather your records

If you’re not looking into the past to see how your business has grown, you’re not really forecasting—you’re just guessing.

You’ll need to gather past financial statements so you can see how your business has developed over time, and then project that development into the future.

Your bookkeeper or bookkeeping software should generate financial statements for you. If you don’t have either, and you don’t have financial statements, you’ll need to take care of that before you can start forecasting. You need complete bookkeeping in order to get the transaction history you base your financial statements on.

Put aside the task for financial forecasting for the moment, and learn how to catch up on your bookkeeping .

Once your books and financial statements are up to date, you’ll have everything you need to start planning for the future.

Step two: Decide how you’ll make your forecast

Depending what resources you choose to use, the type of forecast you create will fall between two poles— historical and researched-based.

Almost every financial forecast includes a little bit of historical forecasting, and a little bit that’s research-based. The blend you choose will depend on your needs and the resources at your disposal.

Remember, the goal is to create a realistic, useful forecast—without breaking the bank or eating up all your time.

Historical forecasting

When you use your financial history to plot the future, it’s historical forecasting . You’re looking at your last few annual Income Statements, Cash Flow Statements, and Balance Sheets to see how fast you’ve grown in the past. From there, you can make a guess about how fast you’ll grow this year.

The benefit of this is that it’s relatively easy to do and doesn’t take a lot of time, money, or expertise. The drawback is that you’re only using info about your own business, and not looking at broader market trends—like what your competition has been up to.

Historical forecasting is a good bet if you’re forecasting for modest growth, or else creating a quick-and-dirty forecast for your own use—not putting together a presentation for potential investors.

Research-based forecasting

When you do research about broader market trends, you’re using research-based forecasting . You may look at how your industry has performed over the past ten years, investigate new technologies and consumer trends, or try to measure the progress of your competitors. You might look at how companies similar to yours have planned their own growth.

The benefit of research-based forecasting is that you get a detailed, nuanced view of how your business could grow, taking into account a lot of different factors. And it’s the kind of forecast that investors and lenders want to see.

The drawback is that researched-based forecasting can be expensive. You may find you need to hire outside consultants and researchers to handle the heavy lifting.

Research-based forecasting is a good choice if you’re courting investors, or planning on rapid, aggressive growth. It’s also good if your company is brand new, and doesn’t have a lot of financial history to draw on for making projections

Step three: Create pro forma statements

Once you’ve collected the information you need to build your forecast, you can create pro forma statements.

We’ll cover the three key financial statements here. Whether you use all of them is up to you.

If you’re creating a quick forecast for your own planning, you may only need to create pro forma Income Statements. If you’re presenting to lenders or investors, you’ll want to use all three.

Rule of thumb: Any form you’d use in the month-to-month operation of your business should be created pro forma. For instance, if you move a lot of cash around every month, and you rely on Cash Flow Statements to make sure you’ve got enough money on hand to pay your vendors, then it’s wise to create pro forma Cash Flow Statements as part of your forecast.

Creating the pro forma Income Statement

First, set a goal—a projection—for sales in the period you’re looking at.

Let’s say you made $30,000 in sales this year. Next year, you want to make $60,000. So, your total sales will increase by $30,000.

Set a production schedule that will let you reach that goal, and map it out over the time period you’re covering. In our example, there will be 12 Income Statements in the year to come (one each month). Map out that $30,000 increase in sales over the 12 statements.

You could do this by increasing sales a fixed amount every month, or gradually increasing the amount of sales you make per month. It’s up to your instincts and experience as a business owner.

Then, it’s time for the “loss” part of “ profit and loss .” Calculate the cost of goods sold for each month, and deduct it from your sales. Deduct any other operating expenses you have, as well.

It’s important to take every expense into account so you get an accurate projection. If part of your plan is quadrupling your online advertising, be sure to include an expense that reflects that.

Once you’re done, your pro Forma Income Statements show you how much you can expect to earn and how much you can expect to spend in the time ahead.

Example Pro Forma Income Statement:

Karen’s Falafel Warehouse

Creating the pro forma Cash Flow Statement

You create a pro forma Cash Flow Statement a lot like the way you’d create a regular Cash Flow Statement. That means taking info from the Income Statement, and using the Cash Flow Statement format to plot out where your money is going, and how much you’ll have on hand at any one time.

Your projected cash flow can tell you a few things. If it’s in the negative, it means you’re not going to have enough cash on-hand to run your business, according to your current trajectory. You’ll need to make plans to borrow money and pay it off.

If your net cash flow is positive, you can plan on having enough surplus cash on hand to pay off loans, or save for a big investment.

Example Pro Forma Cash Flow Statement:

Ruth’s Raccoon Rescue and Rehabilitation Center

Creating the pro forma Balance Sheet

Drawing on info from the Income Statement and the Cash Flow Statement lets you create pro forma Balance Sheets. But you’ll also need previous Balance Sheets to make this useful—so you can follow the story of how your business got from “Balance A” to “Balance B.”

The Balance Sheet will project changes in your business accounts over time. That way, you can plan where to move money, when.

Example Pro Forma Balance Sheet:

Big Bill’s Budget Wedding Videos

Forecast vs. actuals

Once you’ve created a financial forecast, your work isn’t done. The vital second stage is to go back and record what your actual financials were in comparison to your forecast once the month or year is over.

Why is this so vital?

It helps you learn to forecast better next year, and when your forecast is way off, you can take notes for yourself on why that was.

For example:

  • March revenue was much higher than I forecasted for. I didn’t realize there would be a seasonal boost over spring break.
  • Sales were lower than I forecasted in the June. There was a miscommunication with the supplier and I didn’t have all the inventory I needed.

These mundane notes to yourself accumulate into invaluable business knowledge that help make every year more successful than the last.

Best, worst, and normal case projections

Whether you’re the kind of person who always sees the glass half full, or the kind who always sees it half empty, it’s a good idea to take into account different possible outcomes for your business.

Humans aren’t very good at predicting the future. Consider creating three different forecasts: One for the best case scenario, one for the worst, and one for the middle or “regular” scenario.

  • Maybe the t-shirts you buy wholesale for your online store go up in price, like they did last year. Factor that into your worst case scenario .
  • Maybe t-shirt prices stay the same, plus your new advertising plan takes off, and you get more business. Consider that the best case.
  • Maybe everything more or less stays the same. Let’s call that the regular case.

The best/worst/regular trifecta is also useful when you’re making a budget for your business. For example, in January you might budget for a regular scenario. In this case, that means monthly sales revenue of $8,000.

However, in February say your revenue hits $10,000, and in March it’s $11,000. At that point, you may want to adjust your budget to the best case to scenario—since you’ll now have more money to reinvest in your business.

At the end of the day, the more robust your forecast, the better you’ll be able to plan the future of your business, and think on your feet. Plus, you’ll impress investors and lenders, by proving you’ve considered (almost) every possible outcome.

The better you understand how financial statements work, the easier you’ll find it to create financial forecasts. Before you start forecasting, take a look at our other helpful resources for understanding your small business financials:

  • Financial Literacy 101 for Small Business Owners
  • 10 Financial Ratios Every Small Business Owner Should Know
  • Accounting Solutions: The Top 7 Ways to Get Your Accounting Done

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  • Business Planning

Business Plan Financial Projections

Written by Dave Lavinsky

Business Plan Financial Projections

Financial projections are forecasted analyses of your business’ future that include income statements, balance sheets and cash flow statements. We have found them to be an crucial part of your business plan for the following reasons:

  • They can help prove or disprove the viability of your business idea. For example, if your initial projections show your company will never make a sizable profit, your venture might not be feasible. Or, in such a case, you might figure out ways to raise prices, enter new markets, or streamline operations to make it profitable. 
  • Financial projections give investors and lenders an idea of how well your business is likely to do in the future. They can give lenders the confidence that you’ll be able to comfortably repay their loan with interest. And for equity investors, your projections can give them faith that you’ll earn them a solid return on investment. In both cases, your projections can help you secure the funding you need to launch or grow your business.
  • Financial projections help you track your progress over time and ensure your business is on track to meet its goals. For example, if your financial projections show you should generate $500,000 in sales during the year, but you are not on track to accomplish that, you’ll know you need to take corrective action to achieve your goal.

Below you’ll learn more about the key components of financial projections and how to complete and include them in your business plan.

What Are Business Plan Financial Projections?

Financial projections are an estimate of your company’s future financial performance through financial forecasting. They are typically used by businesses to secure funding, but can also be useful for internal decision-making and planning purposes. There are three main financial statements that you will need to include in your business plan financial projections:

1. Income Statement Projection

The income statement projection is a forecast of your company’s future revenues and expenses. It should include line items for each type of income and expense, as well as a total at the end.

There are a few key items you will need to include in your projection:

  • Revenue: Your revenue projection should break down your expected sales by product or service, as well as by month. It is important to be realistic in your projections, so make sure to account for any seasonal variations in your business.
  • Expenses: Your expense projection should include a breakdown of your expected costs by category, such as marketing, salaries, and rent. Again, it is important to be realistic in your estimates.
  • Net Income: The net income projection is the difference between your revenue and expenses. This number tells you how much profit your company is expected to make.

Sample Income Statement

2. cash flow statement & projection.

The cash flow statement and projection are a forecast of your company’s future cash inflows and outflows. It is important to include a cash flow projection in your business plan, as it will give investors and lenders an idea of your company’s ability to generate cash.

There are a few key items you will need to include in your cash flow projection:

  • The cash flow statement shows a breakdown of your expected cash inflows and outflows by month. It is important to be realistic in your projections, so make sure to account for any seasonal variations in your business.
  • Cash inflows should include items such as sales revenue, interest income, and capital gains. Cash outflows should include items such as salaries, rent, and marketing expenses.
  • It is important to track your company’s cash flow over time to ensure that it is healthy. A healthy cash flow is necessary for a successful business.

Sample Cash Flow Statements

3. balance sheet projection.

The balance sheet projection is a forecast of your company’s future financial position. It should include line items for each type of asset and liability, as well as a total at the end.

A projection should include a breakdown of your company’s assets and liabilities by category. It is important to be realistic in your projections, so make sure to account for any seasonal variations in your business.

It is important to track your company’s financial position over time to ensure that it is healthy. A healthy balance is necessary for a successful business.

Sample Balance Sheet

How to create financial projections.

Creating financial projections for your business plan can be a daunting task, but it’s important to put together accurate and realistic financial projections in order to give your business the best chance for success.  

Cost Assumptions

When you create financial projections, it is important to be realistic about the costs your business will incur, using historical financial data can help with this. You will need to make assumptions about the cost of goods sold, operational costs, and capital expenditures.

It is important to track your company’s expenses over time to ensure that it is staying within its budget. A healthy bottom line is necessary for a successful business.

Capital Expenditures, Funding, Tax, and Balance Sheet Items

You will also need to make assumptions about capital expenditures, funding, tax, and balance sheet items. These assumptions will help you to create a realistic financial picture of your business.

Capital Expenditures

When projecting your company’s capital expenditures, you will need to make a number of assumptions about the type of equipment or property your business will purchase. You will also need to estimate the cost of the purchase.

When projecting your company’s funding needs, you will need to make a number of assumptions about where the money will come from. This might include assumptions about bank loans, venture capital, or angel investors.

When projecting your company’s tax liability, you will need to make a number of assumptions about the tax rates that will apply to your business. You will also need to estimate the amount of taxes your company will owe.

Balance Sheet Items

When projecting your company’s balance, you will need to make a number of assumptions about the type and amount of debt your business will have. You will also need to estimate the value of your company’s assets and liabilities.

Financial Projection Scenarios

Write two financial scenarios when creating your financial projections, a best-case scenario, and a worst-case scenario. Use your list of assumptions to come up with realistic numbers for each scenario.

Presuming that you have already generated a list of assumptions, the creation of best and worst-case scenarios should be relatively simple. For each assumption, generate a high and low estimate. For example, if you are assuming that your company will have $100,000 in revenue, your high estimate might be $120,000 and your low estimate might be $80,000.

Once you have generated high and low estimates for all of your assumptions, you can create two scenarios: a best case scenario and a worst-case scenario. Simply plug the high estimates into your financial projections for the best-case scenario and the low estimates into your financial projections for the worst-case scenario.

Conduct a Ratio Analysis

A ratio analysis is a useful tool that can be used to evaluate a company’s financial health. Ratios can be used to compare a company’s performance to its industry average or to its own historical performance.

There are a number of different ratios that can be used in ratio analysis. Some of the more popular ones include the following:

  • Gross margin ratio
  • Operating margin ratio
  • Return on assets (ROA)
  • Return on equity (ROE)

To conduct a ratio analysis, you will need financial statements for your company and for its competitors. You will also need industry average ratios. These can be found in industry reports or on financial websites.

Once you have the necessary information, you can calculate the ratios for your company and compare them to the industry averages or to your own historical performance. If your company’s ratios are significantly different from the industry averages, it might be indicative of a problem.

Be Realistic

When creating your financial projections, it is important to be realistic. Your projections should be based on your list of assumptions and should reflect your best estimate of what your company’s future financial performance will be. This includes projected operating income, a projected income statement, and a profit and loss statement.

Your goal should be to create a realistic set of financial projections that can be used to guide your company’s future decision-making.

Sales Forecast

One of the most important aspects of your financial projections is your sales forecast. Your sales forecast should be based on your list of assumptions and should reflect your best estimate of what your company’s future sales will be.

Your sales forecast should be realistic and achievable. Do not try to “game” the system by creating an overly optimistic or pessimistic forecast. Your goal should be to create a realistic sales forecast that can be used to guide your company’s future decision-making.

Creating a sales forecast is not an exact science, but there are a number of methods that can be used to generate realistic estimates. Some common methods include market analysis, competitor analysis, and customer surveys.

Create Multi-Year Financial Projections

When creating financial projections, it is important to generate projections for multiple years. This will give you a better sense of how your company’s financial performance is likely to change over time.

It is also important to remember that your financial projections are just that: projections. They are based on a number of assumptions and are not guaranteed to be accurate. As such, you should review and update your projections on a regular basis to ensure that they remain relevant.

Creating financial projections is an important part of any business plan. However, it’s important to remember that these projections are just estimates. They are not guarantees of future success.

Business Plan Financial Projections FAQs

What is a business plan financial projection.

A business plan financial projection is a forecast of your company's future financial performance. It should include line items for each type of asset and liability, as well as a total at the end.

What are annual income statements? 

The Annual income statement is a financial document and a financial model that summarize a company's revenues and expenses over the course of a fiscal year. They provide a snapshot of a company's financial health and performance and can be used to track trends and make comparisons with other businesses.

What are the necessary financial statements?

The necessary financial statements for a business plan are an income statement, cash flow statement, and balance sheet.

How do I create financial projections?

You can create financial projections by making a list of assumptions, creating two scenarios (best case and worst case), conducting a ratio analysis, and being realistic.

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Financial projections help leaders visualize growth. Here’s how to create one.

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Financial forecasting is a critical yet often underused tactic for small business owners. In its simplest form, it involves calculating changes based on historical financial statements. The straight-line forecasting method uses data to make quantitative predictions.

Another option is to make assumptions related to your business goals and activities using research-based financial forecasts. The qualitative method considers market trends, industry benchmarks and competitor analysis.

You can use both methods for financial modeling, where you simulate scenarios to see the impact on your company's financial health.

Learn how to make predictions by following these steps to write your financial forecast.

Gather your financial statements

Before looking ahead, it's important to understand your past. First, determine the reporting period for your financial forecast. For business-planning purposes, many business owners predict income for the upcoming year. In comparison, vendors, investors and lenders require financial forecasts for the next three years.

Next, improve accuracy by pulling three years of historical financial statements. Your bookkeeper, accountant or accounting software can generate the following financial statements :

  • Balance sheet.
  • Income statement.
  • Cash flow statement.

Review historical financial statements

For a straight-line forecast, calculate the line item differences for each period. Typically, business owners start with their income statement, also known as a profit and loss (P&L) statement. Ultimately, you'll need a complete model using all three financial statements if you're looking for funding .

Financial planners often recommend creating financial forecasts for worst-, best- and average-case scenarios.

Crunch the numbers line by line to see how your revenue and expenses changed over time. A financial forecast template in Microsoft Excel or Google Sheets can make this process easier. The formula for calculating change finds the difference between two periods (Year Two minus Year One). Then divide the difference by the original number (Year One) to get a decimal. Multiply that figure by 100 to express the change as a percentage.

Here's a financial forecast example based on a fictional company:

  • Flowers Inc. had a gross profit of $30,000 in 2017 (Year One), $50,000 in 2018 (Year Two), $65,000 in 2019 (Year Three) and $55,000 in 2020 (Year Four).
  • Subtract $30,000 (Year One) from $50,000 (Year Two) to get the difference, which is $20,000.
  • Divide $20,000 by $30,000 (Year One) to get the decimal of 0.67.
  • Multiply the decimal by 100 to get the percentage of 67%.

In this example, Flowers Inc. showed growth in profit of 67% in 2018 and 30% in 2019, and a decline in profit of 23% in 2020. Complete this step for each line item on your income statement, balance sheet and cash flow statement

[Read more: Roadmap For Rebuilding: Financial Management ]

Make a financial forecast or straight-line prediction

For a straight-line prediction, look at your historical performance and find the average rate for each category. Apply this figure to future years for each section. However, if you're a numbers whiz or have an accountant , you can make assumptions for pro forma statements. A pro forma statement makes predictions that may differ from your historical data.

For example, Flowers Inc. may want 2020's figure to carry less weight than previous years. Plus, the company recently added a delivery service, increasing sales and expenses. Overall, Flowers Inc. expects to achieve a higher gross profit. Since a pro forma statement isn't required to follow generally accepted accounting principles (GAAP), Flowers Inc. can include these predictions on a pro forma statement.

Likewise, Flowers Inc. may also make assumptions about its cost of goods sold (COGS) based on market data and recent cost hikes. Financial planners often recommend creating financial forecasts for worst-, best- and average-case scenarios. Doing so gives you a range of potential outcomes, which helps when planning your overall budget

Start small, dream big

Once you have a basic financial forecast, it's time to play with the numbers and figure out how to reach your business goals. In addition, think about future debt payments or large expenditures that will impact your financial statements. From our example, Flowers Inc. will pay off its startup loan next year, significantly increasing cash flow and decreasing liabilities, so it can purchase a new vehicle for delivery without negatively affecting its balance sheet.

Factor each assumption into your financial forecast for accuracy. Don't forget to update your financial forecast regularly. Doing so allows you to catch potential cash flow problems or adjust expectations over time.

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7 Financial Forecasting Methods to Predict Business Performance

Professional on laptop using financial forecasting methods to predict business performance

  • 21 Jun 2022

Much of accounting involves evaluating past performance. Financial results demonstrate business success to both shareholders and the public. Planning and preparing for the future, however, is just as important.

Shareholders must be reassured that a business has been, and will continue to be, successful. This requires financial forecasting.

Here's an overview of how to use pro forma statements to conduct financial forecasting, along with seven methods you can leverage to predict a business's future performance.

What Is Financial Forecasting?

Financial forecasting is predicting a company’s financial future by examining historical performance data, such as revenue, cash flow, expenses, or sales. This involves guesswork and assumptions, as many unforeseen factors can influence business performance.

Financial forecasting is important because it informs business decision-making regarding hiring, budgeting, predicting revenue, and strategic planning . It also helps you maintain a forward-focused mindset.

Each financial forecast plays a major role in determining how much attention is given to individual expense items. For example, if you forecast high-level trends for general planning purposes, you can rely more on broad assumptions than specific details. However, if your forecast is concerned with a business’s future, such as a pending merger or acquisition, it's important to be thorough and detailed.

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Forecasting with Pro Forma Statements

A common type of forecasting in financial accounting involves using pro forma statements . Pro forma statements focus on a business's future reports, which are highly dependent on assumptions made during preparation⁠, such as expected market conditions.

Because the term "pro forma" refers to projections or forecasts, pro forma statements apply to any financial document, including:

  • Income statements
  • Balance sheets
  • Cash flow statements

These statements serve both internal and external purposes. Internally, you can use them for strategic planning. Identifying future revenues and expenses can greatly impact business decisions related to hiring and budgeting. Pro forma statements can also inform endeavors by creating multiple statements and interchanging variables to conduct side-by-side comparisons of potential outcomes.

Externally, pro forma statements can demonstrate the risk of investing in a business. While this is an effective form of forecasting, investors should know that pro forma statements don't typically comply with generally accepted accounting principles (GAAP) . This is because pro forma statements don't include one-time expenses—such as equipment purchases or company relocations—which allows for greater accuracy because those expenses don't reflect a company’s ongoing operations.

7 Financial Forecasting Methods

Pro forma statements are incredibly valuable when forecasting revenue, expenses, and sales. These findings are often further supported by one of seven financial forecasting methods that determine future income and growth rates.

There are two primary categories of forecasting: quantitative and qualitative.

Quantitative Methods

When producing accurate forecasts, business leaders typically turn to quantitative forecasts , or assumptions about the future based on historical data.

1. Percent of Sales

Internal pro forma statements are often created using percent of sales forecasting . This method calculates future metrics of financial line items as a percentage of sales. For example, the cost of goods sold is likely to increase proportionally with sales; therefore, it’s logical to apply the same growth rate estimate to each.

To forecast the percent of sales, examine the percentage of each account’s historical profits related to sales. To calculate this, divide each account by its sales, assuming the numbers will remain steady. For example, if the cost of goods sold has historically been 30 percent of sales, assume that trend will continue.

2. Straight Line

The straight-line method assumes a company's historical growth rate will remain constant. Forecasting future revenue involves multiplying a company’s previous year's revenue by its growth rate. For example, if the previous year's growth rate was 12 percent, straight-line forecasting assumes it'll continue to grow by 12 percent next year.

Although straight-line forecasting is an excellent starting point, it doesn't account for market fluctuations or supply chain issues.

3. Moving Average

Moving average involves taking the average—or weighted average—of previous periods⁠ to forecast the future. This method involves more closely examining a business’s high or low demands, so it’s often beneficial for short-term forecasting. For example, you can use it to forecast next month’s sales by averaging the previous quarter.

Moving average forecasting can help estimate several metrics. While it’s most commonly applied to future stock prices, it’s also used to estimate future revenue.

To calculate a moving average, use the following formula:

A1 + A2 + A3 … / N

Formula breakdown:

A = Average for a period

N = Total number of periods

Using weighted averages to emphasize recent periods can increase the accuracy of moving average forecasts.

4. Simple Linear Regression

Simple linear regression forecasts metrics based on a relationship between two variables⁠: dependent and independent. The dependent variable represents the forecasted amount, while the independent variable is the factor that influences the dependent variable.

The equation for simple linear regression is:

Y ⁠ = Dependent variable⁠ (the forecasted number)

B = Regression line's slope

X = Independent variable

A = Y-intercept

5. Multiple Linear Regression

If two or more variables directly impact a company's performance, business leaders might turn to multiple linear regression . This allows for a more accurate forecast, as it accounts for several variables that ultimately influence performance.

To forecast using multiple linear regression, a linear relationship must exist between the dependent and independent variables. Additionally, the independent variables can’t be so closely correlated that it’s impossible to tell which impacts the dependent variable.

Financial Accounting| Understand the numbers that drive business success | Learn More

Qualitative Methods

When it comes to forecasting, numbers don't always tell the whole story. There are additional factors that influence performance and can't be quantified. Qualitative forecasting relies on experts’ knowledge and experience to predict performance rather than historical numerical data.

These forecasting methods are often called into question, as they're more subjective than quantitative methods. Yet, they can provide valuable insight into forecasts and account for factors that can’t be predicted using historical data.

6. Delphi Method

The Delphi method of forecasting involves consulting experts who analyze market conditions to predict a company's performance.

A facilitator reaches out to those experts with questionnaires, requesting forecasts of business performance based on their experience and knowledge. The facilitator then compiles their analyses and sends them to other experts for comments. The goal is to continue circulating them until a consensus is reached.

7. Market Research

Market research is essential for organizational planning. It helps business leaders obtain a holistic market view based on competition, fluctuating conditions, and consumer patterns. It’s also critical for startups when historical data isn’t available. New businesses can benefit from financial forecasting because it’s essential for recruiting investors and budgeting during the first few months of operation.

When conducting market research, begin with a hypothesis and determine what methods are needed. Sending out consumer surveys is an excellent way to better understand consumer behavior when you don’t have numerical data to inform decisions.

A Manager's Guide to Finance and Accounting | Access Your Free E-Book | Download Now

Improve Your Forecasting Skills

Financial forecasting is never a guarantee, but it’s critical for decision-making. Regardless of your business’s industry or stage, it’s important to maintain a forward-thinking mindset—learning from past patterns is an excellent way to plan for the future.

If you’re interested in further exploring financial forecasting and its role in business, consider taking an online course, such as Financial Accounting , to discover how to use it alongside other financial tools to shape your business.

Do you want to take your financial accounting skills to the next level? Consider enrolling in Financial Accounting —one of three courses comprising our Credential of Readiness (CORe) program —to learn how to use financial principles to inform business decisions. Not sure which course is right for you? Download our free flowchart .

how to write a financial forecast for a business plan

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How To Create Financial Projections for Your Business

Learn how to anticipate your business’s financial performance

how to write a financial forecast for a business plan

  • Understanding Financial Projections & Forecasting

Why Forecasting Is Critical for Your Business

Key financial statements for forecasting, how to create your financial projections, frequently asked questions (faqs).

Maskot / Getty Images

Just like a weather forecast lets you know that wearing closed-toe shoes will be important for that afternoon downpour later, a good financial forecast allows you to better anticipate financial highs and lows for your business.

Neglecting to compile financial projections for your business may signal to investors that you’re unprepared for the future, which may cause you to lose out on funding opportunities.

Read on to learn more about financial projections, how to compile and use them in a business plan, and why they can be crucial for every business owner.

Key Takeaways

  • Financial forecasting is a projection of your business's future revenues and expenses based on comparative data analysis, industry research, and more.
  • Financial projections are a valuable tool for entrepreneurs as they offer insight into a business's ability to generate profit, increase cash flow, and repay debts, which can be attractive to investors.
  • Some of the key components to include in a financial projection include a sales projection, break-even analysis, and pro forma balance sheet and income statement.
  • A financial projection can not only attract investors, but helps business owners anticipate fixed costs, find a break-even point, and prepare for the unexpected.

Understanding Financial Projections and Forecasting

Financial forecasting is an educated estimate of future revenues and expenses that involves comparative analysis to get a snapshot of what could happen in your business’s future.

This process helps in making predictions about future business performance based on current financial information, industry trends, and economic conditions. Financial forecasting also helps businesses make decisions about investments, financing sources, inventory management, cost control strategies, and even whether to move into another market.

Developing both short- and mid-term projections is usually necessary to help you determine immediate production and personnel needs as well as future resource requirements for raw materials, equipment, and machinery.

Financial projections are a valuable tool for entrepreneurs as they offer insight into a business's ability to generate profit, increase cash flow, and repay debts. They can also be used to make informed decisions about the business’s plans. Creating an accurate, adaptive financial projection for your business offers many benefits, including:

  • Attracting investors and convincing them to fund your business
  • Anticipating problems before they arise
  • Visualizing your small-business objectives and budgets
  • Demonstrating how you will repay small-business loans
  • Planning for more significant business expenses
  • Showing business growth potential
  • Helping with proper pricing and production planning

Financial forecasting is essentially predicting the revenue and expenses for a business venture. Whether your business is new or established, forecasting can play a vital role in helping you plan for the future and budget your funds.

Creating financial projections may be a necessary exercise for many businesses, particularly those that do not have sufficient cash flow or need to rely on customer credit to maintain operations. Compiling financial information, knowing your market, and understanding what your potential investors are looking for can enable you to make intelligent decisions about your assets and resources.

The income statement, balance sheet, and statement of cash flow are three key financial reports needed for forecasting that can also provide analysts with crucial information about a business's financial health. Here is a closer look at each.

Income Statement

An income statement, also known as a profit and loss statement or P&L, is a financial document that provides an overview of an organization's revenues, expenses, and net income.

Balance Sheet

The balance sheet is a snapshot of the business's assets and liabilities at a certain point in time. Sometimes referred to as the “financial portrait” of a business, the balance sheet provides an overview of how much money the business has, what it owes, and its net worth.

The assets side of the balance sheet includes what the business owns as well as future ownership items. The other side of the sheet includes liabilities and equity, which represent what it owes or what others owe to the business.

A balance sheet that shows hypothetical calculations and future financial projections is also referred to as a “pro forma” balance sheet.

Cash Flow Statement

A cash flow statement monitors the business’s inflows and outflows—both cash and non-cash. Cash flow is the business’s projected earnings before interest, taxes, depreciation, and amortization ( EBITDA ) minus capital investments.

Here's how to compile your financial projections and fit the results into the three above statements.

A financial projections spreadsheet for your business should include these metrics and figures:

  • Sales forecast
  • Balance sheet
  • Operating expenses
  • Payroll expenses (if applicable)
  • Amortization and depreciation
  • Cash flow statement
  • Income statement
  • Cost of goods sold (COGS)
  • Break-even analysis

Here are key steps to account for creating your financial projections.

Projecting Sales

The first step for a financial forecast starts with projecting your business’s sales, which are typically derived from past revenue as well as industry research. These projections allow businesses to understand what their risks are and how much they will need in terms of staffing, resources, and funding.

Sales forecasts also enable businesses to decide on important levels such as product variety, price points, and inventory capacity.

Income Statement Calculations

A projected income statement shows how much you expect in revenue and profit—as well as your estimated expenses and losses—over a specific time in the future. Like a standard income statement, elements on a projection include revenue, COGS, and expenses that you’ll calculate to determine figures such as the business’s gross profit margin and net income.

If you’re developing a hypothetical, or pro forma, income statement, you can use historical data from previous years’ income statements. You can also do a comparative analysis of two different income statement periods to come up with your figures.

Anticipate Fixed Costs

Fixed business costs are expenses that do not change based on the number of products sold. The best way to anticipate fixed business costs is to research your industry and prepare a budget using actual numbers from competitors in the industry. Anticipating fixed costs ensures your business doesn’t overpay for its needs and balances out its variable costs. A few examples of fixed business costs include:

  • Rent or mortgage payments
  • Operating expenses (also called selling, general and administrative expenses or SG&A)
  • Utility bills
  • Insurance premiums

Unfortunately, it might not be possible to predict accurately how much your fixed costs will change in a year due to variables such as inflation, property, and interest rates. It’s best to slightly overestimate fixed costs just in case you need to account for these potential fluctuations.

Find Your Break-Even Point

The break-even point (BEP) is the number at which a business has the same expenses as its revenue. In other words, it occurs when your operations generate enough revenue to cover all of your business’s costs and expenses. The BEP will differ depending on the type of business, market conditions, and other factors.

To find this number, you need to determine two things: your fixed costs and variable costs. Once you have these figures, you can find your BEP using this formula:

Break-even point = fixed expenses ➗ 1 – (variable expenses ➗ sales)

The BEP is an essential consideration for any projection because it is the point at which total revenue from a project equals total cost. This makes it the point of either profit or loss.

Plan for the Unexpected

It is necessary to have the proper financial safeguards in place to prepare for any unanticipated costs. A sudden vehicle repair, a leaky roof, or broken equipment can quickly derail your budget if you aren't prepared. Cash management is a financial management plan that ensures a business has enough cash on hand to maintain operations and meet short-term obligations.

To maintain cash reserves, you can apply for overdraft protection or an overdraft line of credit. Overdraft protection can be set up by a bank or credit card business and provides short-term loans if the account balance falls below zero. On the other hand, a line of credit is an agreement with a lending institution in which they provide you with an unsecured loan at any time until your balance reaches zero again.

How do you make financial projections for startups?

Financial projections for startups can be hard to complete. Historical financial data may not be available. Find someone with financial projections experience to give insight on risks and outcomes.

Consider business forecasting, too, which incorporates assumptions about the exponential growth of your business.

Startups can also benefit from using EBITDA to get a better look at potential cash flow.

What are the benefits associated with forecasting business finances?

Forecasting can be beneficial for businesses in many ways, including:

  • Providing better understanding of your business cash flow
  • Easing the process of planning and budgeting for the future based on income
  • Improving decision-making
  • Providing valuable insight into what's in their future
  • Making decisions on how to best allocate resources for success

How many years should your financial forecast be?

Your financial forecast should either be projected over a specific time period or projected into perpetuity. There are various methods for determining how long a financial forecasting projection should go out, but many businesses use one to five years as a standard timeframe.

U.S. Small Business Administration. " Market Research and Competitive Analysis ."

Score. " Financial Projections Template ."


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How to make financial projections for business.

How to Make Financial Projections for Business

Writing a solid business plan should be the first step for any business owner looking to create a successful business. 

As a small business owner, you will want to get the attention of investors, partners, or potential highly skilled employees. It is, therefore, important to have a realistic financial forecast incorporated into your business plan. 

We’ll break down a financial projection and how to utilize it to give your business the best start possible.

Key Takeaways

Accurate financial projections are essential for businesses to succeed. In this article, we’ll explain everything you need to know about creating financial projections for your business. Here’s what you need to know about financial projections:

  • A financial projection is a group of financial statements that are used to forecast future performance
  • Creating financial projections can break down into 5 simple steps: sales projections, expense projections, balance sheet projections, income statement projections, and cash flow projections
  • Financial projections can offer huge benefits to your business, including helping with forecasting future performance, ensuring steady cash flow, and planning key moves around the growth of the business

Here’s What We’ll Cover:

What Is a Financial Projection?

How to Create a Financial Projection

What goes into a financial projection, what are financial projections used for.

Financial Projections Advantages

Frequently Asked Questions

What Is Financial Projection?

A financial projection is essentially a set of financial statements . These statements will forecast future revenues and expenses. 

Any projection includes your cash inflows and outlays, your general income, and your balance sheet. 

They are perfect for showing bankers and investors how you plan to repay business loans. They also show what you intend to do with your money and how you expect your business to grow. 

Most projections are for the first 3-5 years of business, but some include a 10-year forecast too.

Either way, you will need to develop a short and mid-term projection broken down month by month. 

As you are just starting out with your business, you won’t be expected to provide exact details. Most financial projections are rough guesses. But they should also be educated guesses based on market trends, research, and looking at similar businesses. 

It’s incredibly important for financial statements to be realistic. Most investors will be able to spot a fanciful projection from a mile away. 

In general, most people would prefer to be given realistic projections, even if they’re not as impressive.

Today's Numbers Tomorrow's Growth

Financial projections are created to help business owners gain insight into the future of their company’s financials. 

The question is, how to create financial projections? For business plan purposes, it’s important that you follow the best practices of financial projection closely. This will ensure you get accurate insight, which is vital for existing businesses and new business startups alike.

Here are the steps for creating accurate financial projections for your business.

1. Start With A Sales Projection

For starters, you’ll need to project how much your business will make in sales. If you’re creating a sales forecast for an existing business, you’ll have past performance records to project your next period. Past data can provide useful information for your financial projection, such as if your sales do better in one season than another.

Be sure also to consider external factors, such as the economy at large, the potential for added tariffs and taxes in the future, supply chain issues, or industry downturns. 

The process is almost the same for new businesses, only without past data to refer to. Business startups will need to do more research on their industry to gain insight into potential future sales.

2. Create Your Expense Projection

Next, create an expense projection for your business. In a sense, this is an easier task than a sales projection since it seems simpler to predict your own behaviors than your customers. However, it’s vital that you expect the unexpected.

Optimism is great, but the worst-case scenario must be considered and accounted for in your expense projection. From accidents in the workplace to natural disasters, rising trade prices, to unexpected supply disruptions, you need to consider these large expenses in your projection. 

Something always comes up, so we suggest you add a 10-15% margin on your expense projection.

3. Create Your Balance Sheet Projection

A balance sheet projection is used to get a clear look at your business’s financial position related to assets, liabilities , and equity, giving you a more holistic view of the company’s overall financial health. 

For startup businesses, this can prove to be a lot of work since you won’t have existing records of past performance to pull from. This will need to be factored into your industry research to create an accurate financial projection.

For existing businesses, it will be more straightforward. Use your past and current balance sheets to predict your business’s position in the next 1-3 years. If you use a cloud-based, online accounting software with the feature to generate balance sheets, such as the one offered by FreshBooks, you’ll be able to quickly create balance sheets for your financial projection within the app.

Click here to learn more about the features of FreshBooks accounting software.

FreshBooks accounting software

4. Make Your Income Statement Projection

Next up, create an income statement projection. An income statement is used to declare the net income of a business after all expenses have been made. In other words, it states the profits of a business.

For currently operating businesses, you can use your past income statements and the changes between them to create accurate predictions for the next 1-3 years. You can also use accounting software to generate your income statements automatically. 

You’ll need to work on rough estimates for new businesses or those still in the planning phase. It’s vital that you stay realistic and do your utmost to create an accurate, good-faith projection of future income. 

5. Finally, Create Your Cash Flow Projection

Last but not least is to generate your projected cash flow statement. A cash flow projection forecasts the movement of all money to and from your business. It’s intertwined with a business’s balance sheet and income statement, which is no different when creating projections. 

If your business has been operating for six months or more, you can create a fairly accurate cash flow projection with your past cash flow financial statements. For new businesses, you’ll need to factor in this step of creating a financial forecast when doing your industry research. 

It needs to include five elements to ensure an accurate, useful financial forecast for your business. These financial statements come together to provide greater insight into the projected future of a business’s financial health. These include:

Income Statement

A standard income statement summarizes your company’s revenues and expenses over a period. This is normally done either quarterly or annually.

The income statement is where you will do the bulk of your forecasting. 

On any income statement, you’re likely to find the following:

  • Revenue: Your revenue earned through sales. 
  • Expenses: The amount you’ve spent, including your product costs and your overheads.
  • Pre-Tax Earnings: This is your income before you’ve paid tax.
  • Net Income: The total revenues minus your total expenses. 

Net income is the most important number. If the number is positive, then you’re earning a profit, if it’s negative, it means your expenses outweigh your revenue and you’re making a loss. 

Cash Flow Statement

Your cash flow statement will show any potential investor whether you are a good credit risk. It also shows them if you can successfully repay any loans you are granted.

You can break a cash flow statement into three parts:

  • Cash Revenues: An overview of your calculated cash sales for a given time period. 
  • Cash Disbursements: You list all the cash expenditures you expect to pay.
  • Net Cash Revenue: Take the cash revenues minus your cash disbursements.

cash flow statement

Balance Sheet

Your balance sheet will show your business’s net worth at a given time.

A balance sheet is split up into three different sections:

  • Assets: An asset is a tangible object of value that your company owns. It could be things like stock or property such as warehouses or offices. 
  • Liabilities: These are any debts your business owes.
  • Equity: Your equity is the summary of your assets minus your liabilities.

Balance Sheet

Looking for an easy-to-use yet capable online accounting software? FreshBooks accounting software is a cloud-based solution that makes financial projections simple. With countless financial reporting features and detailed guides on creating accurate financial forecasts, FreshBooks can help you gain the insight you need to let your business thrive. Click here to give FreshBooks a try for free.

FreshBooks accounting software features

Financial projections have many uses for current business owners and startup entrepreneurs. Provided your financial forecasting follows the best practices for an accurate projection, your data will be used for:

  • Internal planning and budgeting – Your finances will be the main factor in whether or not you’ll be able to execute your business plan to completion. Financial projections allow you to make it happen.
  • Attracting investors and securing funding – Whether you’re receiving financing from bank loans, investors, or both, an accurate projection will be essential in receiving the funds you need.
  • Evaluating business performance and identifying areas for improvement – Financial projections help you keep track of your business’s financial health, allowing you to plan ahead and avoid unwelcome surprises.
  • Making strategic business decisions – Timing is important in business, especially when it comes to major expenditures (new product rollouts, large-scale marketing, expansion, etc.). Financial projections allow you to make an informed strategy for these big decisions.

Financial Projections Advantages 

Creating clear financial projections for your business startup or existing company has countless benefits. Focusing on creating (and maintaining) good financial forecasting for your business will:

  • Help you make vital financial decisions for the business in the future
  • Help you plan and strategize for growth and expansion
  • Demonstrate to bankers how you will repay your loans 
  • Demonstrate to investors how you will repay financing
  • Identify your most essential financing needs in the future
  • Assist in fine-tuning your pricing
  • Be helpful when strategizing your production plan
  • Be a useful tool for planning your major expenditures strategically
  • Help you keep an eye on your cash flow for the future

Put Your Books On Autopilot

Your financial forecast is an essential part of your business plan, whether you’re still in the early startup phases or already running an established business. However, it’s vital that you follow the best practices laid out above to ensure you receive the full benefits of comprehensive financial forecasting.  

If you’re looking for a useful tool to save time on the administrative tasks of financial forecasting, FreshBooks can help. With the ability to instantly generate the reports you need and get a birds-eye-view of your business’s past performance and overall financial help, it will be easier to create useful financial projections that provide insight into your financial future. 

FAQs on Financial Projections

More questions about financial forecasting, projections, and how these processes fit into your business plan? Here are some frequently asked questions by business owners.

Why are financial projections important?

Financial projections allow you to gain insight into your business’s economic trajectory. This helps business owners make financial decisions, secure funding, and more. Additionally, financial projections provide early warning of roadblocks and challenges that may lay ahead for the company, making it easier to plan for a clear course of action.

What is an example of a financial projection?

A projection is an overall look at a business’s forecasted performance. It’s made up of several different statements and reports, such as a cash flow statement, income statement, profit and loss statement, and sales statement. You can find free templates and examples of many of these reports via FreshBooks. Click here to view our selection of accounting templates.

Are financial forecasts and financial projections the same?

Technically, there is a difference between forecasting and projections, though many use the terms interchangeably. Financial forecasting often refers to shorter-term (<1 year) predictions of financial performance, while financial projections usually focus on a larger time scale (2-3 years).

What is the most widely used method for financial forecasting?

The most common method of accurate forecasting is the straight-line forecasting method. It’s most often used for projecting the growth of a business’s revenue growth over a set period. If you notice that your records indicate a 4% growth of revenue per year for five years running, it would be reasonable to assume that this will continue year-over-year. 

What is the purpose of a financial projection?

Projection aims to get deeper, more nuanced insight into a business’s financial health and viability. It allows business owners to anticipate expenses and profit growth, giving them the tools to secure funding and loans and strategize major business decisions. It’s an essential accounting process that all business owners should prioritize in their business plans.

how to write a financial forecast for a business plan

Michelle Alexander, CPA

About the author

Michelle Alexander is a CPA and implementation consultant for Artificial Intelligence-powered financial risk discovery technology. She has a Master's of Professional Accounting from the University of Saskatchewan, and has worked in external audit compliance and various finance roles for Government and Big 4. In her spare time you’ll find her traveling the world, shopping for antique jewelry, and painting watercolour floral arrangements.


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Financial projections use existing or estimated financial data to forecast your business’s future income and expenses. They often include different scenarios to see how changes to one aspect of your finances (such as higher sales or lower operating expenses) might affect your profitability.

If you need to create financial projections for a startup or existing business, this free, downloadable template includes all the necessary tools.

What Are Financial Projections Used for?

Financial projections are an essential business planning tool for several reasons.

  • If you’re starting a business, financial projections help you plan your startup budget, assess when you expect the business to become profitable, and set benchmarks for achieving financial goals.
  • If you’re already in business, creating financial projections each year can help you set goals and stay on track.
  • When seeking outside financing, startups and existing businesses need financial projections to convince lenders and investors of the business’s growth potential.

What’s Included in Financial Projections?

This financial projections template pulls together several different financial documents, including:

  • Startup expenses
  • Payroll costs
  • Sales forecast
  • Operating expenses for the first 3 years of business
  • Cash flow statements for the first 3 years of business
  • Income statements for the first 3 years of business
  • Balance sheet
  • Break-even analysis
  • Financial ratios
  • Cost of goods sold (COGS), and
  • Amortization and depreciation for your business.

You can use this template to create the documents from scratch or pull in information from those you’ve already made. The template also includes diagnostic tools to test the numbers in your financial projections and ensure they are within reasonable ranges.

These areas are closely related, so as you work on your financial projections, you’ll find that changes to one element affect the others. You may want to include a best-case and worst-case scenario for all possibilities. Make sure you know the assumptions behind your financial projections and can explain them to others.

Startup business owners often wonder how to create financial projections for a business that doesn’t exist yet. Financial forecasts are continually educated guesses. To make yours as accurate as possible, do your homework and get help. Use the information you unearthed in researching your business plans, such as statistics from industry associations, data from government sources, and financials from similar businesses. An accountant with experience in your industry can help fine-tune your financial projections. So can business advisors such as SCORE mentors.

Once you complete your financial projections, don’t put them away and forget about them. Compare your projections to your financial statements regularly to see how well your business meets your expectations. If your projections turn out to be too optimistic or too pessimistic, make the necessary adjustments to make them more accurate.

*NOTE: The cells with formulas in this workbook are locked. If changes are needed, the unlock code is "1234." Please use caution when unlocking the spreadsheets. If you want to change a formula, we strongly recommend saving a copy of this spreadsheet under a different name before doing so. 

We recommend downloading the  Financial Projections Template Guide in English  or  Espanol .

Do you need help creating your financial projections? Take SCORE’s online course on-demand on financial projections or connect with a SCORE mentor  online or in your community today.

Simple Steps for Starting Your Business: Financial Projections In this online module, you'll learn the importance of financial planning, how to build your financial model, how to understand financial statements and more.

Business Planning & Financial Statements Template Gallery Download SCORE’s templates to help you plan for a new business startup or grow your existing business.

Why Projected Financial Statements Are Essential to the Future Success of Startups Financial statements are vital to the success of any company but particularly start-ups. SCORE mentor Sarah Hadjhamou shares why they are a big part of growing your start-up.

Copyright © 2024 SCORE Association,

Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.


Financial Projections for Startups [Template + Course Included]

how to write a financial forecast for a business plan

January 11, 2022

Adam Hoeksema

Financial projections are an important part of any business plan or startup pitch deck. They allow a company to estimate future revenues, expenses, and profits, and to identify potential risks and opportunities.  We have been helping founders create financial projections through our templates, tools, and custom financial modeling services since 2012.  I thought it was finally time to write a comprehensive article that should answer the key questions that we get from founders again and again.  So here is what I plan to cover:

What are financial projections? 

Why should a startup create financial projections, how to create a financial forecast , creating sales projections based on data, forecasting operating expenses, salary projections.

  • Startup cost forecasting

Pro forma financial statements

Existing business vs. startup vs acquisition forecasting, how to know whether my projections are realistic, what will investors and lenders be looking for in my projections, tools used for financial forecasting.

But first, who am I, and do I know anything about financial projections? 

My name is Adam Hoeksema and I am the Co-Founder of ProjectionHub.  Since 2012 we have helped over 50,000 entrepreneurs create financial projections between our software tool and our business projection spreadsheet templates . 

I didn’t spend a decade on Wall Street or make a killing in private equity, and I haven’t even raised VC funding myself.  

But I did spend over a decade launching a growing an SBA (Small Business Administration) lender in the Indianapolis, IN area.  During that time we made over 1,800 small business loans and we often asked our clients for financial projections along with their loan applications.  That is why I started ProjectionHub.  

So 10 years ago my experience was with helping small, main street businesses create projections and secure loan funding to start their dream.  Along the way, I learned a ton about startup projections for tech-based businesses as well.  Today about 50% of our work is with small businesses looking for an SBA loan and 50% is with tech-based businesses looking to raise capital from investors.  

With that background in mind, I want to share with you what I have learned along the way to try to make your financial forecasting process just a little bit easier.  Let’s dive in!

Financial projections are estimates of the future financial performance of a company. These projections are typically based on a set of assumptions and are used to help businesses plan for the future and make informed decisions about investments, financing, and other strategic matters. Most ProjectionHub customers use pro forma financials to help external stakeholders, such as investors and lenders understand a company's financial position and future prospects. Financial projections typically include projections of income, expenses, cash flow, and balance sheet items.  

There are many opinions on whether a startup needs to create a forecasted balance sheet and how many years a set of projections should be.  At ProjectionHub, all of our financial projection templates have an integrated pro forma income statement, cash flow and balance sheet in annual and monthly format for 5 years.  This seems to meet the needs of 99% of our customers, so I think it is pretty safe to say that your investor or lender might not require all of that level of information, but they probably won’t require more than a 5-year forecast of your 3 statement financials. 

So it sounds like a lot of work to create a financial forecast, so why do we create projections?  No one can know the future.  Isn’t it just a pointless exercise?  

Well, I think it is smart for an entrepreneur to create a set of projections before they start a business to understand what they are getting themselves into and what it will take to break even and generate a profit.  

I could beat that drum all day, and you know what it doesn’t really matter.  Even if we know it is a good idea to create projections before throwing our life savings into a new venture, most entrepreneurs will not create projections before starting their business.  I have just come to accept this!  

So the real reason to create projections is because the people with the money, the investors and lenders ask for them.  

  • Investors will ask for a financial model because they want to see how you plan to use their money, how long you think it will last, and what the potential return could be. 
  • Lenders will ask to see financial projections for startups or new projects or divisions in a business because they want to be able to see whether you think you can pay them back or not.  How does your debt service coverage ratio look? How many cups of coffee are you going to have to sell to make your monthly loan payment? 

Now that we know why we are creating projections and who the audience is, let’s get into the “how.”

So the plan now is to walk through how to create a set of financial projections, how to do good research to take a data-driven approach when modeling, what tools you can use to help you with research, and then how to know whether your forecast is realistic once you are done.   We are going to look at:

  • Creating revenue projections
  • Operating Expenses
  • Salaries Forecasting
  • How to get investor and lender-ready projections

Revenue Projections

This is where we will camp out for a while.  I want to show you a few examples of different types of revenue models to show you how I approach creating revenue projections.  

If you have a stable, existing business, then it is possible that the best approach to creating sales projections is simply to take last year’s numbers and apply a growth rate based on your expectations of growth.  Since that approach is quite straightforward I am not going to spend any time on that today. Our Existing Business Forecast Template will be perfect for you in this scenario.  

We are going to focus on more of a first principles approach.  I am going to outline two different approaches that I often take when building a financial model.  First a capacity approach and then a customer funnel approach.  

Capacity-Based Revenue Projections

I use a capacity-based approach to revenue projections when a company is pretty certain to have demand for their products or services and their revenue is more of a function of your price x capacity.  

Here are some examples of businesses where I would take a capacity-based approach. 

Farming Projections

For a farm, your revenue forecast is going to be based on how many acres you are farming x the yield per acre x the price per unit for your crop.  You don’t really need to worry about whether you have a customer or not.  Since most crops are commodities you won’t need to find a customer, you simply sell into the ready made market at the market price. 

Trucking Projections

Trucking is similar in the sense that as long as you have a valid license and a working truck, you will be able to find loads to deliver.  The question is more about how many trucks do you have, how many miles per day can each truck drive and what price will you be able to earn per mile.  Again this is about capacity and price, not whether or not you can find a customer.  This is the approach we take to show how a trucking business with one truck can generate $400k in annual revenue . 

Daycare Facility

A daycare facility will also be able to calculate a capacity based on the size of the facility and the teacher-to-student ratio requirements.  Once you have your capacity it is mostly a function of pricing to determine your revenue forecast.  You can see a screenshot from our daycare financial forecast tool to see how we think about modeling this type of business. 

Example of daycare capacity projections

I would say most tech businesses do not fall into a capacity-based projection approach. 

For tech companies, I typically use a customer funnel-based approach to forecasting revenue. 

Customer Funnel-Based Revenue Projection Approach

These are companies where your customer might not even know your product or service exists and might not know that they want it or need it so you are going to have to really go out and market and sell.  You will likely have a customer funnel that will have leads that convert into customers over time.  

Here are some examples of business models where I would use a customer funnel approach to financial modeling. 

B2B SaaS Projections

For a B2B SaaS product you will probably have an advertising budget and a sales team that will drive leads that your team will work to qualify.  Then some percentage of those sales qualified leads will turn into customers.  You will need assumptions for things like:

  • A monthly ad budget 
  • Cost per click to attract a website visitor
  • Percentage of website visitors that become sales qualified leads
  • Percentage of sales qualified leads that the sales team converts into customers
  • Average monthly spend per customer

DTC Product Forecasting

For direct to consumer product companies you will have a similar customer funnel.  Once you get to a customer, then you might have assumptions like:

  • Average order value
  • % of customers that become repeat customers
  • How often do repeat customers repurchase

Consumer Apps 

For a consumer mobile app you will need assumptions for things like:

  • Monthly ad budget
  • Cost per download
  • Organic / word of mouth downloads
  • % of customers that download the app that convert into active users
  • % of active users that churn each year
  • Average monthly spend per active user per month

So this should give you an idea of the structure of assumptions that you will need in order to approach creating projections, but I just left you with a bunch of assumptions that you have no idea how to fill in with realistic data.  

Next I want to show you what I would do in order to research and find good data for your sales projections. 

So how do you know how many people are searching on Google for terms that are relevant to your product or service?  How do you know how much it would cost to advertise and get a click for that term?  How do you know what a reasonable conversion rate is from a website visitor to a customer?  How do you know what the average order value is for an ecommerce business like yours, etc? 

I recorded an entire course on this , but I have listed some tools and some slides below to show you my typical research process. 

As you will notice in the slides, I start out be simply doing Google research to try to find reasonable assumptions for as many of the key assumptions as I can.  

From there, I like to use the following tools:

  • Ahrefs - I use this tool for competitor research to determine how much organic traffic my competitors are getting and thereby how much organic traffic my website might get over time. 
  • Google Trends - I use Google Trends to see seasonality trends in a business. 
  • Google Adwords Keyword Tool - I use this tool to forecast how much it will cost per click to attract a website visitor, and to see search volume for certain keywords.
  • Bizminer - You can use Bizminer industry reports to get an idea of key industry ratios to get an idea of whether your projections are realistic for your industry. 

When forecasting expenses I like a couple of different resources to help me forecast my expenses and ensure that my expense projections are within industry standards. 

Expenses for Small Businesses

Bizminer - You can use Bizminer industry reports to get an idea of key industry ratios.  For example, you can determine if the average company in your industry spends 10% on rent or 12% on rent. 

Expenses for Tech Startups

SaaS Capital - You can use this report from SaaS Capital to get an idea of the spending categories as a % of revenue for tech companies.  This is specifically focused on SaaS, so if you are in ecommerce or a hardware startup you will need to find a similar source for your industry.  You can see an example of the expense ratios from SaaS Capital below:

median spend by company funding source chart

When forecasting salaries I actually take two different approaches.  I typically start out by projecting specific salaries and positions for the first 24 months of the projection.  Then after that, I simply include salaries in larger buckets of operating expenses like General & Admin, R&D, and Sales & Marketing.  When you are raising investment the investors will likely want to know your specific use of funds for the first 18 to 24 months, but after that they will understand that it is impossible to predict exact positions, timing and salaries, so transitioning to an expense as a % of revenue makes sense.  You can see how this looks in one of our financial models for a B2B SaaS company : 

Detailed Salary Projections for the First 24 Months:

how to write a financial forecast for a business plan

Salaries included in operating expense categories as a percentage of sales for year 3 and beyond:

how to write a financial forecast for a business plan

Startup Cost Forecasting

When forecasting your startup costs, your specific location, concept, size and scale of business will make a dramatic difference in what it costs to launch your business.  I don’t recommend that you just take the first “average startup cost” number that you find in a Google search because your specific situation matters.  You will need to do your own research for each startup cost, but I have actually found it helpful to use ChatGPT to ask for a list of common startup expenses for business XYZ so that I don’t forget any common expenses. 

I have already mentioned this before, but I commonly take a different approach to creating projections for an existing business compared to a startup compared to modeling a business acquisition.  

Existing Business Projections

When modeling a projection for an existing business I like to use our existing business budgeting template that allows me to enter in historical revenue and expenses and use that as a baseline to build a forecast by increasing or decreasing expenses and revenue based on my plans. 

Startup Projections

For a startup, I would use one of our 70+ industry specific financial projection templates and start from the ground up.  You would use the research process outlined in this article to create your projections. 

Forecasting a Business Acquisition

For creating projections for a business that you are looking to acquire I would use our acquisition financial model which will allow you to enter in historical financials from the target business, but it will also allow you to make adjustments to the balance sheet and revenue and expenses for a post acquisition pro forma. You can’t simply use the existing balance sheet and income statement because both will likely change quite a bit after the sale of the business.

Finally, I wanted to show you some example pro forma statements so that you can see what the end product should look like.  

Pro forma P&L Example

Here is an example of our 5 year pro forma income statement. 

example 5 year profit and loss example

Pro forma Balance Sheet Example

Here is an example of our 5 year pro forma balance sheet. 

Example of 5 year pro forma balance sheet

Once you have a complete set of projections (if you are using a ProjectionHub template) I would suggest taking a look at the profit and loss at a glance table as seen below: 

example of profit and loss summary

In this example, I am looking at projections for a technology company that is looking to raise investment.  So a couple of things that I would look at for a tech company pro forma.  

  • The first year should probably be a loss because that is why you are looking to raise investment right?  I would just make sure you are assuming that you will raise enough investment to cover that first year loss.  
  • Next I would look at how fast revenue is growing.  For an investable company there is a rule of thumb “triple, triple, double, double” which means after investment an investor will be hoping that you triple sales the first 2 years and then double sales the following two years.  This is really hard to do, so if you are forecasting that you will do 10x every year you are probably off base! 
  • For tech startups you can look at this study with our partner Story Pitch Decks where we looked at what is a reasonable projection for a tech startup .  This study will show you what other similar companies are projecting, so that you can ensure that whatever you project will fall within the norms that investors see. 

Investors and lenders will likely be looking at the following numbers and ratios to make sure your projections seem to be reasonable:

  • Gross Profit Margin
  • Profit Margin
  • Debt Service Coverage Ratio
  • Comparing to industry averages
  • Do revenue projections, units sold make sense?
  • Does your balance sheet balance?
  • When do you reach breakeven?
  • Do you have room for error?

I suggest that you simply Google these things and make sure your numbers seem “normal.”  For example, if you are opening a coffee shop you could Google “average profit margin for a coffee shop” and you would probably find our article on coffee shop profit margins .  Confirm that your forecasted profit margins are in line and reasonable. Do this same exercise with each of these key ratios and numbers.  

As a thank you for reading this behemoth of an article, you can download our free financial projection template .  Other tools that I utilized or mentioned in the article include:

  • Ahrefs - For competitor research
  • Google Trends - For seasonality trends
  • Google Adwords Keyword Tool - For search volume and cost per click
  • Bizminer - For industry expense ratios
  • ProjectionHub Pro Forma Templates - You can use our library of templates built specifically for over 70 unique industries and business models. 

If you would like to learn more about my process for creating financial projections, you can watch this course that I put on for tech startups looking to create investor-ready financial projections. 

Insert Webinar video below

Well I hope this has been helpful to you.  If you have specific questions please feel free to reach out directly to us at [email protected]  

About the Author

Adam is the Co-founder of ProjectionHub which helps entrepreneurs create financial projections for potential investors, lenders and internal business planning. Since 2012, over 50,000 entrepreneurs from around the world have used ProjectionHub to help create financial projections.

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Free Financial Templates for a Business Plan

By Andy Marker | July 29, 2020

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In this article, we’ve rounded up expert-tested financial templates for your business plan, all of which are free to download in Excel, Google Sheets, and PDF formats.

Included on this page, you’ll find the essential financial statement templates, including income statement templates , cash flow statement templates , and balance sheet templates . Plus, we cover the key elements of the financial section of a business plan .

Financial Plan Templates

Download and prepare these financial plan templates to include in your business plan. Use historical data and future projections to produce an overview of the financial health of your organization to support your business plan and gain buy-in from stakeholders

Business Financial Plan Template

Business Financial Plan Template

Use this financial plan template to organize and prepare the financial section of your business plan. This customizable template has room to provide a financial overview, any important assumptions, key financial indicators and ratios, a break-even analysis, and pro forma financial statements to share key financial data with potential investors.

Download Financial Plan Template

Word | PDF | Smartsheet

Financial Plan Projections Template for Startups

Startup Financial Projections Template

This financial plan projections template comes as a set of pro forma templates designed to help startups. The template set includes a 12-month profit and loss statement, a balance sheet, and a cash flow statement for you to detail the current and projected financial position of a business.

‌ Download Startup Financial Projections Template

Excel | Smartsheet

Income Statement Templates for Business Plan

Also called profit and loss statements , these income statement templates will empower you to make critical business decisions by providing insight into your company, as well as illustrating the projected profitability associated with business activities. The numbers prepared in your income statement directly influence the cash flow and balance sheet forecasts.

Pro Forma Income Statement/Profit and Loss Sample

how to write a financial forecast for a business plan

Use this pro forma income statement template to project income and expenses over a three-year time period. Pro forma income statements consider historical or market analysis data to calculate the estimated sales, cost of sales, profits, and more.

‌ Download Pro Forma Income Statement Sample - Excel

Small Business Profit and Loss Statement

Small Business Profit and Loss Template

Small businesses can use this simple profit and loss statement template to project income and expenses for a specific time period. Enter expected income, cost of goods sold, and business expenses, and the built-in formulas will automatically calculate the net income.

‌ Download Small Business Profit and Loss Template - Excel

3-Year Income Statement Template

3 Year Income Statement Template

Use this income statement template to calculate and assess the profit and loss generated by your business over three years. This template provides room to enter revenue and expenses associated with operating your business and allows you to track performance over time.

Download 3-Year Income Statement Template

For additional resources, including how to use profit and loss statements, visit “ Download Free Profit and Loss Templates .”

Cash Flow Statement Templates for Business Plan

Use these free cash flow statement templates to convey how efficiently your company manages the inflow and outflow of money. Use a cash flow statement to analyze the availability of liquid assets and your company’s ability to grow and sustain itself long term.

Simple Cash Flow Template

how to write a financial forecast for a business plan

Use this basic cash flow template to compare your business cash flows against different time periods. Enter the beginning balance of cash on hand, and then detail itemized cash receipts, payments, costs of goods sold, and expenses. Once you enter those values, the built-in formulas will calculate total cash payments, net cash change, and the month ending cash position.

Download Simple Cash Flow Template

12-Month Cash Flow Forecast Template

how to write a financial forecast for a business plan

Use this cash flow forecast template, also called a pro forma cash flow template, to track and compare expected and actual cash flow outcomes on a monthly and yearly basis. Enter the cash on hand at the beginning of each month, and then add the cash receipts (from customers, issuance of stock, and other operations). Finally, add the cash paid out (purchases made, wage expenses, and other cash outflow). Once you enter those values, the built-in formulas will calculate your cash position for each month with.

‌ Download 12-Month Cash Flow Forecast

3-Year Cash Flow Statement Template Set

3 Year Cash Flow Statement Template

Use this cash flow statement template set to analyze the amount of cash your company has compared to its expenses and liabilities. This template set contains a tab to create a monthly cash flow statement, a yearly cash flow statement, and a three-year cash flow statement to track cash flow for the operating, investing, and financing activities of your business.

Download 3-Year Cash Flow Statement Template

For additional information on managing your cash flow, including how to create a cash flow forecast, visit “ Free Cash Flow Statement Templates .”

Balance Sheet Templates for a Business Plan

Use these free balance sheet templates to convey the financial position of your business during a specific time period to potential investors and stakeholders.

Small Business Pro Forma Balance Sheet

how to write a financial forecast for a business plan

Small businesses can use this pro forma balance sheet template to project account balances for assets, liabilities, and equity for a designated period. Established businesses can use this template (and its built-in formulas) to calculate key financial ratios, including working capital.

Download Pro Forma Balance Sheet Template

Monthly and Quarterly Balance Sheet Template

how to write a financial forecast for a business plan

Use this balance sheet template to evaluate your company’s financial health on a monthly, quarterly, and annual basis. You can also use this template to project your financial position for a specified time in the future. Once you complete the balance sheet, you can compare and analyze your assets, liabilities, and equity on a quarter-over-quarter or year-over-year basis.

Download Monthly/Quarterly Balance Sheet Template - Excel

Yearly Balance Sheet Template

how to write a financial forecast for a business plan

Use this balance sheet template to compare your company’s short and long-term assets, liabilities, and equity year-over-year. This template also provides calculations for common financial ratios with built-in formulas, so you can use it to evaluate account balances annually.

Download Yearly Balance Sheet Template - Excel

For more downloadable resources for a wide range of organizations, visit “ Free Balance Sheet Templates .”

Sales Forecast Templates for Business Plan

Sales projections are a fundamental part of a business plan, and should support all other components of your plan, including your market analysis, product offerings, and marketing plan . Use these sales forecast templates to estimate future sales, and ensure the numbers align with the sales numbers provided in your income statement.

Basic Sales Forecast Sample Template

Basic Sales Forecast Template

Use this basic forecast template to project the sales of a specific product. Gather historical and industry sales data to generate monthly and yearly estimates of the number of units sold and the price per unit. Then, the pre-built formulas will calculate percentages automatically. You’ll also find details about which months provide the highest sales percentage, and the percentage change in sales month-over-month. 

Download Basic Sales Forecast Sample Template

12-Month Sales Forecast Template for Multiple Products

how to write a financial forecast for a business plan

Use this sales forecast template to project the future sales of a business across multiple products or services over the course of a year. Enter your estimated monthly sales, and the built-in formulas will calculate annual totals. There is also space to record and track year-over-year sales, so you can pinpoint sales trends.

Download 12-Month Sales Forecasting Template for Multiple Products

3-Year Sales Forecast Template for Multiple Products

3 Year Sales Forecast Template

Use this sales forecast template to estimate the monthly and yearly sales for multiple products over a three-year period. Enter the monthly units sold, unit costs, and unit price. Once you enter those values, built-in formulas will automatically calculate revenue, margin per unit, and gross profit. This template also provides bar charts and line graphs to visually display sales and gross profit year over year.

Download 3-Year Sales Forecast Template - Excel

For a wider selection of resources to project your sales, visit “ Free Sales Forecasting Templates .”

Break-Even Analysis Template for Business Plan

A break-even analysis will help you ascertain the point at which a business, product, or service will become profitable. This analysis uses a calculation to pinpoint the number of service or unit sales you need to make to cover costs and make a profit.

Break-Even Analysis Template

Break Even Analysis

Use this break-even analysis template to calculate the number of sales needed to become profitable. Enter the product's selling price at the top of the template, and then add the fixed and variable costs. Once you enter those values, the built-in formulas will calculate the total variable cost, the contribution margin, and break-even units and sales values.

Download Break-Even Analysis Template

For additional resources, visit, “ Free Financial Planning Templates .”

Business Budget Templates for Business Plan

These business budget templates will help you track costs (e.g., fixed and variable) and expenses (e.g., one-time and recurring) associated with starting and running a business. Having a detailed budget enables you to make sound strategic decisions, and should align with the expense values listed on your income statement.

Startup Budget Template

how to write a financial forecast for a business plan

Use this startup budget template to track estimated and actual costs and expenses for various business categories, including administrative, marketing, labor, and other office costs. There is also room to provide funding estimates from investors, banks, and other sources to get a detailed view of the resources you need to start and operate your business.

Download Startup Budget Template

Small Business Budget Template

how to write a financial forecast for a business plan

This business budget template is ideal for small businesses that want to record estimated revenue and expenditures on a monthly and yearly basis. This customizable template comes with a tab to list income, expenses, and a cash flow recording to track cash transactions and balances.

Download Small Business Budget Template

Professional Business Budget Template

how to write a financial forecast for a business plan

Established organizations will appreciate this customizable business budget template, which  contains a separate tab to track projected business expenses, actual business expenses, variances, and an expense analysis. Once you enter projected and actual expenses, the built-in formulas will automatically calculate expense variances and populate the included visual charts. 

‌ Download Professional Business Budget Template

For additional resources to plan and track your business costs and expenses, visit “ Free Business Budget Templates for Any Company .”

Other Financial Templates for Business Plan

In this section, you’ll find additional financial templates that you may want to include as part of your larger business plan.

Startup Funding Requirements Template

Startup Funding Requirements Template

This simple startup funding requirements template is useful for startups and small businesses that require funding to get business off the ground. The numbers generated in this template should align with those in your financial projections, and should detail the allocation of acquired capital to various startup expenses.

Download Startup Funding Requirements Template - Excel

Personnel Plan Template

Personnel Plan Template

Use this customizable personnel plan template to map out the current and future staff needed to get — and keep — the business running. This information belongs in the personnel section of a business plan, and details the job title, amount of pay, and hiring timeline for each position. This template calculates the monthly and yearly expenses associated with each role using built-in formulas. Additionally, you can add an organizational chart to provide a visual overview of the company’s structure. 

Download Personnel Plan Template - Excel

Elements of the Financial Section of a Business Plan

Whether your organization is a startup, a small business, or an enterprise, the financial plan is the cornerstone of any business plan. The financial section should demonstrate the feasibility and profitability of your idea and should support all other aspects of the business plan. 

Below, you’ll find a quick overview of the components of a solid financial plan.

  • Financial Overview: This section provides a brief summary of the financial section, and includes key takeaways of the financial statements. If you prefer, you can also add a brief description of each statement in the respective statement’s section.
  • Key Assumptions: This component details the basis for your financial projections, including tax and interest rates, economic climate, and other critical, underlying factors.
  • Break-Even Analysis: This calculation helps establish the selling price of a product or service, and determines when a product or service should become profitable.
  • Pro Forma Income Statement: Also known as a profit and loss statement, this section details the sales, cost of sales, profitability, and other vital financial information to stakeholders.
  • Pro Forma Cash Flow Statement: This area outlines the projected cash inflows and outflows the business expects to generate from operating, financing, and investing activities during a specific timeframe.
  • Pro Forma Balance Sheet: This document conveys how your business plans to manage assets, including receivables and inventory.
  • Key Financial Indicators and Ratios: In this section, highlight key financial indicators and ratios extracted from financial statements that bankers, analysts, and investors can use to evaluate the financial health and position of your business.

Need help putting together the rest of your business plan? Check out our free simple business plan templates to get started. You can learn how to write a successful simple business plan  here . 

Visit this  free non-profit business plan template roundup  or download a  fill-in-the-blank business plan template  to make things easy. If you are looking for a business plan template by file type, visit our pages dedicated specifically to  Microsoft Excel ,  Microsoft Word , and  Adobe PDF  business plan templates. Read our articles offering  startup business plan templates  or  free 30-60-90-day business plan templates  to find more tailored options.

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How Do You Prepare a Budget and Forecast for a Company?

Budget with young man

Budgeting and forecasting services can help turn your business’s line items into a competitive advantage. How? By ensuring that all of your financial resources are accounted for and allocated to activities that will deliver a return. In this guide, we go into the details of an effective forecasting and budgeting process.

We also cover pressing questions, such as:

  • What is the initial step in preparing a budget or forecasting?
  • Are a budget & forecast the same thing?
  • What is a budget example?
  • What is a forecast example?

Let’s dive in!

Introduction to Budgeting and Forecasting

The main purpose of budgeting and forecasting in business is to get a clear financial picture of where your organization is headed and to prepare accordingly. To achieve this goal, budgeting and forecasting each have distinct roles within the overall process.


Forecasting is one of the earliest steps in financial planning. The goal of this step is to estimate how internal and external trends will affect the company’s financial future. For example, forecasting may reveal an opportunity to break into a new market by releasing an exciting and innovative product. Based on what a business discovers during forecasting, it can develop a strategic plan to capitalize on opportunities and navigate challenges.

Successful forecasting involves two key components:

  • Gathering Data: Assemble relevant internal data, such as figures from income statements, cash flow statements, and balance sheets. Gather related external data points, including supply costs, fixed and variable costs, and customer spending trends. 
  • Analyzing Data: Find connections between data points that can reveal patterns and inform strategic decision-making.

Forecasting is flexible and can be readily adjusted as new information becomes available.

Introduction to Corporate Budgeting and Financial Health

Budget Preparation 

Budgeting happens much later in the financial planning process, as a budget represents how many resources are allocated to a specific purpose. Inaccuracies during budgeting can negatively impact the efficiency of a business, because covering unexpected expenses from one initiative will often require pulling resources from a different initiative.

Businesses can implement different methods of budgeting to best fit their needs, including:

  • Traditional Budgeting: Traditional budgets allocate resources based on the previous year’s expenses. 
  • Zero-Based Budgeting: Zero-based budgets work from the ground up, offering a fresh perspective when allocating resources.
  • Rolling Budgeting: Rolling budgets “zoom in” on a monthly or quarterly basis and are ideal for budgeting for short-term projects and goals.
  • Flexible Budgeting: Flexible budgets leave more room for uncertainty, which can be a good option when pursuing experimental projects.

Budgeting should reflect discoveries made during the forecasting process.

Ready to get the most out of your business’s financial future? Contact us today to get started. 

What Is the Initial Step in Preparing a Budget and Forecasting Plan?

Forecasting needs to happen early in financial planning because it gets your business oriented. Like a sextant for sailors, a forecast allows you to consider key indicators when plotting your course. Where a captain looks for constellations, a forecast focuses on financial data points and observations, such as:

  • Internal financial data from a specific business cycle, including revenue and marketing expenses
  • External demographic data like changing customer tastes
  • Relationships between changes, especially cause and effect
  • Outliers that could skew data analysis

What Is the Initial Step in Preparing a Budget and Forecasting Plan?

When executing the forecasting process, your team has options for different methodologies. The following three examples are the most common:

  • Extrapolation: This method focuses on historical data and projects past trends into the future. If the status quo continues, extrapolation can put you on the right path.
  • Regression Analysis: This method digs deeper than extrapolation and seeks to identify causal relationships between variables.
  • Hybrid: This method combines the best of both extrapolation and regression analysis to give your team the full picture when planning for your business’s financial future. 

In other words, for effective forecasting, you need to know where to find relevant information and what to do with it. To get the most out of this process, it helps to work with professionals. Contact us to learn more.

How To Prepare a Forecast for a Company?

The first step in forecasting is to determine the purpose of your financial planning. Depending on your strategy, the data you need to make effective decisions will change. For example, will you focus on predicting how many units your business will sell of a new product, or is your main concern about how supply costs will shift over the next several quarters?

Once your team has a unified direction, take the following steps for how to prepare a forecast for your company:

  • Determine a Baseline: Use historical data to create a clear picture of your current standings for a specific metric, such as sales volume or digital marketing ROI. This baseline will provide context for projected figures.
  • Project Trends: Use both quantitative and qualitative data to estimate future financial trends. This step should also include thorough data analysis to find meaningful patterns.
  • Compare Forecasts to Business Goals: With both data and insight at your disposal, it’s time to act. You may find that you can charge ahead with your current strategy, or you might need to adjust your sails.
  • Evaluate and Adjust Forecasts: Forecasts are rarely—if ever—100% accurate. As you implement your strategy, new data will become available that will change projected trends. Build in space for flexibility so your team can adapt to shifting needs and market conditions.

How To Prepare a Forecast for a Company?

Having access to the right tools and software can help make your forecasting process as beneficial as possible. The six most common company finance tools to get the job done fit into the following categories:

  • Sales Forecasting Software
  • Demand Forecasting Software
  • Financial Forecasting Software
  • Cash Flow Forecasting Software
  • Revenue Forecasting Software
  • Budget Forecasting Software

Fortunately, there are a lot of amazing programs available for businesses to level up their forecasting. Unfortunately, too many choices can be overwhelming and confusing. At Milestone, our experts are here to help with any (and all) stages of financial forecasting . Whether you want an additional perspective during data analysis or you want the best software system for your finance team, a helping hand is just a phone call away.

How To Prepare a Budget for a Company?

Follow these eight steps during budget preparation to get the most out of your company finance planning:

  • Establish Clear Goals
  • Evaluate Previous Budgets
  • Assess Revenue Estimates
  • Outline Expected Expenses
  • Anticipate Cash Flows
  • Prepare for Contingencies
  • Allocate Resources Efficiently
  • Monitor and Adjust

The goal during budgeting is to take the data and insights your team gathered during forecasting and develop a concrete financial plan. Budgets allocate resources for an initiative during a specific time period, and these plans are much less flexible than forecasts. If you need to make significant changes to one department’s budget, you may have to readjust the resources available to other departments, which will throw everyone off. In other words, accuracy is mission-critical. Therefore, no “How to prepare a budget for a company” checklist is complete without the following line items:

  • Supplies: Office essentials like pens, sticky notes, and chairs
  • Software: Most applications operate on a software as a service (SaaS) model, so software costs will typically be a recurring monthly expense
  • Services: Third-party services that keep your projects moving forward, such as advertising
  • Wages: All of the costs associated with retaining top talent, including salary and benefits

Another essential component of financial planning is coordination between departments. When departments keep careful track of their expenses and budgetary performance, it makes planning for the future easier. Organizations with more data can efficiently manage their resources and create a higher impact with their investments.

How To Prepare a Budget for a Company?

What Is an Example of a Budget and Forecast?

To get a better understanding of how budgeting and forecasting actually play out, check out this case study published by LinkedIn : 

  • Challenge: CNC Machine Shop lacked the data and organization for an effective budget.
  • Solution (Part 1): Overhaul forecasting process to gather relevant data across all seven revenue streams. To achieve this transformation, CNC Machine Shop set a trend line based on the past three years of sales. This resulted in projecting an end of year loss of $3.3 million.
  • Solution (Part 2): Adjust budget to account for insights gained during forecasting. Action items included: optimizing workforce, prioritizing high-yield sales efforts, and exploring third-party service options.
  • Results: CNC Machine Shop spent the rest of the year recovering from their financial troubles instead of digging themselves deeper into debt.   

Looking for more on what an example of budget and forecast is? To see how partnering with a financial services provider can help, review our case study on how Milestone’s CFO services deliver strategic support for a SaaS startup .

Best Practices and Common Pitfalls

For optimal results during financial planning, follow these forecasting and budget preparation best practices:

  • Have a plan so you can compare budgeting plans with organizational goals
  • Be realistic and make data-backed decisions
  • Prioritize high-impact initiatives when allocating resources
  • Include flexibility in budgeting
  • Facilitate collaboration between departments
  • Monitor changes and revise financial plans as new information becomes available

Milestone: Budgeting and Forecasting Services You Can Count On

One of the most common pitfalls that businesses make when it comes to financial planning is taking a reactive approach. When bandwidth is tight, it’s tough to dedicate the time and resources to developing a thorough forecasting and budgeting process. That’s where financial services providers—like Milestone—come in. When you partner with us, you can make your finances work for you instead of against you. Get in touch today to learn more.

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Financial Forecasting: What it Is, How to Do It, And Why It’s Important for Every Business

Financial Forecasting-2-1

In our personal lives, we are terrible predictors of our future selves. Uniformed, we buy houses based on a salary we believe will only increase. We buy cars thinking the price of gas will stay the same. We subscribe to memberships and services thinking we’ll always use them. We constantly seek stasis in a world that is constantly changing.

When it comes to business, why would we be any different?

Some famous business figures don’t even believe we CAN get good at prediction or forecasting. Jason Fried, Founder of BaseCamp, said, “Unless you are a fortune teller, long-term business planning is a fantasy.”

What if that weren’t the case? At our company, SRC (Springfield Remanufacturing Corporation) , our monthly forecasts have proven 95 percent accurate. In fact, our most recent five-year financial forecasts proved to be 96 percent accurate.   

Don’t you wish you could have that kind of accuracy in your business forecasting? What would you need to do that? What data would you pay attention to? Who would you believe?  

Good question! The most successful organizations consistently look at the marketplace and update their forecasts accordingly. Usually, this takes the form of running to the experts.

In his book Rock Breaks Scissors, William Poundstone states, “Research argues that business and political forecasters are not much more accurate than educated non-experts. Most forecasting experts assume current trends will continue into the future. This isn’t necessarily true, but forecasters know their clients will believe it.”

In fact, Morningstar reports that 85% of mutual funds have underperformed their benchmarks. Not quarterly. They’ve missed the mark for generations . Top that with the fact that half of mutual fund managers don’t even invest in their own funds!

You’re already better at forecasting than you probably think. You’re certainly better than many of the experts. Even if you predicted the market would rise every year only by its historic average, you’d be more accurate than the annual forecasts of the top 20 market strategists from large Wall Street banks, according to writer Morgan Housel.

The fact is, anyone can get better at forecasting.


Broadly, forward forecasting is a technique or method that uses historical data to make informed predictions about the future.

Typically people arrive at a forecast by using either the qualitative or quantitative forecasting models.

The qualitative forecasting technique heavily relies on the opinions of experts to determine a final forecast. A business professional using this method would typically gather insight and data from surveys, interviews, market research, etc. to make informed predictions on their own. This method is used when no past data is available.    

Quantitative forecasting uses historical data to identify patterns and observe the way variables have interacted in the past. Often people will combine economic indicators with historical data to arrive at a more accurate forecast.


The way The Great Game of Business forecasts is a little different. Where others pull historical numbers, we use real-time data to arrive at extremely accurate forecasts using the collective knowledge of our employees. Historical data is great when building our long-term forecasts, but when looking 3 months ahead it’s crucial to arrive at the most accurate forecast to ensure the company has enough time to pivot before running into any obstacles that may lie ahead.

In The Great Game of Business, forward forecasting is the fundamental way we communicate the numbers, because we want to control our own destiny.
– Steve Baker and Rich Armstrong, Get in the Game   From our book, Get in the Game.  Grab your copy today!

To do this, every single one of our employees uses the knowledge they have of our customers and vendors TODAY, paired with confidence ratings to predict the company’s revenue and expenses in extreme detail. Our people report these numbers weekly in what we call a “ Huddle ,” or company-wide meeting where the organization reviews financials.

Many refer to their weekly team meeting as a Forecasting Huddle. These Forecasting Huddles are a significant departure from the KPI-driven scorecards you see at many businesses and in almost every other business operating system.


  • Forecasting helps eliminate surprises. In business, no one likes surprises!
  • Forecasting ensures we remain proactive, so we don’t have to wait until the end of the month to learn how we did. We want to impact the outcome while there’s still time to make a difference.
  • Forecasting encourages employees to think about cause and effect—that is, how they can influence the numbers rather than just passively look at results to date.
  • Forecasting makes us smarter about the business. The ability to predict or forecast accurately is a direct indication of how well people understand their numbers.
  • Forecasting creates a sense of urgency, encouraging people to act and take responsibility for improving the score.


Another departure from the herd is our high-involvement approach to forecasting. We try to involve as many people as possible in contributing to the organizational forecast. Makes sense. We’re already considered to be weirdos and heretics to believe that people can learn the financials…why not believe frontline folks can learn to forecast business results?

Huddles help us proactively manage our performance and the financial results we are after. Some believe that financials are lagging measures and have no use in daily or weekly performance management. However, we use them as our early-warning system.

Imagine that the fire marshal just walked into your office and gave you a message that you never want to hear: your house has just burned to the ground. What would you do? There’s not much you can do but sift through the ashes and decide to rebuild or relocate.

Now, imagine that same fire marshal walks in and tells you that in two hours your house is going to catch fire. What would you do? You’d take action! You’d stop the fire at its source, if possible or not, you’d make sure the damage was minimized. It’s a completely different conversation, isn’t it?

Sometimes, we don’t like the message the scoreboard has to tell us, but at least we’ve got that “two-hour notice.” Ignoring the message or not taking it seriously would eventually leave us sifting through ashes. It’s not too late to save the house or at the very least minimize the damage. We just have to plan the next play accordingly.

Financial forecasting in business can be challenging, but the benefits to the short- and long-term health of the organization are tremendous.



Let’s take a look at a simple departmental scoreboard; just one way of many that you can approach a systematic way to harness the wisdom of the crowd and turn it into a reasonable forecast.

This is just one example of a sales team’s current activities. After all, everything in business starts with a credible top line – you can’t have a business if the company's not generating revenue.

In the example below, we are reflecting on a sales team’s scoreboard the department uses to arrive at a forecast of revenue. In our example, you can see columns for Customers, the “Owner” of that account, the Status of the proposal to that Customer, and the Total Potential. Simple enough.

how to write a financial forecast for a business plan

As the team prepares to huddle at the weekly forecasting meeting, they would need to review everything they know about each line item. What’s the latest with that customer? Do they have everything they need? What’s in the way of ‘Yes’ (or recognizing revenue from a closed sale)? What probability would they put on it this week, and why?

Many teams limit probabilities to concrete measures, e.g., 25%: contact has been made. 50%: proposal has been sent. 75%: the proposal is being negotiated/refined. 100%: SOLD!

Next, we can create a ‘Total Potential’ column, then assign it a ‘Probability’.  Multiply those together and you can estimate the ‘Weighted Probability’; the likelihood of that deal closing, and what it might be worth.

Here is the formula:  Total Potential X Probability = Weighted Potential

how to write a financial forecast for a business plan

Now we can divide each Weighted Potential line item by that Customer’s payment terms and plot it across the calendar, illustrating our expectations of revenue recognition, by month.

how to write a financial forecast for a business plan

Imagine not only forecasting sales, but costs, margins, and expenses as well. The real power of forward forecasting is harnessing the wisdom of the crowd. Line-of-sight to organizational goals gives people the ‘why’ they need to stay connected to the bigger picture. Line-item ownership breaks down what could be overwhelming, into something local and manageable for the individual.

You will be amazed at how accurate your forecasts will become with frequency.

The frequency of your forecasting is the real ‘secret’ to continuously improving forecast accuracy and results. Face it. The world of business is dynamic, and new information comes in every day. Will your forecasts change? Absolutely! And with every weekly meeting, your team’s confidence, ownership, and accuracy will increase. Meet less frequently, and your forecasts (and accountability) will erode into a low-engagement victim culture, filled with excuses, finger-pointing, and poor performance.


Repetition, repetition, repetition.

When you start regular Huddles and ask nonfinancial people for an opinion on how the month will end, you’re bound to hear, “How am I supposed to predict the future? What am I, a fortune teller?” It’s imperative that you teach people that “it’s not your job to predict the future. Your job is to influence it.” We’ll never be able to see around every corner, but with each forecast, we get a little smarter. A little more accurate. We seek out more information; we ask more sources.

While we might call it “poorcasting” in the beginning, it’s the disci pline of keeping at it week after week, month after month, that makes us better. At SRC, our monthly forecasts have proven 95 percent accurate. In fact, our most recent five-year financial forecasts proved to be 96 percent accurate. Sound impossible? Believe it—you will get better. Just keep at it.

In business, we don’t like things sneaking up on us. So, forecasting helps us take the surprises out of business. We are not asking people to predict the unpredictable. We are simply asking them to be forward-looking and then learn what impacts their numbers. Their forecast is simply an educated best estimate or opinion on what is expected.

In the end, forecasting will help you gain a deeper understanding of what influences your numbers. Begin by identifying the few key drivers that directly influence your forecast. For example, a sales team is responsible for sales revenue, so the key drivers that may directly influence its forecast are the number of customer prospects, closure rate, number of proposals submitted, product mix, revenue per customer, customer satisfaction, sales cycle, new business, and average sale price.

Here’s how the process works.

Part of the “secret sauce” in playing The Great Game of Business is developing a consistent Huddle rhythm that includes forward fore casting your financial scoreboard by line owners—those people close to the numbers who have responsibility for reporting each line of the scoreboard.

Refer to the financial scoreboard below. The scoreboard is not a financial statement—rather, it’s a common- sense reflection of your income statement, balance sheet, and cash flow statements. Your financial scoreboard should include important data that your team wants and needs to know. During your Huddle, you’ll be keeping score on a number of scoreboards ( bonus plan , MiniGames , etc.), but start with the financial scoreboard.

Screen Shot 2024-05-21 at 10-41-51 AM

Begin by having the sales team call out its revenue forecast for the end of the month. If you’re at the beginning of the month, this forecast will go in the “Forecast 1” column. Then you can work your way down the scoreboard, quickly capturing forecasts of how the month will end from people who own lines relating to COGS and expenses.


Picture going into your weekly huddle, or forecasting meeting, with your team.

You’ll be forecasting the end of the current month. So, your sales team will be updating their departmental scoreboard as illustrated above, preparing for the weekly forecast.

In reality, most sales teams will organize by product line, service line, region, location, or other natural divisions. In our example, we are consolidating the sales team’s efforts into one line, ‘Revenue’.

If we are in the first week of June, the Sales Team could forecast revenue of $61,875, knowing that in the coming weeks, we may close one deal and lose another. This forecast will go in the “Week 1” forecast column.

how to write a financial forecast for a business plan

Then, you can work your way down the scoreboard, quickly capturing forecasts of how the month will end from people who own lines relating to COGS and expenses.

Remember to ask for the stories behind the numbers, especially if there is a variance from the plan or budget.

Coachs Tip Chat Bubble (1)-1

Numbers are nothing more than stories about people. – Jack Stack, The Great Game of Business

In a matter of minutes, you’ll have built a financial picture of how your company will look in the coming weeks. And your team understands why it will look that way. Employees can now go and take action to mitigate the negatives and lock in the positives.

The following week, you’ll repeat the process but with additional data and information available.

Data + Assumption x Frequency = Accuracy.

Your “Week 2” column should look different, as will “Week 3” and “Week 4” in subsequent Huddles. The key is that we are looking ahead instead of looking back, always with an eye on improving our month-end results.

When you reach the month’s end, you’ll cover two months in one Huddle. You’ll cover the month you’re wrapping up, plus “Week 1” of the upcoming month. In this transitional Huddle, you can reconcile your actuals with your forecast very rapidly. You’ve been looking at these numbers for four weeks now, so you can take a quick look back and then immediately throw your attention forward again.

Jack Stack

The whole idea of a forecast is projecting where you want to go and making the commitment to each other to get there. You’re not making up a number to please a boss— you’re making a commitment to take a journey together. This is a beautiful thing. An accurate forecast takes the uncertainty out of the process and sets an expectation for yourself to live up to. If you can control a forecast, you can control the world. I remember one awed CEO who, after his associates started forecasting their results, told me: “I can’t believe there is this much information inside my own company!”

– Jack Stack, The Great Game of Business

Huddle participants begin to realize that what they do behind the line items on the financial scoreboard has everything to do with what they take home in terms of job security and rewards. Huddles provide a weekly check-in on how people are tracking to their bonus payout. The bonus plan keeps everyone excited because the stakes rise at every Huddle, every forecast, every month. Remember how the bonus plan is designed. We’re always in the bonus hunt, and the rewards become greater each quarter. The prospect of sharing in the financial success of the business makes the pursuit of improvements just a little bit sweeter.


At first, embracing the practice of forward forecasting varies across team members—some take it very seriously while others devote little or no time to this critical process. Longtime GGOB coach Jack O’Riley has been a part of thousands of Huddles. He’s seen it all and has learned what to listen for to get everyone on board and effective with forward forecasting.

His first advice is not to overthink it. Don’t overcomplicate the process. Sure, you can use complex Excel spreadsheets drawing upon models such as linear regression or some modeling theory like the Monte Carlo method. Or you can simply draw upon your knowledge of the business, a little historical information, and your experience and intuition and apply all that to the numbers.

O’Riley also suggests that when you hear phrases like the following, it should alert you to dig a little deeper and ask questions of the line owner about the forecast.

“I am trying to be conservative.” This is natural for businesspeople—but not helpful. We want to use all the knowledge available to forecast financials accurately. “Conservative” is not helpful.

“This is how much we have booked this month to date.” If it is the last day of the month, this is fine. However, if half the month is yet to happen, then using month-to-date data will probably not prove to be accurate.

“I am being optimistic.” This is as bad as being conservative. We are not looking for optimistic, pessimistic, or conservative. We are looking for what is likely to happen.

“I am going on last month’s results.” Fine, if this month will be like last month. Not fine if this is used as a shortcut to a forecast. “Just use my number from last month” is probably only good if you are fore- casting something like rent.

“Just use my number from last week.” This sets off all sorts of alarms for a coach. Did the line owner even bother to look at the forecast for this Huddle?

“I did not have time to look at my numbers.” Just not acceptable—this undermines the whole process. If this recurs, this person should not be part of the process.

“Just use the plan number.” If the plan is new, then using those numbers might be appropriate. If the plan is ten months old, then defaulting to plan numbers is probably not acceptable.

“This is my best guess for now until I hear from Tom.” Tom does not own the line and the associated forecast. The line owner does.

“I am waiting on accounting to get back to me.” Accounting is a critical source of information but is not responsible for the forecast. The line owners need to figure out another way to forecast with the data they have for a Huddle.

This list is not exhaustive, but it’s a good representation of phrases you need to be on the lookout for in your Huddles. Other “weasel words” that indicate the person doing the forecast is trying to sidestep the responsibility and accountability include words like "sort of" and "nearly." If you hear phrases like these too often, your Huddle will sort of and nearly be useless.

Screen Shot 2024-05-20 at 4.32.31 PM

Download our "Weasel Words" Handout! Make having effective huddles a breeze with these resources.

Download Weasel Words Handout


While keeping score with a series of scoreboards helps us clearly determine if we are winning or losing, following the action through a  series of Huddles becomes the catalyst for truly effective communication . Following the Action helps an organization close the feedback loop and reconnect, refocus, reengage, and recommit to the success  of the company.

The tips below will ensure your Huddles (company-wide meetings) are most productive:

Begin with the Right Leadership

Be sure the Huddle lives up to its purpose of helping to consistently inform, involve, engage, educate, and, of course, hold people account able for the success of the business. Remember, Huddle leaders, that Huddles are for the team, not for the managers.

Focus on the Right Scoreboard

Huddles start with a relevant and meaningful scoreboard, highlight ing the right measures that clearly tell the team if they are winning or losing and who’s accountable.

Keep Your Huddles Frequent, Swift, and On Time

Maintain a simple, fixed agenda while making sure the content is relevant and the communication is concise and swift. Same day, same time, same place—every week. That way people can count on it. They can plan for it. They can develop a routine around it.

Push Back on the Pushback

The immediate pushback you will get when recommending a frequent Huddle is, “We’re too busy!” Executives can’t imagine finding the time to get everybody in the same place every week for one minute, let alone thirty to sixty. Yet this discipline will actually save you time. Teams that Huddle frequently find they interrupt each other consider ably less and that productivity improves. They understand there is a fixed time when they’ll have everyone else’s attention.

Assign Employees to Small Teams

In your company-wide Main Huddles, create groups with a manager acting as the team captain to teach and coach the team during the Huddle. The small groups provide a comfortable setting for employees to get involved, ask questions, and provide input—all the things you want the Huddle process to create.

Provide a Blank Scoreboard, and Populate It in Real-Time

Give employees a blank scorecard each month to fill out so each can track, measure, and report information during each weekly Huddle. The simple act of writing the numbers down and doing a little math keeps everyone engaged and involved and has a dramatic effect on the employees’ ability to learn, understand, and remember how the numbers work together. Try it—it works.

Consider Binders

In an age of electronics, paper seems counterintuitive. But object permanence is a real thing. Consider providing Game binders to the employees that include all the GGOB information they need in order to follow the progress of The Game, including the annual business plan, Huddle scoreboards, bonus plan, a business/financial glossary of terms, training bites, and so on. Think of it as your employees’ mobile office—a central place to store all the information they need to follow the action of The Game.

Make It Interesting ... and a Little Fun!

Provide small incentives to employees or their teams to answer questions or make calculations on the scoreboard. Include small games or brief training bites to reinforce your financial and business literacy efforts. One practitioner created Company-opoly—a custom ized version of the classic Monopoly game—to begin teaching the balance sheet to its teams.


Struggling to provide regular training and development opportunities to your employees?

If you're looking to make training a regular part of your company huddles but find it difficult to keep up with building training bites and lesson plans, then you need to check out our online Community!

The Great Game of Business Community hosts semi-regular training segments, called "Training Tuesdays," where they bring live, 15-minute training sessions directly to you and your people!

When the Community is in between Training Tuesday sessions, you can check out our pre-made training bite handouts to utilize during huddles or catch up on previous Training Tuesday series. We've had some great sessions on the income statement, balance sheet, and financial literacy!

Explore the Community

Encourage Learning

The Huddle should educate people on the business. Highlight the topics that are relevant and useful to the team. Ultimately, people want to know how they can make a difference. It’s important to always provide line of sight by making a connection between what they do every day—both individually and as a team—and the financial outcomes of the business.

Keep in Touch with Your Strategic (High-Involvement) Plan

People support what they help create, remember? The more input you get from your team as you put your annual plan together, the more you’ll want to reconnect to it during your Huddles. But don’t just present numbers. Start a discussion about how the numbers they’re forecasting compare to the goals they previously set.

Employees, Not Accounting, Should Generate the Numbers

Employees’ efforts created those numbers, so they should be the ones to gather them. This also allows the employees to discover and understand exactly where these numbers are coming from and how their daily efforts drive those numbers.

And They Should Report the Numbers, Too

Give your employees a voice by letting them call out their own forecasts. This allows them to celebrate their successes and mourn their failures with the rest of the company. It’s such a great reminder that you’re all in it together.

Proactively Highlight People Creating “Stories behind the Numbers”

Your company’s success didn’t happen magically. There are real, flesh- and-blood people behind everything you do. Show your employees how each one of them plays a role in the company’s success by proac tively seeking out stories about how the numbers were achieved. This adds an extra layer of accountability and ownership.

Always Keep It High Energy

Don’t be like Ferris Bueller’s economics teacher, droning your audience into submission. Bring the energy. Your employees aren’t going to get excited if you aren’t engaged in the process. Ask questions. Give out kudos. Show your passion for making the company a great place for everyone to work and achieve success. Remember, they’re watching you.

Screen Shot 2024-05-20 at 4.33.31 PM


Okay, okay. Someone out there is asking, “So what happens when the numbers look grim?”. The answer goes back to ownership of the numbers. If the CEO reports historical numbers on a quarterly basis, everyone knows that those numbers belong to him/her, and there’s nothing to be done.

Line-item ownership and accountability flip the script on that concept, as the numbers become ‘our’ numbers instead of ‘your’ numbers. Plus, by forecasting, we have time to do something to try to improve the numbers or mitigate the damage, rather than being relegated to fate.  

So instead of playing the blame game, the team starts to rally together around how they can improve the numbers – because everyone wants to win, and everyone wants to earn a bonus.

Bonus Plan Design Social Media Graphic-3

Learn how we tie bonus programs to financial performance while forecasting the bonus pool weekly to eliminate bonus entitlement.

Get one-on-one help building a bonus plan!

Forecasting allows us to influence our own future and destiny. Whether that be career advancement, bonus payouts, or simply job security, employees are much more engaged, happy, and satisfied when they have some agency or control over their own lives.

Annual Plan and Budget Tool Scorecard


This tool is a robust scorecard built in Microsoft Excel and has everything you need to start sharing, tracking, and forecasting company financials. Plus, it also includes a bonus program tracker and scorecard.

More articles you might like:

7 Best Practices to Take Your Bonus Plan Up a Notch

Our 10-Step Approach to GGOB Implementation

The Building Blocks of an Effective Bonus Plan

Kiolbassa Uses Core Values to Celebrate First Quarter Bonuses

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how to write a financial forecast for a business plan

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how to write a financial forecast for a business plan

How to Create a Sales Forecast

Female entrepreneur standing at the front of her shop reviewing receipts to start organizing categories for a sales forecast.

11 min. read

Updated October 27, 2023

Business owners are often afraid to forecast sales. But, you shouldn’t be. Because you can successfully forecast your own business’s sales.

You don’t have to be an MBA or CPA. It’s not about some magic right answer that you don’t know. It’s not about training you don’t have. It doesn’t take spreadsheet modeling (much less econometric modeling) to estimate units and price per unit for future sales. You just have to know your own business. 

Forecasting isn’t about seeing into the future

Sales forecasting is much easier than you think and much more useful than you imagine.

I was a vice president of a market research firm for several years, doing expensive forecasts, and I saw many times that there’s nothing better than the educated guess of somebody who knows the business well. All those sophisticated techniques depend on data from the past — and the past, by itself, isn’t the best predictor of the future. You are.

It’s not about guessing the future correctly. We’re human; we don’t do that well. Instead, it’s about setting down assumptions, expectations, drivers, tracking, and management. It’s about doing your job, not having precognitive powers. 

  • Successful forecasting is driven by regular reviews

What really matters is that you review and revise your forecast regularly. Spending should be tied to sales, so the forecast helps you budget and manage. You measure the value of a sales forecast like you do anything in business, by its measurable business results.

That also means you should not back off from forecasting because you have a new product, or new business, without past data. Lay out the sales drivers and interdependencies, to connect the dots, so that as you review plan-versus-actual results every month, you can easily make course corrections.

If you think sales forecasting is hard, try running a business without a forecast. That’s much harder.

Your sales forecast is also the backbone of your business plan . People measure a business and its growth by sales, and your sales forecast sets the standard for  expenses , profits, and growth. The sales forecast is almost always going to be the first set of numbers you’ll track for plan versus actual use, even if you do no other numbers.

If nothing else, just forecast your sales, track plan-versus-actual results, and make corrections — that process alone, just the sales forecast and tracking is in itself already business planning. To get started on building your forecast follow these steps.

And if you run a subscription-based business, we have a guide dedicated to building a sales forecast for that business model.

  • Step 1: Set up your lines of sales

Most forecasts show several distinct lines of sales. Ideally, your sales lines match your accounting, but not necessarily in the same level of detail.   

For example, a restaurant ought not to forecast sales for each item on the menu. Instead, it forecasts breakfasts, lunches, dinners, and drinks, summarized. And a bookstore ought not to forecast sales by book, and not even by topic or author, but rather by lines of sales such as hardcover, softcover, magazines, and maybe categories (such as fiction, non-fiction, travel, etc.) if that works.

Always try to set your streams to match your accounting, so you can look at the difference between the forecast and actual sales later. This is excellent for real business planning. It makes the heart of the process, the regular review, and revision, much easier. The point is better management.

For instance, in a bicycle retail store business plan, the owner works with five lines of sales, as shown in the illustration here.  

how to write a financial forecast for a business plan

In this sample case, the revenue includes new bikes, repair, clothing, accessories, and a service contract. The bookkeeping for this retail store tracks sales in those same five categories.

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  • Step 2: Forecast line by line

There are many ways to forecast a line of sales.

The method for each row depends on the business model

Among the main methods are:.

  • Unit sales : My personal favorite. Sales = units times price. You set an average price and forecast the units. And of course, you can change projected pricing over time. This is my favorite for most businesses because it gives you two factors to act on with course corrections: unit sales, or price.
  • Service units : Even though services don’t sell physical units, most sell billable units, such as billable hours for lawyers and accountants, or trips for transportations services, engagements for consultants, and so forth.
  • Recurring charges : Subscriptions. For each month or year, it has to forecast new signups, existing monthly charges, and cancellations. Estimates depend on both new signups and cancellations, which is often called “churn.”
  • Revenue only : For those who prefer to forecast revenue by the stream as just the money, without the extra information of breaking it into units and prices.

Most sales forecast rows are simple math

For a business plan, I recommend you make your sales forecast a detailed look at the next 12 months and then broadly cover two years after that. Here’s how to approach each method of line-by-line forecasting.

Start with units if you can

For unit sales, start by forecasting units month by month, as shown here below for the new bike’s line of sales in the bicycle shop plan:

how to write a financial forecast for a business plan

I recommend looking at the visual as you forecast the units because most of us can see trends easier when we look at the line, as shown in the illustration, rather than just the numbers. You can also see the numbers in the forecast near the bottom. The first year, fiscal 2021 in this forecast, is the sum of those months.

Estimate price assumptions

With a simple revenue-only assumption, you do one row of units as shown in the above illustration, and you are done. The units are dollars, or whatever other currency you are using in your forecast. In this example, the new bicycle product will be sold for an average of $550.00. 

That’s a simplifying assumption, taking the average price, not the detailed price for each brand or line. Garrett, the shop owner, uses his past results to determine his actual average price for the most recent year. Then he rounds that estimate and adds his own judgment and educated guess on how that will change. 

how to write a financial forecast for a business plan

Multiply price times units

Multiplying units times the revenue per unit generates the sales forecast for this row. So for example the $18,150 shown for October of 2020 is the product of 33 units times $550 each. And the $21,450 shown for the next month is the product of 39 units times $550 each. 

Subscription models are more complicated

Lately, a lot of businesses offer their buyers subscriptions, such as monthly packages, traditional or online newspapers, software, and even streaming services. All of these give a business recurring revenues, which is a big advantage. 

For subscriptions, you normally estimate new subscriptions per month and canceled subscriptions per month, and leave a calculation for the actual subscriptions charged. That’s a more complicated method, which demands more details. 

For that, you can refer to detailed discussions on subscription forecasting in How to Forecast Sales for a Subscription Business .

  • But how do you know what numbers to put into your sales forecast?

The math may be simple, yes, but this is predicting the future, and humans don’t do that well. So, don’t try to guess the future accurately for months in advance.

Instead, aim for making clear assumptions and understanding what drives your sales, such as web traffic and conversions, in one example, or the direct sales pipeline and leads, in another. Review results every month, and revise your forecast. Your educated guesses become more accurate over time.

Experience in the field is a huge advantage

In a normal ongoing business, the business owner has ample experience with past sales. They may not know accounting or technical forecasting, but they know their business. They are aware of changes in the market, their own business’s promotions, and other factors that business owners should know. They are comfortable making educated guesses.

If you don’t personally have the experience, try to find information and make guesses based on the experience of an employee,  your mentor , or others you’ve spoken within your field.

Use past results as a guide

Use results from the recent past if your business has them. Start a forecast by putting last year’s numbers into next year’s forecast, and then focus on what might be different this year from next.

Do you have new opportunities that will make sales grow? New marketing activities, promotions? Then increase the forecast. New competition, and new problems? Nobody wants to forecast decreasing sales, but if that’s likely, you need to deal with it by cutting costs or changing your focus.

Look for drivers

To forecast sales for a new restaurant, first, draw a map of tables and chairs and then estimate how many meals per mealtime at capacity, and in the beginning. It’s not a random number; it’s a matter of how many people come in.

To forecast sales for a new mobile app, you might get data from the Apple and Android mobile app stores about average downloads for different apps. A good web search might also reveal some anecdotal evidence, blog posts, and news stories, about the ramp-up of existing apps that were successful.

Get those numbers and think about how your case might be different. Maybe you drive downloads with a website, so you can predict traffic from past experience and then assume a percentage of web visitors who will download the app.

  • Estimate direct costs

Direct costs are also called the cost of goods sold (COGS) and per-unit costs. Direct costs are important because they help calculate gross margin, which is used as a basis for comparison in financial benchmarks, and are an instant measure (sales less direct costs) of your underlying profitability.

For example, I know from benchmarks that an average sporting goods store makes a 34 percent gross margin. That means that they spend $66 on average to buy the goods they sell for $100.

Not all businesses have direct costs. Service businesses supposedly don’t have direct costs, so they have a gross margin of 100 percent. That may be true for some professionals like accountants and lawyers, but a lot of services do have direct costs. For example, taxis have gasoline and maintenance. So do airlines.

A normal sales forecast includes units, price per unit, sales, direct cost per unit, and direct costs. The math is simple, with the direct costs per unit related to total direct costs the same way price per unit relates to total sales.

Multiply the units projected for any time period by the unit direct costs, and that gives you total direct costs. And here too, assume this view is just a cut-out, it flows to the right. In this example, Garrett the shop owner projected the direct costs of new bikes based on the assumption of 49 percent of sales.

how to write a financial forecast for a business plan

Given the unit forecast estimate, the calculation of units times direct costs produces the forecast shown in the illustration below for direct costs for that product. So therefore the projected direct costs for new bikes in October is $8,894, which is 49% of the projected sales for that month, $18,150.

how to write a financial forecast for a business plan

  • Never forecast in a vacuum

Never think of your sales forecast in a vacuum. It flows from the strategic action plans with their assumptions,  milestones , and metrics. Your marketing milestones affect your sales. Your business offering milestones affect your sales.

When you change milestones—and you will, because all business plans change—you should change your sales forecast to match.

  • Timing matters

Your sales are supposed to refer to when the ownership changes hands (for products) or when the service is performed (for services). It isn’t a sale when it’s ordered, or promised, or even when it’s contracted.

With proper  accrual accounting , it is a sale even if it hasn’t been paid for. With so-called cash-based accounting, by the way, it isn’t a sale until it’s paid for. Accrual is better because it gives you a more accurate picture, unless you’re very small and do all your business, both buying and selling, with cash only.

I know that seems simple, but it’s surprising how many people decide to do something different. The penalty for doing things differently is that then you don’t match the standard, and the bankers, analysts, and investors can’t tell what you meant.

This goes for direct costs, too. The direct costs in your monthly  profit and loss statement  are supposed to be just the costs associated with that month’s sales. Please notice how, in the examples above, the direct costs for the sample bicycle store are linked to the actual unit sales.

  • Live with your assumptions

Sales forecasting is not about accurately guessing the future. It’s about laying out your assumptions so you can manage changes effectively as sales and direct costs come out different from what you expected. Use this to adjust your sales forecast and improve your business by making course corrections to deal with what is working and what isn’t.

I believe that even if you do nothing else, by the time you use a sales forecast and review plan versus actual results every month, you are already managing with a business plan . You can’t review actual results without looking at what happened, why, and what to do next.

Content Author: Tim Berry

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

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Money blog: NatWest app used by millions crashes on payday for many

The NatWest app is displaying an error message for thousands of users on what for many is payday. Read this and the rest of today's consumer and personal finance news in the Money blog below, and leave your thoughts in the comments box.

Tuesday 28 May 2024 08:48, UK

  • NatWest down: Major banking app crashes on payday
  • Chocolate bars with 'menopause almonds' branded a 'ridiculous money-making product'
  • Renters Reform Bill shelved - while leasehold bill passes without cap on ground rents
  • Rural areas see bigger house price growth

Essential reads

  • Women in Business : 'A truck unloaded a £600 car that her son bought on eBay thinking it was a toy' - The schoolgate stories that led to GoHenry
  • Money Problem : 'My mortgage lender is ending my two-year fix and I haven't been in the house for two years - can they do this?'
  • How much is pocket money in 2024 and where are kids spending it?
  • Best of the Money blog - an archive

Ask a question or make a comment

A banking app used by millions of people appears to have crashed for thousands this morning.

The NatWest app is displaying an error message for some users, with approximately 3,000 reporting issues on Downdetector from 7am onwards.

Users took to X to complain, with some pointing out the fault had occurred on payday for many.

"NatWest online banking is always broken when I need it," one said.

Customers trying to use the app have been greeted with the message: "We're sorry, some kind of error has occurred when trying to establish a connection between your device and ourselves."

Some 9.8 million people use the app, according to the NatWest Group.

A NatWest spokesperson said: "We are aware that some customers are experiencing difficulties accessing NatWest mobile and online banking. 

"We apologise to customers for the inconvenience and we're working to resolve this as quickly as possible.

"Customers can still use telephone banking or visit a branch."

Just 18% of companies in the UK are led by women, a nd while data suggests female entrepreneurs are on the rise, men still receive more funding and are entrusted with higher average loans to get them started.  

In a new series every Tuesday,  Money blog reporter Jess Sharp speaks to women who are bossing it in their respective fields - hearing their stories, struggles and advice for those who want to follow in their footsteps. 

First up is the co-founder and CEO of GoHenry, Louise Hill...  

For many women, having kids pauses or unfairly disrupts their careers. For Louise, the opposite happened. 

Growing up in Lowestoft on the east coast of England, she had a childhood filled with days on the beach, kayaking and exploring old boats. But her own kids arrived into a very different world - one of apps and downloads and online market places.

It wasn't long before she started to think about financial education and the importance of practical money skills.  

Back when her two children had iPods and would download music from iTunes, she would print off an invoice every time they landed a bill in her inbox. The invoice would then be stuck on the fridge.

When they came to her at the weekend asking for pocket money, Louise would point to the fridge and deduct the amount they had already spent from their allowance.  

"I was trying to make them understand that money has to come from somewhere, and it really doesn't grow on trees," she told the Money team. 

"I could go through the process of saying, well you'd normally get £5 but here's what you've spent this week, so you only get £1.20." 

How the idea for GoHenry came about

Among school pick-ups and kids' football games, she heard other parents complaining about their children's spending habits.  

One parent told a story about her daughter spending £200 on an online My Little Pony game. Another didn't know what to do when a battered-up car arrived at her driveway on a flatbed truck after her son spent £600 on eBay on what he thought was a toy. 

"Everybody had a story. It was amazing to realise we were all having the same problems and kids were starting to have access through their parents to the digital world, but there was nothing in the market to help parents teach them to access it in a safe way," Louise said.  

"We wanted to create a service that would empower them with freedom, confidence, to use and understand money but in a safe environment."

The idea of GoHenry, a prepaid debit card and learning app, was born.  

With a big mortgage, little money to set up a business and two kids to look after following a divorce, Louise said she and her co-founders (who quickly left the company) "grafted".

"I could have got a fairly safe, well-paid corporate job - jumping off the edge of a cliff into the uncertainty of starting a business was quite a leap," she said.

"But, the idea was too good, frankly. 

"It took a little while to work out the right tool to use, so we worked nights, we worked weekends, we worked holidays, all because we really, really wanted to bring this to market." 

In an initial round of seed funding, she raised more than £650,000, which was followed by several successful crowdfunding campaigns. 

The challenges

Her company eventually launched in 2012 and while it's now a huge success, delivering a service to more than two million people across France, Spain, Italy, the US and the UK, Louise said it hasn't been without its challenges. 

The first one was the name. When it first came to market, the business was called PCT Money (pronounced pocket money), but the name was changed about 18 months later after she realised it was "stupid".  

"Nobody could say it and nobody could spell it, it was a really silly idea," she added. 

The business got the name GoHenry after its very first customer – an 11-year-old boy named Henry from Bristol.

Another challenge was its scale of growth - GoHenry grew in a big way, very quickly, which meant constant changes needed to be made to the company structure. 

"About six or seven years ago, we were growing incredibly quickly... I know this sounds ridiculous but almost every six months you'd have to step back and look at what we needed," she said. 

This was an issue Louise had faced and failed to overcome years before in a previous business - an ecommerce company called Manners which she was forced to sell after running out of cash to sustain its growth. 

"We failed to think about how we would scale it. We couldn't grow it any more because we didn't have enough cash in the company. At the time, I was really cross with myself for not having thought about that," she said. 

'I was becoming a roadblock'

In around 2017-18, Louise realised another issue with GoHenry - herself. 

"I was becoming a roadblock. I was working flat out and so much of the information about why we did things the way we did them was in my head or in my laptop files," she explained.

"That kind of snuck up on me and I was fundamentally creating a risk for the business and stopping us growing as quickly as we could." 

She started a campaign across the company, encouraging staff to raise "single points of failure" to see where the problems were. 

"I appeared in there an awful lot," she said. "So, yeah, that's a top tip from me - don't let that sneak up on you. Plan ahead." 

What's been the key to her success? 

Now running for more than 12 years, GoHenry has continued to expand and innovate.

Louise said keeping her mission of "making every kid smart with money" at the forefront had been "fundamental". 

"That is our sole focus. This isn't an add-on product to another business, everyone who joins GoHenry is here for one reason and that's to serve Gen Z and now Generation Alpha's money needs and I think that makes a big difference," she added. 

Louise's advice for others 

"Who am I to give advice?" was her initial response when asked this question, adding that she hoped to see more young girls and women see images of people who look like them succeeding.

"The more that becomes the norm, the more people will think they can do it too," she said. 

"I've been asked many times what's the difference between a founder, an entrepreneur and a non-entrepreneur, and it has to come down to risk appetite," she added.

"I've thought about all sorts of different mindsets, different backgrounds, different abilities with, I don't know, spreadsheets or contacts... But at some point it comes down to being confident enough." 

So practically, she said women looking to set up a business should start by finding support groups.

"There are loads out there. They can be hugely helpful because founding a business can be lonely and a tough move to make. Nobody pretends that it's easy," she said. 

Another tip she had was to plan for scale "from day one", thinking about the partners you work with, the suppliers, how much money you need to bring in and how often you might need to "go out and get more money". 

But the most important lesson, she says, is was to hire people you know are better than you. 

"It's scary to hire people that you know are much better than you but if you can do that and then give them the space they need to do what they can really well, you'll have a much higher chance of a successful business," she said. 

" What's the worst that can happen if you fail? Pick yourself up, dust yourself off, start again." 

Holland & Barrett has come under fire over a chocolate bar aimed at women enduring menopause symptoms. 

The £3.79 dark chocolate bar is being marketed as soothing menopause symptoms and contributing to "the regulation of hormonal activity", according to the Daily Mail. 

The packaging states the 75g bar contains vitamin B6, which is found in almonds. 

Menopause campaigner Kate Muir told the newspaper she believed the chocolate bar was a "ridiculous money-making product".

"I feel very strongly that this is exploiting a vulnerable group of women," she said. 

"Hopefully [women] won't be distracted by ridiculous money-making products like this."

"There is a peak in suicide among women in perimenopause," she said. "Women need to know they can go to the NHS and get proper help, rather than relying on chocolate bars."

Others on social media branded the product "insulting" and "patronising, profiteering tosh". 

The chocolates also contain the average woman's entire daily allowance of saturated fat. 

A Holland & Barrett spokesman told the Money blog: "Our Holland & Barrett food range has been developed to offer a range of functional food products and swaps for popular snacks and foods.

"This bar is recommended to be consumed as part of a balanced and varied diet alongside a healthy lifestyle, and is designed to be a little treat which has some added benefits compared to other chocolate bars.

"For customers curious about how vitamins, minerals or herbal supplements could support them with their menopause symptoms they can speak to a trained advisor in our stores, and for full personalised information customers can also book a free 45-minute appointment with one of our nutritionists."

The Tories have been accused of caving in to "vested interests" after shelving a flagship bill to reform the renting system.

The Renters Reform Bill acted on a 2019 Conservative manifesto pledge to ban section 21 "no-fault" evictions, which have fuelled a huge rise in homelessness.

Its aim was to make the rental market fairer but its progress through parliament was delayed by opposition from some Conservative MPs who wanted to strengthen protections for landlords.

The legislation was promised by Theresa May back in April 2019 when she was prime minister, and the commitment was carried over by Boris Johnson and Rishi Sunak.

However, the bill has now been shelved ahead of parliament dissolving for the summer general election.

Labour accused the Tories of "caving into vested interests" of pro-landlord MPs.

And Polly Neate, chief executive of Shelter, said: "Renters have been shouting from the rooftops about the urgent need for reform, but once again politicians have let them down."

Friday was the last day MPs sat before the election and several bills were rammed though parliament so they could become law in what is known as the "wash-up period".

One piece of legislation that made it through was the Leasehold and Freehold Reform Bill.

Millions of homeowners in England have rights to their property for a fixed period only, and are required to pay fees and ground rents to a freeholder.

This bill bans most new leasehold houses, makes it easier for leaseholders to buy out or extend their lease, and increases transparency around service charges.

But it was passed without the promised cap on ground rents.

Financial pressures on UK families "eased significantly in April", according to Asda's Income Tracker.

The tracker also suggests disposable income for the average household reached its highest level since September 2021.

"The amount average households were left with last month, after spending on bills and essentials, was £239 per week - £32.52 per week higher than April 2023," the supermarket said.

"The improved financial outlook saw the tracker reach its highest level in well over two years, with household disposable income now only 2.7% below its pre-crisis peak of £346 in March 2021."

A "key driver" was falling inflation - it dropped to  2.3% in April . The energy price cap also fell at the start of the month.

Asda's figures are produced by Cebr, an economics consultancy.

Sam Miley, its managing economist, said: "The income tracker continues to improve, with discretionary income increasing to £239 per week. 

"This improvement was driven by several factors, including still-resilient earnings growth, the reduction in the Ofgem price cap, the uplift in the national living wage, and further cuts to national insurance contribution rates."

He added: "Cebr anticipates spending power to see further improvements in 2024, bolstered by the economic growth momentum that has pulled the UK out of the technical recession experienced in the [second half] of 2023."

Rural areas saw bigger house price growth than urban locations over the five years to the end of 2023, according Nationwide.

The building society, which used data from the ONS, found property values in areas classed as predominantly rural had risen by 22% over the past five years.

In urban areas the increase was 17%. 

Andrew Harvey, Nationwide's senior economist, noted that average house prices across both urban and rural areas "declined a little overall during 2023", which "reflects the rise in borrowing costs, which have added to affordability pressures".

He continued: "Increased demand for properties in rural areas over recent years has been part of the 'race for space' seen during the pandemic.

"However, it is actually rural semi-detached properties that have seen the strongest price growth between December 2018 and December 2023, with average prices increasing by 24%."

We're back for another week of consumer news, personal finance tips and all the latest on the economy.

This is how the week in the Money blog is shaping up...

Tuesday : We're launching a new Women in Business  feature - interviewing women who are bossing their industry. And this week's  Basically...  explains everything you need to know about the triple lock.

Wednesday : We have another top chef picking their best Cheap Eats - this week from Suffolk.

Thursday : Savings Champion  founder Anna Bowes will be back with her weekly insight into the savings market.

Friday : We'll have everything you need to know about the mortgage market this week with the guys from Moneyfacts.

Running every weekday, Money features a morning markets round-up from the  Sky News business team  and regular updates and analysis from our business, City and economic correspondents, editors and presenters -  Ed Conway ,  Mark Kleinman ,  Ian King ,  Paul Kelso  and  Adele Robinson .

You'll also be able to stream  Business Live with Ian King on weekdays at 11.30am and 4.30pm.

Bookmark  and check back from 8am, and through the day, each weekday.

The Money team is Emily Mee, Bhvishya Patel, Jess Sharp, Katie Williams, Brad Young and Ollie Cooper, with sub-editing by Isobel Souster. The blog is edited by Jimmy Rice.

Every Monday we get an expert to answer your money problems or consumer disputes. Find out how to submit yours at the bottom of this post. Today's question is...

I bought my first flat in April 2023 with a two-year fixed-rate mortgage. I got the deal with the help of a broker, who has now contacted me saying my deal is due to end in November - significantly earlier than I had expected. I've spoken to my lender - they said the deal I was on no longer exists. Is there anything I can do to keep my current rate?  Michelle, Kent

We asked David Hollingworth, associate director at L&C Mortgages , to answer this one...

Fixed mortgage rates do what they say on the tin and lock in the interest rate payable for a specified period of time.  Those periods will generally be blocked into market sectors and so are usually tagged as two, three or five-year fixed rates.  

Once that deal is taken, the terms cannot be changed by the lender and the rate can't be brought to an end early.

Some lenders will fix their deals for a specific number of years from completion, but a lot of lenders' rates will be fixed until a specific end date. That could mean that the fix will last even longer than two years at the point that the application is made.

However, it can take time to complete a deal, especially when purchasing a property which may be subject to a lengthy chain. 

Mortgage offers will typically be valid for up to six months. If you originally agreed to buy your flat before the end of 2022 then the deal on offer at the time could feasibly have been fixed until November 2024. 

That could have equated to two years or more when you applied but if it took some time to complete the purchase, it would explain why you feel that you haven't benefited from a full two years of the fixed rate.

It would be a good idea to look back at the original mortgage offer, which will specify all the product details. That will detail when the fixed rate ends and what rate the mortgage will move onto after that. 

That's likely to be a higher variable rate, so it makes sense to shop around for a better deal well before the current rate comes to an end. 

A broker will be able to help you work out the best available rates for you, whether from your current lender or from across the whole market. 

This feature is not intended as financial advice - the aim is to give an overview of the things you should think about.  Submit your dilemma or consumer dispute via:

  • The form above - you need to leave a phone number or email address so we can contact you for further details
  • Email [email protected] with the subject line "Money blog"
  • WhatsApp us  here

By Bhvishya Patel , Money team

Pocket money is in decline, data shows - but kids are finding new ways to pay for their everyday "essentials".

Data from the Natwest pocket money index  (looking at transactions from 308,000 children in the Rooster app) shows only 30% of families now pay pocket money as part of a regular routine (down 2%), with children getting £3.78 on average a week (down 10p from last year).

In fact, pocket money now makes up just 14% of children's income. Instead they're finding new income streams - with a typical child netting £479.96 a year (£9.23 a week) for one-off chores or entrepreneurship.

These "salaries" obviously differ for age groups... 

  • £5.68 for a six-year-old 
  • £24.71 for a 17-year-old

British children are now charging extra for chores and squeezing more money out of their side hustles.

  • Car cleaning earned £3.25 on average - 32% (79p) more than a year ago
  • Paper round earnings increased 2% (45p) to £23.10 a week
  • However, it's been a less good year for reselling - with earnings down 15% to £22.62 a week.

Arguably the most interesting part of the data is where kids are spending their money.

Amazon was top, with Tesco and McDonald's next. Primark, Co-op, PlayStation, Xbox, Sainsbury's and Asda are next in that order - but there's no place this year for Apple, which has been replaced by fashion brand Shein, rounding off the top 10.

NatWest Rooster Money said "kids' money is completely changing shape"... 

"Kids are increasingly complementing [pocket money] in other, more sophisticated ways. This move to greater independence and maturity in their earning has been fantastic to see and bodes well for some bright, financially confident futures ahead." Will Carmichael, chief executive and founder of NatWest Rooster Money

An illustration of this maturity is kids' saving rate of 9.5% - not far off the adult average of 10.2%. Gaming, holidays and the future were the top three saving incentives, in that order.

Is there a right answer?

Kirsty Ketley, a parenting specialist from Surrey, said she gave her 11-year-old daughter Ella £5 and her seven-year-old son Leo £2 a week in cash.

They both started receiving pocket money when they were six.

"I often say to parents, even with children as young as four, it's fine to start giving a bit of pocket money because it's such an important life skill to have – to learn how to manage money because you don't get taught it," she said.

Presenter and children's author Konnie Huq, who has two sons, Covey, 12, and Huxley, 10, told the Money team that a regular pocket money allowance was a "really good way" of getting children into the habit of earning and spending.

She said receiving a regular allowance helped teach children "responsibility" and "financial literacy".

"That's what they will be doing as the grown-ups they become," she said. "I've always said kids are shaping and forming between 0 to seven. You want to put the values in them now in these younger years that they will take through with them in their life."

Sharon Olivero-Chapman, chief executive and founder of Harrienna Health, disagrees. She has always thought a regular pocket money figure is the "wrong message to give to children" - and her daughter Harriet, 13, is one of those raking it in from side hustles.

"Pocket money gives them the wrong association with money," she said. "They're just given money on a plate, whereas that's not real life, is it?"

Ms Olivero-Chapman said if her daughter did want to buy something she had to work out how she could get that money and would then be given chores to earn it. She said it was £1 to unload and fill the dishwasher, £1 to fill and empty the washing machine and 50p to make her bed.

"It's not a regular thing every week," she explained.

Ms Olivero-Chapman said the family's entrepreneurial bug had rubbed off on Harriet and she began running her own Etsy store business last year which sees her personalise phone cases. Her business has earned nearly £1,000 so far.

Your pocket money stories - how much, how and in return for what

The Dursuns, Scotland

Aga Dursun, 41, a PMO analyst from Erskine, gives her 13-year-old son Galip £3 a day and her nine-year-old son Troy £1 a day via transfers into a Starling account. They also get £20 each on her pay day. No chores are required.

"It gives them a lot of freedom and they learn the value of money as well because for example now if they want more expensive trainers they have to save up," she says.

"It's mostly spent on games which breaks my heart."

The Shaws, London

Sammy Shaw, from Enfield, said she gave her eight-year-old twins Teddy and Hope £3.50 a week via the Natwest Rooster Money card.

To earn the money, her son and daughter are set a number of activities which they must complete  - if they don't, money is deducted.

"My two have got an exceptional amount they have got to do. The first thing they've got to do is make their bed, get dressed independently. When they go downstairs they've got to do 10 minutes of practice on the keyboard, they do Times Tables Rock Stars (a digital maths app) and then 10 minutes of reading. 

"The parent has to go into the app and approve these activities and if they don't do them it takes percentages off."

Last year, the twins saved up to buy theatre tickets for the family at £35 a pop.

The Regulskis, Wales

Over in Caerphilly, Dean Regulski, 44, has a fairly similar routine: money in return for washing, ironing, dog walking, laundry and vacuuming. He and his wife give kids Emmeline, Nancy and Abraham (aged 12 to 15) £10 a week also using Rooster.

"Every time they want to make a transaction, it pings my phone so straight away I can have a conversation with them about what they are buying and if it's just sweets I can limit it on the app so it's a £1 transaction," Dean says.

"My son the other day was asking if he could buy something that was beyond the £40 and I said he can take it out next month but that will cost extra chores. I explained the concept of interest to him."

The Moores, West Midlands

Ben Moore, 40, from Solihull, said his 13-year-old twin daughters had got £5 a week in pocket money for the past two years.

They used GoHenry before switching to a debit card.

"We spent a year on GoHenry and it was good because we could say 'you can't spend it on McDonald's' and restrict the type of spending but there was a monthly fee for it," he said.

Chores are not a requirement as he is "really keen" his daughters use the money to "go out with their friends rather than just sit on their phones".

The Scotts, Wiltshire

Fiona Scott, 58, from Swindon in Wiltshire, said her three children Samantha, 24, Georgia, 22, and David, 17, all got pocket money until they were able to make their own money.

"We've always had a little book at home showing this is what is coming in and going out and this is what we've got to spend, so I've encouraged them all to do that in different ways. They've got used to seeing and understanding what a household budget is," she said.

The Joneses, West Midlands

Mother-of-three Jenny Jones, 43, said her 11-year-old daughter Rebecca receives £10 a month - no chores, but everyone is expected to muck in.

It started off with 50p a week when she was seven but when she turned 11, Ms Jones opened up a junior account at Barclays and money goes in monthly.

"It's taught her general management around money. At the moment she loves bubble tea and she loves getting bits of jewellery so it's a case of her thinking what does she want, can she afford both? It enables her to make those decisions.

"It's just those life lessons, isn't it? We can't have everything we want and you've got to make those decisions - and it's okay to make the wrong decision, which is normal."

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  1. How to Create a Financial Forecast for a Startup Business Plan

    Here's how to begin creating a financial forecast for a new business. [Read more: Startup 2021: Business Plan Financials] Start with a sales forecast. A sales forecast attempts to predict what your monthly sales will be for up to 18 months after launching your business. Creating a sales forecast without any past results is a little difficult ...

  2. Financial forecast example for new businesses and startups

    The financial forecast is an essential step when creating a business plan. The financial forecast allows you to anticipate the revenues and expenses of your new business over a given period. ... where he spent most of his time creating complex financial forecasts, writing business plans, and analysing financial statements to make financing and ...

  3. How to Prepare a Financial Plan for Startup Business (w/ example)

    7. Build a Visual Report. If you've closely followed the steps leading to this, you know how to research for financial projections, create a financial plan, and test assumptions using "what-if" scenarios. Now, we'll prepare visual reports to present your numbers in a visually appealing and easily digestible format.

  4. How to Write a Financial Plan: Budget and Forecasts

    Financial ratios and metrics. With your financial statements and forecasts in place, you have all the numbers needed to calculate insightful financial ratios. While including these metrics in your plan is entirely optional, having them easily accessible can be valuable for tracking your performance and overall financial situation.

  5. How to Write the Financial Section of a Business Plan

    Use the numbers that you put in your sales forecast, expense projections, and cash flow statement. "Sales, lest cost of sales, is gross margin," Berry says. "Gross margin, less expenses, interest ...

  6. How To Create Financial Projections for Your Business Plan

    Collect relevant historical financial data and market analysis. Forecast expenses. Forecast sales. Build financial projections. The following five steps can help you break down the process of developing financial projections for your company: 1. Identify the purpose and timeframe for your projections.

  7. Financial Forecasting Guide

    The formula reads =-D42* (1-D9). I then sum forecasted sales and COGS to calculate "Gross Profit", located in cell D44. The formula reads =SUM (D42:D43). A handy shortcut for summing is ALT + =. Next, I forecast all the expenses in rows 45 to 48 as a percentage of sales. Let's first start with "Distribution Expenses," then copy the ...

  8. How to Create a Financial Forecast

    There are three steps you need to follow: Gather your past financial statements. You'll need to look at your past finances in order to project your income, cash flow, and balance. Decide how you'll make projections. Besides past records, there's other data you can draw on to make your projections more accurate.

  9. How to Create a Cash Flow Forecast and Statement

    In the direct cash flow forecasting method, calculating cash flow is simple. Just subtract the amount of cash you plan on spending in a month from the amount of cash you plan on receiving. This will be your "net cash flow". If the number is positive, you receive more cash than you spend.

  10. How to Create a Profit and Loss Forecast

    If you're writing a business plan document and don't yet have money coming in, you might be wondering how you would arrive at a sales number for a financial forecast. It's normal for the financials of a business plan to be your best educated guess at what the next few years of numbers will be. No one can predict the future, but you can ...

  11. How to Create a Financial Forecast

    Step 1: Estimate future revenue and expenses with a growth or decline percentage. The most straightforward forecasting technique is to take your business's most recent income statement and apply ...

  12. Writing a Business Plan—Financial Projections

    The financial section of your business plan should include a sales forecast, expenses budget, cash flow statement, balance sheet, and a profit and loss statement. Be sure to follow the generally accepted accounting principles (GAAP) set forth by the Financial Accounting Standards Board, a private-sector organization responsible for setting ...

  13. Business Plan Financial Projections

    There are three main financial statements that you will need to include in your business plan financial projections: 1. Income Statement Projection. The income statement projection is a forecast of your company's future revenues and expenses. It should include line items for each type of income and expense, as well as a total at the end.

  14. How to Write a Financial Forecast for Your Business

    Then divide the difference by the original number (Year One) to get a decimal. Multiply that figure by 100 to express the change as a percentage. Here's a financial forecast example based on a fictional company: Flowers Inc. had a gross profit of $30,000 in 2017 (Year One), $50,000 in 2018 (Year Two), $65,000 in 2019 (Year Three) and $55,000 in ...

  15. 7 Financial Forecasting Methods to Predict Business Performance

    6. Delphi Method. The Delphi method of forecasting involves consulting experts who analyze market conditions to predict a company's performance. A facilitator reaches out to those experts with questionnaires, requesting forecasts of business performance based on their experience and knowledge.

  16. How To Create Financial Projections for Your Business

    Why Forecasting Is Critical for Your Business . Financial forecasting is essentially predicting the revenue and expenses for a business venture. Whether your business is new or established, forecasting can play a vital role in helping you plan for the future and budget your funds.

  17. How to Make Financial Projections for Business

    Writing a solid business plan should be the first step for any business owner looking to create a successful business. As a small business owner, you will want to get the attention of investors, partners, or potential highly skilled employees. It is, therefore, important to have a realistic financial forecast incorporated into your business plan.

  18. Financial Projections Template

    Download Template. Financial projections use existing or estimated financial data to forecast your business's future income and expenses. They often include different scenarios to see how changes to one aspect of your finances (such as higher sales or lower operating expenses) might affect your profitability.

  19. Guide to Writing a Financial Plan for a Business

    Balance Sheet. The balance sheet portion of the financial plan aims to give an idea of what the business will be worth, considering all its assets and liabilities, at a future date. To do this, it uses figures from the income statement and cash flow statement. The essence of a balance sheet is found in the equation: Liabilities + Equity = Assets.

  20. Financial Projections for Startups [Template + Course Included]

    Financial projections typically include projections of income, expenses, cash flow, and balance sheet items. There are many opinions on whether a startup needs to create a forecasted balance sheet and how many years a set of projections should be. At ProjectionHub, all of our financial projection templates have an integrated pro forma income ...

  21. Financial Forecasting Explained: A Simple Guide to Financial Forecast

    Let's look at a simple financial forecasting flow to get a general idea of what it takes to forecast. Step 1. Fetch historical data for the forecast from your financial statements. The first step is probably the hardest and most time-consuming one. It implies fetching historical data and organizing it conveniently.

  22. Business Plan Financial Templates

    This financial plan projections template comes as a set of pro forma templates designed to help startups. The template set includes a 12-month profit and loss statement, a balance sheet, and a cash flow statement for you to detail the current and projected financial position of a business. ‌. Download Startup Financial Projections Template.

  23. How Do You Prepare a Budget and Forecast for a Company?

    Allocate Resources Efficiently. Monitor and Adjust. The goal during budgeting is to take the data and insights your team gathered during forecasting and develop a concrete financial plan. Budgets allocate resources for an initiative during a specific time period, and these plans are much less flexible than forecasts.

  24. Financial Forecasting: What it Is, How to Do It, And Why It's Important

    Forecasting makes us smarter about the business. The ability to predict or forecast accurately is a direct indication of how well people understand their numbers. Forecasting creates a sense of urgency, encouraging people to act and take responsibility for improving the score.

  25. Financial Forecasting: Its Critical Role In Small-Business Success

    getty. Running a small business can be unpredictable, but financial forecasting helps bring some clarity to the chaos. By looking into historical data and market trends, entrepreneurs can chart a ...

  26. How to Create a Sales Forecast the Right Way

    Step 1: Set up your lines of sales. Most forecasts show several distinct lines of sales. Ideally, your sales lines match your accounting, but not necessarily in the same level of detail. For example, a restaurant ought not to forecast sales for each item on the menu.

  27. The Complete Guide to Building a Sales Forecast

    Accurate sales forecasts keep your leaders happy and your business healthy. In this guide, we'll explain everything you need to know about sales forecasting — so you can get a clear picture of your company's projected sales and keep everyone's expectations on track. We've organized this reference guide by the top questions sales teams ...

  28. Money blog: Can my lender end my fixed-rate mortgage early?

    Paper round earnings increased 2% (45p) to £23.10 a week. However, it's been a less good year for reselling - with earnings down 15% to £22.62 a week. Arguably the most interesting part of the ...