business plan financial projection

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• Building Your Business
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• Business Plans

Writing a Business Plan—Financial Projections

Spell out your financial forecast in dollars and sense

Creating financial projections for your startup is both an art and a science. Although investors want to see cold, hard numbers, it can be difficult to predict your financial performance three years down the road, especially if you are still raising seed money. Regardless, short- and medium-term financial projections are a required part of your business plan if you want serious attention from investors.

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 financial accounting and reporting standards in the U.S. If financial reporting is new territory for you, have an accountant review your projections.

Sales Forecast

As a startup business, you do not have past results to review, which can make forecasting sales difficult. It can be done, though, if you have a good understanding of the market you are entering and industry trends as a whole. In fact, sales forecasts based on a solid understanding of industry and market trends will show potential investors that you've done your homework and your forecast is more than just guesswork.

In practical terms, your forecast should be broken down by monthly sales with entries showing which units are being sold, their price points, and how many you expect to sell. When getting into the second year of your business plan and beyond, it's acceptable to reduce the forecast to quarterly sales. In fact, that's the case for most items in your business plan.

Expenses Budget

What you're selling has to cost something, and this budget is where you need to show your expenses. These include the cost to your business of the units being sold in addition to overhead. It's a good idea to break down your expenses by fixed costs and variable costs. For example, certain expenses will be the same or close to the same every month, including rent, insurance, and others. Some costs likely will vary month by month such as advertising or seasonal sales help.

Cash Flow Statement

As with your sales forecast, cash flow statements for a startup require doing some homework since you do not have historical data to use as a reference. This statement, in short, breaks down how much cash is coming into your business on a monthly basis vs. how much is going out. By using your sales forecasts and your expenses budget, you can estimate your cash flow intelligently.

Keep in mind that revenue often will trail sales, depending on the type of business you are operating. For example, if you have contracts with clients, they may not be paying for items they purchase until the month following delivery. Some clients may carry balances 60 or 90 days beyond delivery. You need to account for this lag when calculating exactly when you expect to see your revenue.

Profit and Loss Statement

Your P&L statement should take the information from your sales projections, expenses budget, and cash flow statement to project how much you expect in profits or losses through the three years included in your business plan. You should have a figure for each individual year as well as a figure for the full three-year period.

Balance Sheet

You provide a breakdown of all of your assets and liabilities in the balances sheet. Many of these assets and liabilities are items that go beyond monthly sales and expenses. For example, any property, equipment, or unsold inventory you own is an asset with a value that can be assigned to it. The same goes for outstanding invoices owed to you that have not been paid. Even though you don't have the cash in hand, you can count those invoices as assets. The amount you owe on a business loan or the amount you owe others on invoices you've not paid would count as liabilities. The balance is the difference between the value of everything you own vs. the value of everything you owe.

Break-Even Projection

If you've done a good job projecting your sales and expenses and inputting the numbers into a spreadsheet, you should be able to identify a date when your business breaks even—in other words, the date when you become profitable, with more money coming in than going out. As a startup business, this is not expected to happen overnight, but potential investors want to see that you have a date in mind and that you can support that projection with the numbers you've supplied in the financial section of your business plan.

Additional Tips

When putting together your financial projections, keep some general tips in mind:

• Get comfortable with spreadsheet software if you aren't already. It is the starting point for all financial projections and offers flexibility, allowing you to quickly change assumptions or weigh alternative scenarios. Microsoft Excel is the most common, and chances are you already have it on your computer. You can also buy special software packages to help with financial projections.
• Prepare a five-year projection . Don’t include this one in the business plan, since the further into the future you project, the harder it is to predict. However, have the projection available in case an investor asks for it.
• Offer two scenarios only . Investors will want to see a best-case and worst-case scenario, but don’t inundate your business plan with myriad medium-case scenarios. They likely will just cause confusion.
• Be reasonable and clear . As mentioned before, financial forecasting is as much art as science. You’ll have to assume certain things, such as your revenue growth, how your raw material and administrative costs will grow, and how effective you’ll be at collecting on accounts receivable. It’s best to be realistic in your projections as you try to recruit investors. If your industry is going through a contraction period and you’re projecting revenue growth of 20 percent a month, expect investors to see red flags.

• Business Planning

Business Plan Financial Projections

Written by Dave Lavinsky

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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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.

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.

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.

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.

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.

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

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.

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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How to Write a Small Business Financial Plan

Noah Parsons

4 min. read

Updated April 22, 2024

Creating a financial plan is often the most intimidating part of writing a business plan.

It’s also one of the most vital. Businesses with well-structured and accurate financial statements are more prepared to pitch to investors, receive funding, and achieve long-term success.

Thankfully, you don’t need an accounting degree to successfully create your budget and forecasts.

Here is everything you need to include in your financial plan, along with optional performance metrics, funding specifics, mistakes to avoid , and free templates.

• Key components of a financial plan

A sound financial plan is made up of six key components that help you easily track and forecast your business financials. They include your:

Sales forecast

What do you expect to sell in a given period? Segment and organize your sales projections with a personalized sales forecast based on your business type.

Subscription sales forecast

While not too different from traditional sales forecasts—there are a few specific terms and calculations you’ll need to know when forecasting sales for a subscription-based business.

Expense budget

Create, review, and revise your expense budget to keep your business on track and more easily predict future expenses.

How to forecast personnel costs

How much do your current, and future, employees’ pay, taxes, and benefits cost your business? Find out by forecasting your personnel costs.

Profit and loss forecast

Track how you make money and how much you spend by listing all of your revenue streams and expenses in your profit and loss statement.

Cash flow forecast

Manage and create projections for the inflow and outflow of cash by building a cash flow statement and forecast.

Balance sheet

Need a snapshot of your business’s financial position? Keep an eye on your assets, liabilities, and equity within the balance sheet.

What to include if you plan to pursue funding

Do you plan to pursue any form of funding or financing? If the answer is yes, then there are a few additional pieces of information that you’ll need to include as part of your financial plan.

Highlight any risks and assumptions

Every entrepreneur takes risks with the biggest being assumptions and guesses about the future. Just be sure to track and address these unknowns in your plan early on.

Plan your exit strategy

Investors will want to know your long-term plans as a business owner. While you don’t need to have all the details, it’s worth taking the time to think through how you eventually plan to leave your business.

• 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.

Key financial terms you should know

It’s not hard. Anybody who can run a business can understand these key financial terms. And every business owner and entrepreneur should know them.

Common business ratios

Unsure of which business ratios you should be using? Check out this list of key financial ratios that bankers, financial analysts, and investors will want to see.

Break-even analysis

Do you want to know when you’ll become profitable? Find out how much you need to sell to offset your production costs by conducting a break-even analysis.

How to calculate ROI

How much could a business decision be worth? Evaluate the efficiency or profitability by calculating the potential return on investment (ROI).

• How to improve your financial plan

Your financial statements are the core part of your business plan that you’ll revisit most often. Instead of worrying about getting it perfect the first time, check out the following resources to learn how to improve your projections over time.

Common mistakes with business forecasts

I was glad to be asked about common mistakes with startup financial projections. I read about 100 business plans per year, and I have this list of mistakes.

How to improve your financial projections

Learn how to improve your business financial projections by following these five basic guidelines.

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• Financial plan templates and tools

Download and use these free financial templates and calculators to easily create your own financial plan.

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Download a free detailed sales forecast spreadsheet, with built-in formulas, to easily estimate your first full year of monthly sales.

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Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

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Financial Projections for Startups and Small Businesses

What’s on the horizon for your business? Will you need to hire new employees? Invest in new capital expenditures? Or maybe even consider opening a new location? Financial projections provide insight for small businesses and startups to plan for the future, as well as data and information potential lenders and investors need to understand your business.

What Are Financial Projections?

A financial projection is what your business expects to happen, based off hypothetical situations using the facts and data you have available. A financial projection is often prepared to present a course of action for evaluation. It’s a type of pro forma statement. Some examples of pro forma financial statements include projected income statements, balance sheets and cash flow statements.

Projections are based on financial modeling techniques and provide the answers to questions that may come from lenders, investors or other business stakeholders. Essentially, these statements are an answer to the questions, “If we lend you this money, what will you do with it? And how will you pay it back?”

Why Are Financial Projections So Important for Startups and Small Businesses?

Financial projections help you see when you may have financing needs and the best times to make capital expenditures. They help you monitor cash flow, change pricing or alter production plans.

Projections provide all the minutia that lenders might be looking for to better understand your business: how it obtains revenue and where it spends money. Additionally, if your business is ever the target of an acquisition, the financial statements help potential buyers evaluate its worth.

There are subtle differences between the terms projection and forecast. But both describe predictions of future financial performance using financial models. A financial forecast presents predicted outcomes based on the conditions you expect to exist for your business. Projections are financial statements that present an expected financial position given one or more hypothetical assumptions.

For example, Linda’s Linens is growing its sales volume 10% each year, and that growth has been steady for the last 18 months. After examining the financial forecast, it’s reasonable for Linda to assume that growth will continue, and she should plan accordingly. This helps her with inventory planning, hiring decisions and how much to allocate for marketing.

Linda is considering opening a second location. So she prepares a financial projection to show her bank a “what if” scenario to see how much growth she might expect if she received a loan to open another store on the other side of town. The hypothetical situation of opening a new location in the financial projection is what makes it different from the sustained growth she might reasonably suspect in the financial forecast.

What Are Financial Projections Used For?

Financial projections help you realize possible potential in your business. What might happen if you receive outside funding? Or purchase additional equipment? This is where you get to be creative and explore what the future of your business might look like.

Business Plan: Financial projections and business plans go hand-in-hand. It’s a way to show that your company is stable and is financially successful. It’s a good practice to provide quarterly or monthly projections for the first year and annual projections for the four years after that. These include projected income statements, balance sheets, cash flow statements and budgets for capital expenditures. You should be able to explain projections and match them to funding.

Investors: Your potential investors want to know if the business will make money and when they can expect a return on their investment. Some common benchmarks to watch for include how long it will take until the company turns a profit, sales in years three and five, and data showing how your numbers fit in context of your industry.

Loans and Lines of Credit: These are the most common sources of external funding for small businesses. To secure a Small Business Association (SBA) loan, you’ll need a thorough understanding of your finances so you can show the lender how your funds will be used and when the loan will be paid back.

Know your Business: Financial projections show discipline in financial management – and better financial management leads to a much higher chance of business success. By using a financial model to make financial projections, you can see if, when and whether your business will make a profit. You’ll have a better understanding of your cash position to make better decisions about when to hire more people, buy more inventory or make capital investments.

7 Steps to Building a Financial Projection for Your Startup or Small Business

Some common scenarios for projections are monthly projections for year one, quarterly for the next two years and annual thereafter. To build out your financial projections and make them as useful as possible, consider including the following:

• Sales revenue estimates
• Cost of sales or cost of goods sold (COGs)
• Operating costs
• Capital expenditures
• Gross margin by product line
• Sales increase by product line
• Interest rates on debts
• Income tax rate
• Accounts receivable collection plan
• Accounts payable schedule
• Inventory turnover
• Depreciation schedules
• The usefulness or depreciation of assets

Financial projections will usually have a detailed view in a spreadsheet, as well as a summary of some of the most important information. To create this, your business will need a financial model, or a summary of your company’s expenses and earnings. Some of the basic areas to start building financial projections include:

• Create a sales forecast.

What’s driving your sales? That’s where you should start with your projections. For example, if you have a subscription-based web business, correlate sales with estimated website traffic, and conversion rates with the source of traffic. Like a project management platform that sees 1.5% of its traffic from organic Google searches turn into paying customers. The same project management company should also identify conversion rates for customers who land on the site from ads. That way they can estimate how many new customers an increased ad spend or increased organic searches might attract. And finally, the platform should track their churn rate, or how many customers don’t renew their subscription.

For a business that sells physical products, the sales forecast should estimate the number of units it will sell and the price per unit. It’s also helpful to see where and how the items are being sold: How many stores are carrying the products? How are each of those stores performing? The company should factor in things that might affect sales like seasonality. For example, more ice cream and sunscreen are sold in the summer. Is there a seasonality to your product?

• Create an expense budget.

Expenses will include the costs associated with sales, as well as operating expenses. To forecast cost of sales or cost of goods sold (COGS), take all of the current information on the income statement about product cost, fulfillment expense, customer service and merchant fees. Express assumptions about how that will change as a percentage of revenue. Apply the same idea to operating expenses. Consider how headcount, salaries and benefits as well as expenses like advertising, rent and more will change and express everything (with the exception of headcount) as a percentage.

• Create the income statement projection.

Link those assumptions to formulas built in the income statement. The financial model will forecast revenue, net revenue, COGS, gross profit, gross margin, operating expense, operating profit and operating margin. The output of the financial model is the projected income statement.

• Create the cash flow projection.

The projected income statement shows you, as well as potential lenders and investors, if the company is profitable and/or when it is expected to make a profit. The cash flow projection shows your cash position and provides a more detailed view of monthly inflows and outflows of cash for a specific period of time — 3 months, 6 months, 12 months, etc.

• Create the balance sheet projection.

Where the cash flow projection lets you see when there should be cash influxes and dips, the balance sheet shows or projects the worth of your company at any given time. Cash flow projections appear on your balance sheet as assets. On the liabilities side of the balance sheet, you’ll list things like accounts payable and debt.

• Use projections for planning.

Projections are important when seeking new funding. And they help you know when to make capital expenditures. For planning, projections help with analyzing the impact of different business strategies. For example, what if you charge a higher or lower price? What if you’re able to collect invoices faster? Running and testing these various numbers shows how such decisions could affect finances.

Projected financial statements also help you prepare for best and worst case scenarios. You can use projected financial statements to drill down to the product level and know when it will be profitable, when to ramp up production or even when it no longer makes business sense to continue producing it.

By comparing projections against actual results you can see if you’re on target or need to adjust to reach them. Consider purchasing accounting and planning software for financial projections . Tracking performance is much easier and quicker with dashboards and charts that can show you at-a-glance information.

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Benefits of Using Accounting and Planning Software for Financial Projections

There are advantages to automating financial modeling. You can handle more complex datasets and certain visualization capabilities, as well as streamline financial projections.

• All lines of businesses are connected to the same data, improving control, visibility and trust in the numbers.
• Drill-through capability means you can spend more time drilling into the data to understand the source of the numbers. Finance then has more time to understand the "why" and can better help the business owners understand how their decisions affect the rest of the company.
• You can easily run what-if-scenario analysis to explore different business opportunities.
• Pre-built reports and dashboards make it easy to compare projected vs. actual results.

Automation can increase accuracy save time, and help you compare actual and forecasted results in charts and dashboards. With so much potential, automation is a growing trend. In fact, a survey by Robert Half, a global human resources consulting firm, found that nearly one quarter of respondents expect to automate processes behind financial forecasting.

But even if the analytics associated with financial projection aren’t automated, using technology to automate other parts of the accounting process that go into building the static financial statements provide savings in terms of speed and accuracy.

To run a business, you need to know not just where you are financially, but where you want to be. There is a correlation between how frequently small businesses examine their financial statements and the financial health of their business. The U.S. Small Business Administration found businesses that only look at financial statements annually have a 25% success rate. But those that do it monthly have a success rate of 75%-85%, and those that do it weekly have a 95% success rate. It takes more than just a good idea and dedication to make your business succeed. And accounting software for financial planning is an important tool to keep your company on track to prosperity.

Financial Management

Small Business Financial Management: Tips, Importance and Challenges

It is remarkably difficult to start a small business. Only about half stay open for five years, and only a third make it to the 10-year mark. That’s why it’s vital to make every effort to succeed. And one of the most fundamental…

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

Free Financial Statements Template

Ajay Jagtap

• December 7, 2023

13 Min Read

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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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.

Create a Financial Plan with Upmetrics in no time

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

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:

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 Cash-Flow Statement

Projected Profit & Loss Statement

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.

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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

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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Business Plan Financial Projections: How To Create Accurate Targets

• Written by Keith Murphy
• 16 min read

Small businesses and startups have a lot riding on their ability to create effective and accurate financial projections as part of their business plan. Solid financials are a strong enticement for investors, after all, and can help new businesses chart a course that will take them beyond the legendendarily difficult first year and into a productive and profitable future.

But the need for business owners to look ahead in order to secure funding, increase profits, and make intelligent financial decisions doesn’t end when startups become full-fledged businesses—and business plan financial projections aren’t just for startups. Existing businesses can also put them to good use by harvesting insights from their existing financial statements and creating sales projections and other financial forecasts that guide and improve their ongoing business planning.

What Are Business Plan Financial Projections?

Successful companies plan ahead, looking as best they can into the near and distant future to chart a course to growth, innovation, and competitive strength. Financial projections, both as part of an initial business plan and as part of ongoing business planning, use a company’s financial statements to help business owners forecast their upcoming expenses and revenue in a strategically useful way.

Most businesses use two types of financial projections:

• Short-term projections are broken down by month and generally cover the coming 12 months. They provide a guide companies can use to monitor and adjust their financial activity to set and hit targets for the financial year. In the first year, short-term projections will be entirely estimated, but in subsequent years, historical data can be used to help fine-tune them for greater accuracy and strategic utility.
• Long-term projections are focused on the coming three to five years and are generally used to secure investment (both initial and ongoing), provide a strategic roadmap for the company’s growth, or both.

For startups, creating financial projections is part of their initial business plan. Providing financial forecasts banks and potential investors can use to determine the financial viability of a business is key to obtaining financing and investments needed to get the business off the ground.

For existing businesses—for whom an initial business plan has evolved into business planning—financial projections are useful in attracting investors who want to see clear estimates for upcoming revenue, expenses, and potential growth. They’re also helpful in securing loans and lines of credit from financial institutions for the same reason. And even if you’re not trying to get funding or investments, financial projections provide a useful framework for building budgets focused on growth and competitive advantage.

So whether you’re a small business owner, an aspiring tycoon starting a new business, or part of the financial team at a well-established corporation, what matters most is viewing financial projections as a living, breathing reference tool that can help you plan and budget for growth in a realistic way while still setting aspirational goals for your business.

Financial projections, both as part of an initial business plan and as part of ongoing business planning, use a company’s financial statements to help business owners forecast their upcoming expenses and revenue in a strategically useful way.

Financial Projections: Core Components

Whether you’re preparing them as part of your business plan or to enhance your business planning, you’ll need the same financial statements to prepare financial projections: an income statement, a cash-flow statement, and a balance sheet.

• Income statements , sometimes called profit and loss statements , provide detailed information on your company’s revenue and expenses for a given period (e.g., a quarter, year, or multi-year period).
• Cash flow statements provide a comprehensive view of cash flowing into and out of a business. They record all cash flow from operations, investment, and financing activities.
• Balance sheets are used to showcase a company’s assets, liabilities, and owner’s equity for a specific period.

How to Create Financial Projections

The process of creating financial projections is the same whether you’re drafting a business plan or creating forecasts for an existing business. The primary difference is whether you’ll draw on your own research and expertise (a new business or startup business) or use historical data (existing businesses).

Keep in mind that while you’ll create the necessary documents separately, you’ll most likely finish them by consulting each of them as needed. For example, your sales forecast might change once you prepare your cash-flow statement. The best approach is to view each document as both its own piece of the financial projection puzzle and a reference for the others; this will help ensure you can assemble comprehensive and clear financial projections.

1. Start with a Sales Projection

A sales forecast is the first step in creating your income statement. You can start with a one, three, or five-year projection, but keep in mind that, without historical financial data, accuracy may decrease over time. It’s best to start with monthly income statements until you reach your projected break-even , which is the point at which revenue exceeds total operating expenses and you show a profit. Once you hit the break-even, you can transition to annual income statements.

Also, keep in mind factors outside of sales; market conditions, global environmental, political, and health concerns, sourcing challenges (including pricing changes and increased variable costs) and other business disruptors can put the kibosh on your carefully constructed forecasts if you leave them out of your considerations.

Start with a reasonable estimate of the units sold for the forecast period, and multiply them by the price per unit. This value is your total sales for the period.

Next, estimate the total cost of producing these units (i.e., the cost of goods sold , or COGS; sometimes called cost of sales ) by multiplying the per-unit cost by the number of units produced.

Deducting your COGS from your estimated sales yields your gross profit margin.

From the gross margin, subtract expenses such as wages, marketing costs, rent, and other operating expenses. The result is your projected operating income , or net income .

Using these figures, you can create an income statement:

2. Cash Flow Statement

Tracking your estimated cash inflows and outflows from investment and financing, combined with the cash generated by business operations, is the purpose of a cash flow projection .

Investment activities might include, for example, purchasing real estate or investing in research and development outside of daily operations.

Financing activities include cash inflows from investor funding or business loans, as well as cash outflows to repay debts or pay dividends to shareholders.

A reliable and accurate cash flow projection is essential to managing your working capital effectively and ensuring you have all the cash you need to cover your ongoing obligations while still having enough left to invest in growth and innovation or cover emergencies.

Drawing from our income statement, we can create a basic cash flow statement:

3. The Balance Sheet

Providing a “snapshot” of your businesses’ financial performance for a given period of time, the balance sheet contains your company’s assets, liabilities, and owner’s equity.

Assets include inventory, real estate, and capital, while liabilities represent financial obligations and include accounts payable, bank loans, and other debt.

Owner’s equity represents the amount remaining once liabilities have been paid.

Ideally, over time your company’s balance sheet will reflect your growth through a reduction of liabilities and an increase in owner’s equity.

We can complete our triumvirate of financial statements with a basic balance sheet:

Best Practices for Effective Financial Projections

Like a lot of other business processes, financial planning can be complex, time-consuming, and even frustrating if you’re still using manual workflows and paper documents or basic spreadsheet-style applications such as Microsoft Excel. You can get free templates for basic financial projections from the Service Corps of Retired Executives (SCORE), but even templates can only take you so far.

Without a doubt, the best advantage you can give yourself in creating effective and accurate financial projections—whether they’re for the financial section of your business plan or simply part of your ongoing business planning—is to invest in comprehensive procure-to-pay (P2P) software such as Planergy.

In addition to helpful templates, best-in-class P2P software also provides a rich array of real-time data analysis, reporting, and forecasting tools that make it easy to transform historical data (or market research) into accurate forecasts. In addition, artificial intelligence and process automation make it easy to collect, organize, manage and share your data with all internal stakeholders, so everyone has the information they need to create the most useful and complete forecasts and projections possible.

Beyond investing in P2P software, you can also improve the quality and accuracy of your financial projections by:

• Doing your homework. Invest in financial statement analysis and ratio analysis, with a focus not just on your own company, but your industry and the market in general. Learn the current ratios used for liquidity analysis, profitability, and debt and compare them to your own to get a more nuanced and useful understanding of how your company performs internally and within the context of the marketplace.
• Keeping it real. It can be all too easy to get carried away with pie-in-the-sky optimism when forecasting the future of your business. Rose-colored glasses aren’t exclusive to startups and small businesses; over-inflated estimates can hobble even veteran organizations if they don’t practice good data discipline and temper their hopes with practical considerations. Focus on creating realistic, but positive, projections, and you won’t have to worry about investors or lenders glancing askance at your hard work.
• Hoping for the best, but planning for the worst. Run two scenarios when performing your financial projections: the best-case scenario where everything goes perfectly to plan, and a worse-case scenario where Murphy’s Law holds sway. While actual performance will undoubtedly fall somewhere in between the two, having an upper and lower boundary appeals to investors and lenders who are assessing your company’s financial viability.

Financial Projections Help You Reach Your Goals for Growth

From startups to global corporations, every business needs reliable tools for financial forecasting. Take the time to create well-researched, data-driven financial projections, and you’ll be well-equipped to attract investors, secure funding, and chart a course for greater profits, growth, and performance in today’s competitive marketplace.

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Financial projections are not just a component of your business plan; they are the beating heart of strategic thinking and analysis in both startups and established businesses. These projections serve as a vital tool for setting targets, assessing key results, and understanding the reasons behind meeting or not meeting these targets. They enable businesses to recalibrate their strategies effectively, ensuring agility and responsiveness to market dynamics.

Essential for Diverse Business Needs

Apart from their critical role in internal analysis and strategy setting, financial projections are indispensable for a variety of external purposes:

• Raising Capital:  Whether you’re a startup aiming for seed funding or an established business seeking expansion capital, clear and well-structured financial projections can significantly increase your chances of securing investment .
• Regulatory and Legal Compliance:  Specific employment and investment visas, licensing, certification, and accreditation processes often require detailed financial projections to demonstrate the viability and potential of your business.
• Understanding Audiences:  Depending on the audience—whether investors, regulatory bodies, or partners—the nature and detail of the financial projections can vary. Our “Understanding Audiences” page provides in-depth insights into tailoring your projections for different stakeholders.

Versatility in Application

Financial projections can be a standalone document or part of a comprehensive business plan. Their structure and emphasis may vary based on the business’s objectives:

• Debt Financing:  For new businesses seeking loans , financial projections within a business plan help in demonstrating the capacity to repay the loan.
• Equity-Based Financing:  For businesses in stages like pre-seed, seed , or series A funding, standalone financial projections are crucial. They provide clarity on startup requirements, burn-rate , and runway , which are key factors investors evaluate.

Foundations of Effective Financial Projections

Crafting impactful financial projections is a detailed and systematic process, grounded in deep research and thorough data collection. To create a robust foundation for these projections, two distinct approaches are recommended, each suited to different types of businesses and their unique needs:

• Ideal for New and Innovative Ventures:  The Pre-Planning Process , detailed under Core Cost Analysis and Startup & Operational Costs in the “Get Started” section of Businessplan.com, is particularly beneficial for businesses that are in their nascent stages or are pioneering new markets.
• First-Movers and Fast-Followers:  For ventures that aim to be first-movers or fast-followers in emerging industries, this comprehensive approach is crucial to understand the uncharted market dynamics.
• Startups Eyeing Investment Capital:  Additionally, startups that plan to seek investment capital will find this process instrumental in laying a solid groundwork for their financial projections, giving potential investors a clear view of the business’s potential.
• Tailored for Established Industries:  Businesses operating within well-established industries, where market dynamics are relatively known and stable, will benefit significantly from using a Model-Based Planning® Worksheet .
• Focus on Speed and Efficiency:  This approach is designed for ventures where rapid planning and execution are prioritized. It provides a streamlined, industry-specific framework that accelerates the planning process.
• Customized to Specific Business Models:  The Worksheet is customized for a wide range of business models and industries, ensuring that the financial projections are relevant and aligned with industry standards and expectations.

By choosing the approach that best aligns with your business’s stage, industry, and goals, you can ensure that your financial projections are not only realistic and well-informed but also highly effective in guiding your business towards success.

Key Sections of Financial Projections

Key assumptions.

In financial planning for businesses, especially startups, the creation of key assumptions is critical. These assumptions form the backbone of your financial projections, influencing every aspect from revenue forecasting to cost management. Their accuracy and realism are crucial for developing a financial model that truly reflects the potential of your business.

The Role of Key Assumptions

Key assumptions serve multiple purposes:

• Simplifying Complexity : By categorizing diverse products or services into manageable units, Key Assumptions help in creating a more readable and practical financial model .
• Guiding Strategic Decisions:  These assumptions are instrumental in shaping business strategies, from marketing to product development.
• Facilitating Communication:  Clear and concise assumptions make your financial projections more understandable to stakeholders, including investors and team members.

Creating Effective Key Assumptions

To craft meaningful and effective Key Assumptions, consider the following steps:

• Understand Your Business Model:  Grasp the intricacies of your business, including product/service offerings, customer behavior, and market trends.
• Use Averages and Ratios:  Simplify complex product lines or service offerings into average sales figures or ratios.
• Research and Validate:  Ground your assumptions in market research or historical data, ensuring they are realistic and defendable.
• Think Creatively and Contextually:  Tailor your assumptions to the unique context of your business, avoiding one-size-fits-all templates.

Personnel Plan

A comprehensive personnel plan is an essential component of your business’s financial projections. It not only outlines the staffing requirements but also encapsulates the associated costs, playing a significant role in the overall financial health of your enterprise.

Part 1: Personnel Forecast

The Personnel Forecast is a detailed table that includes the following elements:

• Specific Roles/Positions:  Identify the various roles and positions needed within your company. This could range from managerial positions to operational staff.
• Average Salary or Hourly Rate:  For each position, determine the average salary or hourly wage. This should be based on industry standards, regional salary averages, and the level of expertise required.
• Headcount:  Specify the number of individuals needed for each role. This will depend on the scale of your operations and business needs.
• Total Payroll per Position:  Calculate the total payroll for each position by multiplying the average salary or hourly rate by the headcount.
• Total Payroll:  Summarize the total payroll expenses, combining the costs from all positions.

Part 2: Personnel-Related Notes for Other Financial Tables

In addition to the Personnel Forecast, certain personnel-related expenses will be input into other financial tables:

• Pre-Launch Training:  Costs associated with training employees before the business launch should be included in the ‘ Sources & Uses of Funds ‘ under ‘Startup Expenses’.
• Ongoing or Post-Launch Training:  Regular training or development costs incurred after the launch should be accounted for in the ‘Expenses’ section of the Pro Forma Profit & Loss statement.
• Total Benefits:  Include costs related to sick leave, vacation, 401K match, health insurance, etc., in the Pro Forma Profit & Loss statement. These benefits form a significant part of employee compensation and affect the overall financial planning.
• Payroll Taxes:  Calculate and include payroll taxes based on state and federal rates in the Pro Forma Profit & Loss statement. These taxes are a mandatory financial obligation and an integral part of payroll expenses.

Projecting Revenue

Projecting revenue is one of the most challenging aspects of business planning, primarily due to the uncertainties inherent in predicting future market behavior. However, strategic tools like Total Addressable Market (TAM) , Serviceable Available Market (SAM), and Serviceable Obtainable Market (SOM) can significantly aid in this process.

Understanding TAM, SAM, and SOM

• Total Addressable Market (TAM):  TAM refers to the total market demand for a product or service. It’s the maximum revenue opportunity available for a product or service, assuming 100% market share.
• S erviceable Available Market (SAM):  SAM is the segment of the TAM targeted by your products and services that is within your geographical reach. It’s more realistic than TAM as it considers the market that is actually serviceable.
• Serviceable Obtainable Market (SOM):  SOM, the most immediate and practical measure, is the portion of SAM that you can capture. It considers factors like competition, your unique value proposition, pricing strategy, and operational capacity. SOM is what you realistically aim to achieve in the short to medium term.

Utilizing Industry Reports for Revenue Projection

Industry reports, like those from IBISWorld , are invaluable in this process. They provide detailed insights, including a section on Cost Structure which outlines the average percentage of revenue spent on various expenses in your industry. Here’s how you can use this data:

• Estimate Revenue Based on Personnel Costs:  Given the detailed personnel plan you have, use the “Wages” percentage from the IBISWorld report. By dividing your total annual personnel costs by this percentage, you get an estimate of the annual revenue required to support your staff.
• Refine with SOM:  This initial estimate is a starting point. Refine it by applying the SOM concept. Assess how your company’s unique factors — like your value proposition , competitive landscape, and sales capacity — will influence your achievable market share. For example, if the SAM for your product is $100 million and you estimate that you can realistically capture 5% of this market based on your unique factors, your SOM would be $5 million.

While no method guarantees perfect revenue projections, using TAM, SAM, and SOM provides a structured approach to estimate potential sales. Industry reports like those from IBISWorld further refine these projections by grounding them in real-world data, making them more realistic and achievable. Always remember, these are estimates meant to guide planning and strategy, and they should be regularly reviewed and adjusted as your business grows and market conditions evolve.

Pro Forma Profit & Loss Statement

A Pro Forma Profit & Loss (P&L) Statement is a crucial financial document that projects your business’s revenues and expenses over a specific period. While industry reports like those from IBISWorld offer a high-level view of common expenses, creating a detailed and realistic P&L statement requires a deeper dive into your unique fixed and variable costs .

Utilizing Industry Reports with Caution

Industry reports provide average percentages for various cost categories such as marketing, depreciation, profit, rent, utilities, wages, and others. However, it’s vital to remember that these figures are averages derived from a wide range of companies. Your specific costs may differ significantly based on your business model, location, and operational strategy.

Steps to Develop a Pro Forma P&L Statement

• Rent:  Engage in preliminary discussions with landlords or commercial brokers to ascertain expected rent costs. Location and space requirements will significantly impact this expense.
• Marketing and Promotion:  Detail the components of your marketing, promotional, sales, and customer service strategies. Refer to the ‘ Strategy & Implementation ‘ section on Businessplan.com for guidance. Assess the costs associated with each element, considering both traditional and digital marketing channels.
• Operational Costs:  Identify and quantify your fixed and variable operational costs. Fixed costs might include utilities, insurance, and salaries, while variable costs could be tied to production levels, such as raw materials and shipping.
• Utilize your revenue projections (based on TAM, SAM, and SOM analyses) to estimate sales.
• List and quantify all anticipated expenses, separating them into fixed and variable categories. This is a good time to thoroughly review the Key Activities, Key Resources, and Key Partners in your business model.
• Gross Profit:  Subtract the cost of goods sold (COGS) from your total revenue.
• Net Profit:  Deduct all operational expenses, including fixed and variable costs, from the gross profit.
• Account for depreciation of assets and any applicable taxes to determine the final net profit.

A detailed Pro Forma P&L statement is a vital tool for any business. While industry reports offer a starting point, the specificity and accuracy of your projections will come from a deep understanding of your unique business costs and revenue potential. Regularly revisiting and updating this document is key to maintaining its relevance and usefulness as your business evolves.

Projected Cash Flow

A projected cash flow statement is an essential financial tool that helps map out the flow of cash in and out of your business. It’s a forecast of your company’s cash income and expenditures over a specific period and is crucial for managing liquidity and ensuring financial stability.

Creating a Cash Flow Projection

Estimate Cash Inflows:  Include all sources of income, such as sales revenue, investment income, and any other cash receipts. Consider the timing of these inflows, as delays in payment can significantly affect your cash flow.

Estimate Cash Outflows:  List all expected cash payments, including operating expenses, loan repayments, purchases of assets, and other expenditures. Timing is crucial here as well, particularly for seasonal businesses or those with irregular payment cycles.

Project Net Cash Flow:  Calculate the net cash flow for each period (monthly, quarterly, etc.) by subtracting cash outflows from cash inflows. This gives you a clear picture of when and where cash shortages or surpluses might occur.

Include Opening and Closing Balances:  Start with your opening cash balance (beginning of the period). Add the net cash flow to this opening balance to arrive at the closing balance (end of the period).

Projected Balance Sheet

The projected balance sheet is a financial statement that provides a snapshot of your company’s financial position at a future date. It includes assets , liabilities , and owner’s equity , projecting how these elements will change over time.

Preparing a Projected Balance Sheet

• Current Assets:  Include cash, accounts receivable , inventory , and other assets that are expected to be converted to cash within a year.
• Long-term Assets:  Include property, plant, equipment, and other assets that provide value over a longer period.
• Current Liabilities:  These are obligations due within a year, like accounts payable, short-term loans, and accrued expenses.
• Long-term Liabilities:  Include long-term debts, lease obligations, and other liabilities not due within the next year.
• Calculate Owner’s Equity:  Owner’s equity is the residual interest in the assets of the business after deducting liabilities. It includes initial investment, retained earnings, and any other equity contributions.
• Ensure the Fundamental Accounting Equation:  The balance sheet must follow the equation: Assets = Liabilities + Owner’s Equity. This equation must balance, which means the total value of the assets must equal the combined value of liabilities and owner’s equity.

Break-Even Analysis

Break-even analysis is a critical financial tool used to determine when a business will be able to cover all its expenses and start generating profit. Understanding the break-even point is vital for both new and existing businesses, as it informs pricing strategies, cost management, and funding requirements.

Break-Even for Different Business Types

• Established Market Entrants:  Businesses entering established markets (restaurants, dental offices, dry cleaners, etc.), possibly with debt financing like an SBA loan, typically have shorter break-even periods. These range from 6 to 18 months, depending on business complexity and market penetration strategies. For these businesses, the break-even point is crucial to manage debt and establish a foothold in the market.
• Venture-Backed Companies:  For startups (first-movers or fast-followers) creating new markets with novel solutions, the path to break-even is often longer. This is by design, as venture capitalists invest in these companies with the understanding that establishing or growing a new market takes time. These companies may operate for extended periods without breaking even, focusing on market creation and growth rather than immediate profitability.

Calculating the Break-Even Point

• The break-even point is calculated by dividing total fixed costs by the difference between unit price and variable cost per unit.
• Understanding fixed costs (like rent, salaries) and variable costs (costs that change with production volume) is essential for accurate calculation.

Sensitivity Analysis

Sensitivity analysis is a technique used to predict the outcome of a decision given a certain range of variables. In financial modeling , it involves testing how different values of an independent variable affect a particular dependent variable under a given set of assumptions.

Application in Revenue Projections

• Adjusting Revenue Projections:  Commonly, sensitivity analysis in business planning involves altering top-line revenue projections by a certain percentage. This helps in understanding how changes in sales will impact the business’s financial health.
• Scenarios for Sensitivity Analysis:  For example, a business may test how their financials would look if revenues are 15% lower than projected. Assessing different scenarios helps in preparing for various market conditions.
• Importance in Debt Financing:  Banks and financial institutions often use sensitivity analysis to determine if a business can still maintain a debt service coverage ratio above a certain threshold (e.g., 1.3) even if revenues fall short of projections. This analysis is crucial for businesses seeking loans, as it impacts the lender’s confidence in the business’s ability to repay debt.

Up Next: Strategy & Implementation

It’s essential to remember the critical role financial projections play in writing a business plan and guiding your business towards sustainable growth and success. Projections, built on a foundation of diligent research and detailed analysis, enable you to navigate the complexity of fundraising or business management with greater confidence and precision.

Financial projections empower you to set realistic targets, assess key results, and adapt strategies effectively in response to market dynamics. Your financial projections are not just numbers on a page; they are a reflection of your business’s potential and a roadmap for its future.

We encourage you to revisit and refine your financial projections regularly, aligning them with your evolving business landscape and market conditions. And remember, the journey doesn’t end here. To continue enhancing your business acumen and strategic planning, we invite you to explore the next critical step in the Plan & Pitch section: Strategy & Implementation . Here, you’ll get deeper into formulating effective strategies and actionable plans that will further elevate your business’s trajectory. Embrace this journey with the knowledge and tools you’ve acquired, and watch your business vision come to life, one well-planned step at a time.

Proceed to Strategy & Implementation

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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

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

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

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 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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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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Financial Projections for Startups [Template + Course Included]

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. 

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:

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:

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

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. 

Pro forma Balance Sheet Example

Here is an example of our 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: 

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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It is important for financial projections for a small business or startup to be realistic or else an investor or lender may not take them seriously. More importantly, the founder may make a financial mistake without a reliable plan.

How to Finance a Small Business Acquisition

In this article we are going to walk through how to finance a small business acquisition and answer some key questions related to financing options.

How to Acquire a Business in 11 Steps

Many people don't realize that acquiring a business can be a great way to become a business owner if they prefer not to start one from scratch. But the acquisition process can be a little intimidating so here is a guide helping you through it!

Have some questions? Let us know and we'll be in touch.

Business Plan Financial Projections Template

Identify financial requirements and objectives, draft projected income statement, detail projected balance sheet, calculate projected cash flow statement, apply appropriate financial ratios analysis.

• 1 Current Ratio
• 2 Gross Profit Margin
• 3 Return on Investment
• 4 Debt-to-Equity Ratio
• 5 Inventory Turnover

Adjust for inflation rate predictions

Consider the impact of business growth on financial projections, check cost assumptions for products and services, investigate potential risks and variables in the financial projection, approval: financial analyst for initial review.

• Draft projected income statement Will be submitted
• Detail projected balance sheet Will be submitted
• Calculate projected cash flow statement Will be submitted
• Apply appropriate financial ratios analysis Will be submitted
• Adjust for inflation rate predictions Will be submitted
• Consider the impact of business growth on financial projections Will be submitted
• Check cost assumptions for products and services Will be submitted
• Investigate potential risks and variables in the financial projection Will be submitted

Incorporate feedback and modify financial projections accordingly

Cross-check with industry standards and competitor analysis, analyse break-even point and profitability metrics, compile final draft of financial projections, approval: ceo review and validation of final draft.

• Incorporate feedback and modify financial projections accordingly Will be submitted
• Cross-check with industry standards and competitor analysis Will be submitted
• Analyse break-even point and profitability metrics Will be submitted
• Compile final draft of financial projections Will be submitted

Send financial projections for external auditing

Conduct scenario analysis for best-case, worst-case, and most likely outcomes, discuss and finalize plan with key stakeholders, approval: board of directors.

• Send financial projections for external auditing Will be submitted
• Conduct scenario analysis for best-case, worst-case, and most likely outcomes Will be submitted
• Discuss and finalize plan with key stakeholders Will be submitted

Implement financial projections into overall business plan

Take control of your workflows today., more templates like this.

ZenBusinessPlans

Home » Business Plans

How to Write a Business Plan Financial Projection [Sample Template]

How do you prepare a business plan financial statement? Do you need help developing business plan financial projections? Do you need a business plan projections template? Then i advice you read on because this article is for you.

What is a Business Plan Financial Statement?

The financial statement is a distinct section of your business plan because it outlines your financial projections. A business lives and dies based on its financial feasibility and most importantly its profitability. Regardless of how hard you work or how much you have invested of your time and money, people, at the end of the day, only want to support something that can return their investments with profits.

Your executive summary may be brilliantly crafted, and your market or industry analysis may be the bomb. But your business plan isn’t just complete without a financial statement to justify it with good figures on the bottom line.

Your financial statement is what makes or mars your chances of obtaining a bank loan or attracting investors to your business. Even if you don’t need financing from a third party, compiling a financial statement will help you steer your business to success. So, before we dig further into how to prepare a financial statement, you need to understand what a financial statement is not.

What’s the Difference Between a Financial Projection Statement and Accounting Statement?

However, you need to keep in mind that the financial statement is not the same as an accounting statement. Granted, a financial statement includes financial projections such as profit and loss, balance sheets, and cash flow, all of which makes it look similar to an accounting statement.

But the major difference between them is that an accounting statement deals with the past, while the financial projections statement of your business plan outlines your future spending and earnings. Having made this point clear, let’s now look at the steps involved on preparing a financial statement for your business plan.

So what exactly do you have to include in this section? You will need to include three statements:

• Income Statement
• Balance Sheet
• Cash-Flow Statement

Now, let’s briefly discuss each.

Components of a Business Plan Financial Statement

Income statement.

This beautiful composition of numbers tells the reader what exactly your sources of revenue are and which expenses you spent your money on to arrive at the bottom line. Essentially, for a given time period, the income statement states the profit or loss ( revenue-expenses ) that you made.

Balance sheet

The key word here is “ balance, ” but you are probably wondering what exactly needs to be weighed, right? On one side you should list all your assets ( what you own ) and on the other side, all your liabilities ( what you owe ), thereby giving a snapshot of your net worth ( assets – liabilities = equity ).

Cash flow statement

This statement is similar to your income statement with one important difference; it takes into account just when revenues are actually collected and when expenses are paid. When the cash you have coming in ( collected revenue ) is greater than the cash you have going out ( disbursements ), your cash flow is said to be positive.

And when the opposite scenario is true, your cash flow is negative. Ideally, your cash flow statement will allow you to recognize where cash is low, when you might have a surplus, and how to be on top of your game when operating in an uncertain environment.

How to Prepare a Business Plan Financial Projections Statement

1. Start by preparing a revenue forecast and a forecast profit and loss statement

Also, prepare supporting schedules with detailed information about your projected personnel and marketing costs. If your business has few fixed assets or it’s just a cash business without significant receivables, you don’t need a forecast balance sheet.

2. Using your planned revenue model, prepare a spreadsheet

Set the key variables in such a way that they can be easily changed as your calculations chain through. To ensure that your projected revenues are realistic and attainable, run your draft through a number of iterations. For each year covered in your business plan, prepare a monthly forecast of revenues and spending.

3. If you plan to sell any goods, then include a forecast of goods sold

This applies the most to manufacturing businesses. Give a reasonable estimate for this cost. And be of the assumption that the efficiency of your products would increase with time and the cost of goods sold as a percentage of sales will decline.

4. Quantify your marketing plan

Look at each marketing strategy you outlined in the business plan and attach specific costs to each of them. That is, if you are looking at billboard advertising, TV advertising, and online marketing methods such as pay-per-click advertising and so on; then you should estimate the cost of each medium and have it documented.

5. Forecast the cost of running the business, including general and administrative costs

Also, forecast the cost of utilities, rents, and other recurring costs. Don’t leave out any category of expenses that is required to run your business. And don’t forget the cost of professional services such as accounting and legal services.

6. In the form of a spreadsheet, forecast the payroll

This outlines each individual that you plan to hire, the month they will start work, and their salary. Also include the percentage salary increases (due to increased cost of living and as reward for exemplary performance) that will come in the second and subsequent years of the forecast.

Additional tips for Writing a Business Plan Financial Statement

• Don’t stuff your pages with lots of information, and avoid large chunks of text. Also, use a font size that is large enough. Even if these would spread out your statement into more pages, don’t hesitate to spread it out. Legibility matters!
• After completing the spreadsheets in the financial statement, you should summarize the figures in the narrative section of your business plan.
• Put a table near the front of your financial statement that shows projected figures, pre-tax profit, and expenses. These are the figures you want the reader to remember. You can help the reader retain these figures in memory by including a bar chart of these figures, too.

As a final note, you should keep in mind that a financial statement is just an informed guess of what will likely happen in the future. In reality, the actual results you will achieve will vary. In fact, this difference may be very far from what you have forecast.

So, if your business is a start-up, prepare more capital than your projections show that you will need. Entrepreneurs have a natural tendency to project a faster revenue growth than what is realistic. So, don’t let this instinct fool you.

More on Business Plans

Plannit Financial Projections

Take Your Business Plan to the Next Level

Financial projections are a crucial part of any business plan. Plannit AI’s financial projections and income statement generator simplifies the process, allowing entrepreneurs to create accurate, detailed financial forecasts with ease. This feature streamlines the process of generating your initial financial information.

Comprehensive Financial Overview

Our algorithms merge seamlessly with the GPT-4 engine to learn from your revenue model, business information and financial inputs, to automatically generate a comprehensive financial overview for your business plan. This includes an in-depth look at the projected growth rate of the company, the expected revenue, and the anticipated expenses.

10x More Powerful AI

We utilize the GPT-4 engine at our own expense to ensure that you have access to the most powerful AI in the industry. This allows us to provide you with the most accurate and detailed financial overview possible.

Simplified User Experience

Answer a few additional questions to allow us to calculate your financial projections and generate an income statement for your business plan. All in under 30 seconds.

Detailed 3-Year Income Statement

Based on your revenue model, your business information and your financial inputs, we generate a detailed 3-year income statement for your business plan, formatting your vision into dollars.

Simple, Accurate, and Detailed

Plannit only requires a few additional inputs to generate your detailed financial overview and income statement. It also learns from your revenue model and takes industry standards into account.

Increase Your Chances of Getting Funded

Accurate financial projections.

Plannit AI’s financial projections and income statement generator ensures that your business plan is backed by accurate, detailed financial forecasts. This increases your chances of securing funding and support from investors and lenders.

Professional Income Statement

Download your plan with a professional income statement that is formatted to industry standards and editable. This will help you present your business plan in a professional manner and increase your chances of securing funding.

By leveraging Plannit's financial projections and income statement generator, you can ensure that your business plan is backed by a detailed financial overview that puts numbers behind your vision and provides you with a blueprint for a successful outcome.

Create Your Business Plan Today

Simple Business Plan Template for Startups, Small Businesses & Entrepreneurs

Financial plan, what is a financial plan.

A business’ financial plan is the part of your business plan that details how your company will achieve its financial goals. It includes information on your company’s projected income, expenses, and cash flow in the form of a 5-Year Income Statement, Balance Sheet and Cash Flow Statement. The plan should also detail how much funding your company needs and the key uses of these funds.

The financial plan is an important part of the business plan, as it provides a framework for making financial decisions. It can be used to track progress and make adjustments as needed.

Why Your Financial Plan is Important

The financial section of your business plan details the financial implications of running your company. It is important for the following two reasons:

Making Informed Decisions

A financial plan provides a framework for making decisions about how to use your money. It can help you determine whether or not you can afford to make a major purchase, such as a new piece of equipment.

It can also help you decide how much money to reinvest in your business, and how much to save for paying taxes.

A financial plan is like a roadmap for your business. It can help you track your progress and make adjustments as needed. The plan can also help you identify potential problems before they arise.

For example, if your sales are below your projections, you may need to adjust your budget accordingly.

Your financial plan helps you understand how much outside funding is required, when your levels of cash might fall low, and what sales and other goals you need to hit to become financially viable.

Securing Funding

This section of your plan is absolutely critical if you are trying to secure funding. Your financial plan should include information on your revenue, expenses, and cash flow.

This information will help potential investors or lenders understand your business’s financial situation and decide whether or not to provide funding.

Include a detailed description of how you plan to use the funds you are requesting. For example, what are the key uses of the funds (e.g., purchasing equipment, paying staff, etc.) and what are the future timings of these financial outlays.

The financial information in your business plan should be realistic and accurate. Do not overstate your projected revenues or underestimate your expenses. This can lead to problems down the road.

Potential investors and lenders will be very interested in your future projections since it indicates whether you will be able to repay your loans and/or provide a nice return on investment (ROI) upon exit.

Financial Plan Template: 4 Components to Include in Your Financial Plan

The financial section of a business plan should have the following four sub-sections:

Revenue Model

Here you will detail how your company generates revenues. Oftentimes this is very straightforward, for instance, if you sell products. Other times, your answer might be more complex, such as if you’re selling subscriptions (particularly at different price/service levels) or if you are selling multiple products and services.

Financial Overview & Highlights

In developing your financial plan, you need to create full financial forecasts including the following financial statements.

5-Year Income Statement / Profit and Loss Statement

An income statement, also known as a profit and loss statement (P&L), shows how much revenue your business has generated over a specific period of time, and how much of that revenue has turned into profits. The statement includes your company’s revenues and expenses for a given time period, such as a month, quarter, or year. It can also show your company’s net income, which is the amount of money your company has made after all expenses have been paid.

5-Year Balance Sheet

A balance sheet shows a company’s financial position at a specific point in time. The balance sheet lists a company’s assets (what it owns), its liabilities (what it owes), and its equity (the difference between its assets and its liabilities).

The balance sheet is important because it shows a company’s financial health at a specific point in time. A strong balance sheet indicates that a company has the resources it needs to grow and expand. A weak balance sheet, on the other hand, may indicate that a company is struggling to pay its bills and may be at risk of bankruptcy.

5-Year Cash Flow Statement

A cash flow statement shows how much cash a company has on hand, as well as how much cash it is generating (or losing) over a specific period of time. The statement includes both operating and non-operating activities, such as revenue from sales, expenses, investing activities, and financing activities.

While your full financial projections will go in your Appendix, highlights of your financial projections will go in the Financial Plan section.

These highlights include your Total Revenue, Direct Expenses, Gross Profit, Other Expenses, EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), and Net Income projections. Also include key assumptions used in creating these future projections such as revenue and cost growth rates.

Funding Requirements/Use of Funds

In this section, you will detail how much outside funding you require, if any, and the core uses of these funds.

For example, detail how much of the funding you need for:

• Product Development
• Product Manufacturing
• Rent or Office/Building Build-Out

Exit Strategy

If you are seeking equity capital, you need to explain your “exit strategy” here or how investors will “cash out” from their investment.

To add credibility to your exit strategy, conduct market research. Specifically, find other companies in your market who have exited in the past few years. Mention how they exited and the amounts of the exit (e.g., XYZ Corp. bought ABC Corp. for $Y).  

Business Plan Financial Plan FAQs

What is a financial plan template.

A financial plan template is a pre-formatted spreadsheet that you can use to create your own financial plan. The financial plan template includes formulas that will automatically calculate your revenue, expenses, and cash flow projections.

How Can I Download a Financial Plan Template?

Download Growthink’s Ultimate Business Plan Template which includes a complete financial plan template and more to help you write a solid business plan in hours.

How Do You Make Realistic Assumptions in Your Business Plan?

When forecasting your company’s future, you need to make realistic assumptions. Conduct market research and speak with industry experts to get a better idea of the key trends affecting your business and realistic growth rates.

You should also use historical data to help inform your projections. For example, if you are launching a new product, use past sales data to estimate how many units you might sell in Year 1, Year 2, etc.

Learn more about how to make the appropriate financial assumptions for your business plan.

How Do You Make the Proper Financial Projections for Your Business Plan?

Your business plan’s financial projections should be based on your business model and your market research. The goal is to make as realistic and achievable projections as possible.

To create a good financial projection, you need to understand your revenue model and your target market. Once you have this information, you can develop assumptions around revenue growth, cost of goods sold, margins, expenses, and other key metrics.

Once you have your assumptions set, you can plug them into a financial model to generate your projections.

Learn more about how to make the proper financial projections for your business plan.

What Financials Should Be Included in a Business Plan?

There are a few key financials that should be included in a traditional business plan format. These include the Income Statement, Balance Sheet, and Cash Flow Statement.

Income Statements, also called Profit and Loss Statements, will show your company’s expected income and expense projections over a specific period of time (usually 1 year, 3 years, or 5 years). Balance Sheets will show your company’s assets, liabilities, and equity at a specific point in time. Cash Flow Statements will show how much cash your company has generated and used over a specific period of time.

Growthink's Ultimate Business Plan Template includes a complete financial plan template to easily create these financial statements and more so you can write a great business plan in hours.

BUSINESS PLAN TEMPLATE OUTLINE

• Business Plan Template Home
• 1. Executive Summary
• 2. Company Overview
• 3. Industry Analysis
• 4. Customer Analysis
• 5. Competitive Analysis
• 6. Marketing Plan
• 7. Operations Plan
• 8. Management Team
• 9. Financial Plan
• 10. Appendix
• Business Plan Summary

Other Helpful Business Planning Articles & Templates

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How to create a cash flow projection (and why you should)

For small business owners, managing cash flow (the money going into and out of your business) can be the difference between a thriving, successful company and filing for chapter 11 (aka bankruptcy).

In fact, one study showed that 30% of businesses fail because the owner runs out of money, and 60% of small business owners don’t feel knowledgeable about accounting or finance .

Understanding and predicting the flow of money in and out of your business, however, can help entrepreneurs make smarter decisions, plan ahead, and ultimately avoid an unnecessary cash flow crisis.

After all, knowing whether the next month will see a financial feast or famine can help you make better decisions about spending, saving, and investing in your business today.

One way to do this (without hiring a psychic)? Cash flow projection.

What is cash flow projection?

Cash flow projection is a breakdown of the money that is expected to come in and out of your business. This includes calculating your income and all of your expenses, which will give your business a clear idea on how much cash you'll be left with over a specific period of time.

If, for example, your cash flow projection suggests you’re going to have higher than normal costs and lower than normal earnings, it might not be the best time to buy that new piece of equipment.

On the other hand, if your cash flow projection suggests a surplus , it might be the right time to invest in the business.

Cash flow projections: The basics

In order to properly create a cash flow forecast, there are two concepts you should be aware of: accounts receivable (cash in) and accounts payable (cash out)

• Accounts Receivable: refers to the money the business is expecting to collect, such as customer payments and deposits, but it also includes government grants , rebates, and even bank loans and lines of credit .
• Accounts Payable: refers to the exact opposite—that is, anything the business will need to spend money on. That includes payroll , taxes, payments to suppliers and vendors, rent, overhead, inventory, as well as the owner’s compensation.

A cash flow projection (also referred to as a cash flow forecast) is essentially a breakdown of expected receivables versus payables. It ultimately provides an overview of how much cash the business is expected to have on hand at the end of each month .

Cash flow projections typically take less than an hour to produce but can go a long way in helping entrepreneurs identify and prepare for a potential shortfall, and make smarter choices when running their business.

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How to calculate your cash flow projection

Calculating your cash flow projection can seem intimidating at first, but once you start pulling together the necessary information, it isn’t so scary. Let’s walk through the first steps together.

1. Gather your documents

This includes data about your business’s income and expenses.

2. Find your opening balance

Your opening balance is the balance in your bank at the start of a period. (So, if you’ve just started your business, this is zero.)

Your closing balance is the amount in your bank at the end of the period.

So the opening balance in one month should equal the closing balance at the end of the previous month. But more on this later.

3. Receivables (money received/cash in) for next period

This is an estimate of your anticipated sales (such as invoices you expect to be paid, or payments made on credit), revenue, grants , or loans and investments.

4. Payables (money spent/cash out) for next period

Again, this is an estimate. You should consider things like materials, rent, taxes, utilities, insurance, bills, marketing, payroll, and any one-time or seasonal expenses.

“Seasonality can have a material effect on the cash flow of your business,” Andy Bailey, CEO of Petra Coach, wrote in an article for Forbes . “A good cash flow forecast will anticipate when cash outlays and cash receipts are higher or lower so you can better manage the working capital needs of the company.”

5. Calculate cash flow

Now, let’s bring it all together using this cash flow formula : Cash Flow = Estimated Cash In – Estimated Cash Out

6. Add cash flow to opening balance

Now, you’ll want to add your cash flow to your opening balance, which will provide you with your closing balance.

Put it all together: How a cash flow projections look on paper

In practical terms, a cash flow projection chart includes 12 months laid out across the top of a graph, and a column on the left-hand side with a list of both payables and receivables.

Here are all the categories you’ll need for your cash flow projection:

• Opening balance/operating cash
• Money received (cash sales, payments, loans, investments, etc.
• Money spent (expenses, materials, marketing, payroll and taxes, bills, loans, etc.)
• Totals for money received and money spent, respectively
• Total cash flow for the period
• Closing balance

This column typically begins with “operating cash”/opening balance or unused earnings from the previous month. For example, if your cash flow projection for January suggests a surplus of $5,000, your operating cash for February is also $5,000.

Below operating cash, list all expected accounts receivable sources—such as sales, loans, or grants—leaving a space at the bottom to add them all up.

Next, list all potential payable items—such as payroll, overhead, taxes, and inventory—with another space to add their total below.

Once you have your numbers prepared, simply subtract the total funds that are likely to be spent from the cash that is likely to be received to arrive at the month’s cash flow projection.

Once you’ve calculated your monthly cash flow, take the final number and list it at the top of the next month’s column under operating cash, and repeat the process until you’ve got a forecast for the next 12 months.

After the end of each month, be sure to update the projection accordingly, and add another month to the projection.

If you’re a Wave customer and you prefer to use a ready-made chart to help you create your projection, you can pull your financial data from the Reports section of Wave and feed it into this cash flow forecast template .

Be realistic with your cash flow forecast

Cash flow projections are only as strong as the numbers behind them, so it’s important to be as realistic as possible when putting yours together.

For example, being overly generous in your sales estimates can compromise the accuracy of the projection.

Furthermore, if you provide customers with a 30-day payment schedule and a majority pay on the last possible day, make sure that cycle is accurately reflected in your projection.

On the payables side of the equation, try to anticipate annual and quarterly bills and plan for an increased tax rate if the business is likely to reach a new tax level.

Those who pay their staff on a bi-weekly basis also need to keep an eye out for months with three payroll cycles, which typically occurs twice each year.

“Monthly or quarterly forecasts generally are more useful for stable, established businesses,” Bailey also wrote . “Weekly projections will be essential for companies scaling up or going through significant changes, such as a restructuring or merger/acquisition.”

“We like to encourage business owners—especially those who are starting out—to create a 13-week forecast for cash,” William Lieberman, the Managing Partner of The CEO’s Right Hand, told Forbes . “Each week, update the forecast based on what happened the previous week and extend the forecast window by one more week. In this way, you can keep a close watch on exactly what’s coming in and going out so you can be more proactive in addressing potential cash crunches.”

Those who want to be extra cautious with their projections can even include an “other expenses” category that designates a certain percentage of revenues for unanticipated costs. Putting aside some extra cash as a buffer is especially useful for those building their first projections, just in case they accidentally leave something out.

What now: Use your cash flow forecast to make data-driven decisions

Building the cash flow projection chart itself is an important exercise, but it’s only as useful as the insights you take away from it. Instead of hiding it away for the remainder of the month, consult your cash flow projection when making important financial decisions about your business.

If, for example, you anticipate a deficit in the months ahead, consider ways to cut your costs , increase sales, or save surpluses to help make up the difference. If you notice that payments often come in late, consider introducing a late penalty for bills past due.

You can also consult your cash flow projection to determine the best time to invest in new equipment, hire new staff, revise your pricing and payment terms, or when to offer promotions and discounts.

Have clients that regularly procrastinate on payments? Check out these tactics to get your clients to pay you faster .

Improving the accuracy of cash flow projections over time

Once you’re in the habit of creating cash flow projections, it becomes easier to improve their accuracy over time.

Comparing projections to actual results can help you improve the accuracy of your cash flow projections, and help identify longer-term patterns and cycles. Seasonal changes in revenue, patterns that contribute to late payments, and opportunities to cut costs will all become more apparent with each new cash flow projection.

While all these benefits won’t come all at once, entrepreneurs can use their cash flow projection to become better operators and better decision makers with each passing month.

Cash flow projection FAQs

How do cash flow projections affect business decisions, and how can small business owners improve their accuracy.

Cash flow projections play a key role in how you make business decisions by giving you important info on the movement of money in and out of your business You can up their accuracy by regularly updating projections, comparing them to actual results, and adjusting for any discrepancies. This helps you make smart choices about spending, saving, and investing in your business.

What industry-specific factors should small business owners consider in cash flow projections?

Small business owners need to consider various industry-specific factors when creating cash flow projections. For instance, seasonal changes in revenue, payment cycles, and market trends can significantly impact cash flow. By analyzing these factors, you can tailor your projections to better reflect the realities of your industry and adjust your strategies accordingly.

How can small business owners make sure their cash flow projections are reliable?

Small business owners often face challenges in making cash flow projections due to uncertainties in revenue, expenses, and market conditions. To ensure reliability, you should try to be realistic in your estimates, account for potential fluctuations, and regularly update your projections based on actual performance. Additionally, seeking advice from financial experts and using tools like cash flow forecasting templates can help with these challenges and improve the accuracy of projections over time.

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Original text

Using Financial Statements

Projected financial statement analysis is a key strategy-implementation technique. It allows your startup to examine the expected results of various actions and approaches.  This type of analysis can be used to forecast the various implementation decisions (for example, to increase your promotion expenditures by 50% to support a market-development strategy). Nearly all financial institutions require your startup to have at least three years of projected financial statements whenever your business seeks capital.  A projected income statement and balance sheet allows your business to estimate financial ratios under various strategy-implementation scenarios.  

Why is Budgeting The Basis of All Business Success?

A financial budget details how your business will obtain and spend funds.  Annual budgets are the most common, although the period for a budget can range from one day to more than 10 years. Financial budgeting should not be thought of as a tool for limiting expenditures but rather as a method for obtaining the most productive and profitable use of an organization’s resources.  Financial budgets can be viewed as the planned allocation of your business resources based on forecasts of the future.

There are almost as many different types of financial budgets as there are organizations.  Some common types of budgets include cash budgets, operating budgets, sales budgets.  When an organization is experiencing financial difficulties, budgets are especially important in guiding strategy implementation.

Budgeting and financial analysis are tools used to create a plan and see where the business is heading financially. Financial analysis encompasses several financial areas of the business from capital budgeting to income statement, cash flow, balance sheet, and other financial statements related to investments such as financial ratios.

What Role Do Income Statements Play in Financial Analysis?

The income statement is essential in building a substantial financial analysis for startups. A positive income statement demonstrates steady growth in the first three months of operating a business. The sales volumes should keep increasing and the business expenses need to remain reduced throughout the months and the first three years.

Businesses have different expenses depending on the industry they operate in. For instance, the service companies such as staffing companies exclude the use of inventory, facility…etc. Thus, the costs are lower.

How Is Cash Flow Measured in Your Startup?

The cash flow statement is one of the three key financial statements. It reports the cash generated by the startup and spent during a specific period. The cash flow statement indicates how the funds are moved in and out of the startup.

A positive cash flow statement in the first twelve months should not disclose a negative balance. The cash generated by the startup should be increasing monthly and the balance should remain positive after paying all the expenses at the end of the month. Therefore, the cash collected is considered as cash on hand for the following months.

How Do You Work on Your Startup Balance Sheet?

The balance sheet is based on the fundamental equation: Assets = Liabilities + Equity .

The balance sheet of your startup indicates the company’s total assets, and how these assets are financed, through either debt or equity. As an entrepreneur, you should be very thorough in reporting your company’s assets and liabilities for a specific period. In other words, the balance sheet indicates what your business owns and owes.

There are many alternatives to assess your startup finances.  Every entrepreneur who embarks on a new journey faces a dilemma assessing how much capital is needed to start the business. It is possible to predict how much a new business will need during the first five years. However, businesses should come up with optimistic expectations.

Thanks to many accounting software in the market, calculations related to startup finances are made quickly and easily. Financial software companies enable entrepreneurs to assess any cost related to the startup or examine the financial health of the company. One of the easiest ways to develop a financial analysis such as income statement, balance sheet, and cash flow for the startup is to use a financial template that pulls together different financial formulas to help with preparing any financial projections. In recent years, many entrepreneurs were looking to incorporate accounting software into their startup's operations which turned to be successful.

Financial analysis encompasses several financial statements of the startups. It covers income statements, cash flow, balance sheets, and sales forecasting. They all convey the financial business activities as well as the financial performance of the startups.

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

Understand Basic Financial Statements to Better Your Business Learn how to make better financial decisions by understanding these 3 basic financial statements: profit & loss, balance sheet and cash flow statements.

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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.

More From Forbes

Financial forecasting: its critical role in small-business success.

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Nick Chandi is the CEO of Forwardly , an award-winning payment platform that helps US businesses send and receive payments in 60 seconds.

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 course toward sustainable success. For small businesses, financial planning acts as a blueprint for growth and resilience. By staying on top of your finances, you can not only survive but also find ways to grow and win in the competitive market.

The Power Of Financial Forecasting

Financial planning can guide your small business through the unpredictable terrain of the market. It uses historical data and current trends to predict future trajectories. By leveraging historical data and current trends, it equips you with sturdy armor to face whatever challenges may arise. I’ve been working with small businesses for over a decade, and I’ve seen time and time again that proactive financial forecasting offers a plethora of benefits, from managing cash flow to strategizing investments.

By anticipating income and expenses, you can maintain a healthy cash flow essential for sustaining operations. Not just this, but it also enables proactive risk management, identifying and mitigating potential financial pitfalls. This foresight also fuels strategic planning, empowering you to make informed decisions about expansion and staffing . But the power of forecasting doesn’t stop there. By regularly comparing forecasts with actual results, you can continuously monitor their performance and adjust strategies as needed. I cannot stress this enough—it is a dynamic process that ensures agility and resilience in the face of changing market conditions.

Understanding Different Forecasts

In financial planning, entrepreneurs can use various forecasting tools to steer their businesses. I have three types of forecasts for your small business that will serve a specific purpose and offer insights into different financial aspects. Sales forecasts predict future revenue by analyzing past sales, market trends and customer behavior. These forecasts can be created by gathering historical sales data, conducting market research and considering factors like seasonality and economic trends.

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Cash flow forecasts estimate cash coming in and going out over time to maintain enough money on hand. This type of cash flow forecasting is one of my favorites, as it is crucial to the success and sustainability of any business. Cash flow problems cause 82% of business failures in the United States, so it’s crucial to stay on top of your cash flow management to avoid financial trouble.

You can make these forecasts by predicting sales, noting fixed and flexible expenses, and considering factors like payment terms and loan repayments. Some modern payment solutions offer tools for cash flow forecasting that sync with accounting software, making the process easier for you and providing real-time insights into cash flow.

Expense forecasts predict future spending on overhead costs and employee wages. You can easily create these forecasts by looking at past expenses, planning for upcoming projects and considering potential changes in costs.

Profit and loss forecasts evaluate financial health by estimating revenue, expenses and net income. To create these forecasts, analyze historical financial statements, estimate your future revenues and expenses, and adjust for changes in the business environment. Understanding how to create and interpret these forecasts is essential for developing a robust financial strategy and making informed decisions about the business’s future.

Strategies For Effective Financial Planning

When it comes to effective financial planning, I believe a close examination of your business’s past financial performance is essential. This is a must-do step for me. Reviewing your sales, expenses and profits from previous periods provides valuable insights into your business’s trends and patterns. This retrospective analysis lays the groundwork for making informed decisions and accurate predictions about your future finances.

From my experience, while it’s important to plan for the short term, it’s equally crucial to think ahead for the long term. When forecasting your finances, consider projecting your financial trajectory over an extended period, such as months or even years. By doing so, you can anticipate potential shifts in the market, identify growth opportunities and prepare for any challenges that may arise along the way.

In your financial forecasting process, it’s essential to consider both the best and worst-case scenarios. Envisioning the best possible outcomes helps you set ambitious yet achievable goals and objectives. However, it’s equally important to prepare for the worst by considering potential setbacks or downturns in sales. This balanced approach allows you to develop resilient strategies that can withstand various market conditions.

Understanding your expenses is key. Take the time to list out all your anticipated costs, including overhead expenses, employee salaries, inventory costs, marketing expenses and any other expenditures relevant to your business operations. This detailed breakdown helps you budget more effectively and ensures that you have a clear understanding of where your money is being allocated.

Along with your planned expenses, it’s important to prepare for unexpected costs that may arise. These could include emergency repairs, legal fees or other unforeseen expenses that could impact your bottom line. By building a buffer for unexpected expenses into your financial forecasts, you can better protect your business’s financial health and stability.

Lastly, remember to regularly review and update your financial forecasts. Market conditions and business circumstances can change rapidly, so it’s essential to revisit your forecasts regularly to ensure they remain accurate and relevant. By staying adaptable and responsive to changes in the business environment, you can make more informed decisions and take your business toward long-term success.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

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Connecticut Small Business Development Center

Financial projections that open doors to funding (jun. 20).

Live webinar event: June 20, 11 AM – 12 PM

Whether you are launching or expanding your business, financial projections play a key role in helping you make decisions about your business. They are also necessary for obtaining funding, whether it is a grant, a loan, or another type of investment.

Join us in this hour-long webinar to get the 411 on financial projections and the resources available to support you as you work on them.

Learning Outcomes

• Understand the importance of financial projections for your business and outside funding
• Review the basics of what you need to create effective projections
• Walk away with an idea of what strong financial projections should look like and how we can help you get there

The course will be 60 minutes in length with 30 minutes reserved for Q&A and you will receive a downloadable business plan template to use to create your plan.

Register here