financial projection in business plan

Business Plan Financial Projections

Written By Dave Lavinsky

Financial Projections for a New and Existing Business

Financial projections are an important part of your business plan. The projections give investors and lenders an idea of how well your business is likely to do in the future. Financial projections include both income statements and balance sheets.

Financial projections are important for a number of reasons. First, they give investors and lenders an idea of how well your business is likely to do in the future. This can help you secure the funding you need to get your business off the ground. Financial projections also help you track your progress over time. You can use them to make sure your business is on track to meet its goals. Finally, financial projections can help you spot potential problems early on, so you can take corrective action.

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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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.

How to Create Financial Projections for Your Business

Written by Dave Lavinsky

Growthink Business Plan Financial Projections

As an entrepreneur, you spend months, even years coming up with ideas to start or grow your business. Then you write a business plan and try to convince someone (a co-founder, a banker, or an investor) that your idea is worthy of investment. The most crucial part of convincing them is your financial projections.

By creating financial projections, you have the opportunity to see the potential financial forecasting and impact of your ideas. Your financial projections (also known as your financial model) will help you understand the viability of your thoughts and help potential investors or lenders grasp the potential ROI (return on investment) of funding you.

This article will show you how to make financial projections for a startup business plan or an existing business. You will learn what to include in your financial projections, why they are essential, and how you can create them effectively.

Download our Ultimate Business Plan Template Here to Quickly & Easily Complete Your Business Plan & Financial Projections

What are Financial Projections?

Financial projections are forecasts or estimations of your company’s future revenues and expenses, serving as a crucial part of business planning. To complete them you must develop multiple assumptions with regards to items like future sales volumes, employee headcount and the cost of supplies and other expenses. Financial projections help you create better strategies to grow your business.

Your financial projections will be the most analyzed part of your business plan by investors and/or banks. While never a precise prediction of future performance, an excellent financial model outlines the core assumptions of your business and helps you and others evaluate capital requirements, risks involved, and rewards that successful execution will deliver.

Having a solid framework in place also will help you compare your performance to the financial projections and evaluate how your business is progressing. If your performance is behind your projections, you will have a framework in place to assess the effects of lowering costs, increasing prices, or even reimagining your model. In the happy case that you exceed your business projections, you can use your framework to plan for accelerated growth, new hires, or additional expansion investments.

Hence, the use of financial projections is multi-fold and crucial for the success of any business. Your financial projections should include three core financial statements – the income statement, the cash flow statement, and the balance sheet. The following section explains each statement in detail.

Necessary Financial Statements

The three financial statements are the income statement, the cash flow statement, and the balance sheet. You will learn how to create each one in detail below.

Income Statement Projection

The projected income statement is also referred to as a profit and loss statement and showcases your business’s revenues and expenses for a specific period.

To create an income statement, you first will need to chart out a sales forecast by taking realistic estimates of units sold and multiplying them by price per unit to arrive at a total sales number. Then, estimate the cost of these units and multiply them by the number of units to get the cost of sales. Finally, calculate your gross margin by subtracting the cost of sales from your sales.

Once you have calculated your gross margin, deduct items like wages, rent, marketing costs, and other expenses that you plan to pay to facilitate your business’s operations. The resulting total represents your projected operating income, which is a critical business metric.

Plan to create an income statement monthly until your projected break-even, or the point at which future revenues outpace total expenses, and you reflect operating profit. From there, annual income statements will suffice.

Consider a sample income statement for a retail store below:

Cash Flow Projection

As the name indicates, a cash flow statement shows the cash flowing in and out of your business. The cash flow statement incorporates cash from business operations and includes cash inflows and outflows from investment and financing activities to deliver a holistic cash picture of your company.

Investment activities include purchasing land or equipment or research & development activities that aren’t necessarily part of daily operations. Cash movements due to financing activities include cash flowing in a business through investors and/or banks and cash flowing out due to debt repayment or distributions made to shareholders.

You should total all these three components of a cash flow projection for any specified period to arrive at a total ending cash balance. Constructing solid cash flow projections will ensure you anticipate capital needs to carry the business to a place of sustainable operations.

Below is a simple cash flow statement for the same retail store:

Balance Sheet Projection

A balance sheet shows your company’s assets, liabilities, and owner’s equity for a certain period and provides a snapshot in time of your business performance. Assets include things of value that the business owns, such as inventory, capital, and land. Liabilities, on the other hand, are legally bound commitments like payables for goods or services rendered and debt. Finally, owner’s equity refers to the amount that is remaining once liabilities are paid off. Assets must total – or balance – liabilities and equity.

Your startup financial documents should include annual balance sheets that show the changing balance of assets, liabilities, and equity as the business progresses. Ideally, that progression shows a reduction in liabilities and an increase in equity over time.

While constructing these varied business projections, remember to be flexible. You likely will need to go back and forth between the different financial statements since working on one will necessitate changes to the others.

Below is a simple balance sheet for the retail store:

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Creating Financial Projections

When it comes to financial forecasting, simplicity is key. Your financial projections do not have to be overly sophisticated and complicated to impress, and convoluted projections likely will have the opposite effect on potential investors. Keep your tables and graphs simple and fill them with credible data that inspires confidence in your plan and vision. The below tips will help bolster your financial projections.

Create a List of Assumptions

Your financial projections should be tied to a list of assumptions. For example, one assumption will be the initial monthly cash sales you achieve. Another assumption will be your monthly growth rate. As you can imagine, changing either of these assumptions will significantly impact your financial projections.

As a result, tie your income statement, balance sheet, and cash flow statements to your assumptions. That way, if you change your assumptions, all of your financial projections automatically update.

Below are the key assumptions to include in your financial model:

For EACH essential product or service you offer:

What is the number of units you expect to sell each month?
What is your expected monthly sales growth rate?
What is the average price that you will charge per product or service unit sold?
How much do you expect to raise your prices each year?
How much does it cost you to produce or deliver each unit sold?
How much (if at all) do you expect your direct product costs to grow each year?

For EACH subscription/membership, you offer:

What is the monthly/quarterly/annual price of your membership?
How many members do you have now, or how many members do you expect to gain in the first month/quarter/year?
What is your projected monthly/quarterly/annual growth rate in the number of members?
What is your projected monthly/quarterly/annual member churn (the percentage of members that will cancel each month/quarter/year)?
What is the average monthly/quarterly/annual direct cost to serve each member (if applicable)?

Cost Assumptions

What is your monthly salary? What is the annual growth rate in your salary?
What is your monthly salary for the rest of your team? What is the expected annual growth rate in your team’s salaries?
What is your initial monthly marketing expense? What is the expected annual growth rate in your marketing expense?
What is your initial monthly rent + utility expense? What is the expected annual growth rate in your rent + utility expense?
What is your initial monthly insurance expense? What is the expected annual growth rate in your insurance expense?
What is your initial monthly office supplies expense? What is the expected annual growth rate in your office supplies expense?
What is your initial monthly cost for “other” expenses? What is the expected annual growth rate in your “other” expenses?

Assumptions related to Capital Expenditures, Funding, Tax, and Balance Sheet Items

How much money do you need for Capital Expenditures in your first year (to buy computers, desks, equipment, space build-out, etc.)?
How much other funding do you need right now?
What percent of the funding will be financed by Debt (versus equity)?
What Corporate Tax Rate would you like to apply to company profits?
What is your Current Liabilities Turnover (in the number of days)?
What are your Current Assets, excluding cash (in the number of days)?
What is your Depreciation rate?
What is your Amortization number of Years?
What is the number of years in which your debt (loan) must be paid back?
What is your Debt Payback interest rate?

Create Two Scenarios

It would be best if you used your assumptions to create two sets of financial projections that exhibit two very different scenarios. One is your best-case scenario, and the other is your worst-case. Investors are usually very interested in how a business plan will play out in both these scenarios, allowing them to better analyze the robustness and potential profitability of a business.

Conduct a Ratio Analysis

Gain an understanding of average industry financial ratios, including operating ratios, profitability ratios, return on investment ratios, and the like. You can then compare your own estimates with these existing ratios to evaluate costs you may have overlooked or find historical financial data to support your projected performance. This ratio analysis helps ensure your financial projections are neither excessively optimistic nor excessively pessimistic.

Be Realistic

It is easy to get carried away when dealing with estimates and you end up with very optimistic financial projections that will feel untenable to an objective audience. Investors are quick to notice and question inflated figures. Rather than excite investors, such scenarios will compromise your legitimacy.

Create Multi-Year Financial Projections

The first year of your financial projections should be presented on a granular, monthly basis. For subsequent years, annual projections will suffice. It is advised to have three- or five-year projections ready when you start courting investors. Since your plan needs to be succinct, you can add yearly projections as appendices to your main plan.

You should now know how to create financial projections for your business plan. In addition to creating your full projections as their own document, you will need to insert your financial projections into your plan. In your executive summary, Insert your topline projections, that is, just your sales, gross margins, recurring expenses, EBITDA (earnings before interest, taxes, depreciation, and amortization), and net income). In the financial plan section of your plan, insert your key assumptions and a little more detail than your topline projections. Include your full financial model in the appendix of your plan.

Other Resources for Writing Your Business Plan

How to Write an Executive Summary
How to Expertly Write the Company Description in Your Business Plan
How to Write the Market Analysis Section of a Business Plan
The Customer Analysis Section of Your Business Plan
Completing the Competitive Analysis Section of Your Business Plan
How to Write the Management Team Section of a Business Plan + Examples
Financial Assumptions and Your Business Plan
Everything You Need to Know about the Business Plan Appendix
Business Plan Conclusion: Summary & Recap

Resources for Your Growing Business

How to make financial projections for business.

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

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

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

Key Takeaways

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

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

Here’s What We’ll Cover:

What Is a Financial Projection?

How to Create a Financial Projection

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

Financial Projections Advantages

Frequently Asked Questions

What Is Financial Projection?

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

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

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

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

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

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

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

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

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

Stairs leading up to a dollar sign. Represents creating a financial plan to achieve profitability.

Noah Parsons

3 min. read

Updated January 3, 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 in place are more prepared to pitch to investors, receive funding, and achieve long-term success.

Thankfully, you don’t need an accounting degree to successfully put your budget and forecasts together. Here is everything you need to include in your financial plan along with optional performance metrics, specifics for funding, 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 all of your financial statements and forecasts in place, you have all the numbers needed to calculate insightful financial ratios. While these metrics are entirely optional to include in your plan, having them easily accessible can be valuable for tracking your performance and overall financial situation.

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).

Financial plan templates and tools

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

Sales forecast template

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

Download Template

Accurate and easy financial forecasting

Get a full financial picture of your business with LivePlan's simple financial management tools.

Get Started

See why 1.2 million entrepreneurs have written their business plans with LivePlan

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.

Table of Contents

What to include for funding

3 Min. Read

What to Include in Your Business Plan Appendix

10 Min. Read

How to Write the Company Overview for a Business Plan

How to Write a Competitive Analysis for Your Business Plan

24 Min. Read

The 10 AI Prompts You Need to Write a Business Plan

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Financial projections how to write a financial plan

Resources on Business Plan Writing :

An article of the Accelerated MBA written by:

Antoine Martin (Ph.D) | Business coach

Is this article relevant? Share it & help someone!

By the way…

Before we dig into the financial projections’ discussion, let us give you a tiny bit of background!

We are professional business coaches, and our job is to push entrepreneurs and business owners to their next steps.

Business planning and business plans are part of that, obviously, therefore we have written a series of free articles on how to write a business plan – of which this page is a part.

We are on a mission to make entrepreneurship fun and accessible, so we provide about 80 percent of our content for free – including a free business plan template to be downloaded down this page.

Still, in case that’s not sufficient, we’ve also created our Business Plan Builder Module , which has been designed to make your life super easy.

Shameless plug: it gives you access to:

a complete and solid business plan writing work-frame tool
automated financial tables that take the hassle away (yayyy!)
two designer-made templates (comprehensive + pitch deck)
and two hours of tutorial videos recorded with a business coach to explain all the logic you’ll need to master if you plan on writing a business plan that converts.

There’s simply no way to make things easier!

Now, having said that, let’s get going.

As a reminder, what is a business plan about?

To start the discussion, remember that a business plan is about much more than just numbers. As we’ve explained in our article What are Business Plans For? , the role of such a document is to show that beyond a nice business plan pdf nobody really cares about, you have a real business and a plan to get it somewhere.

First, a business plan’s purpose is to help you explain what your project is about. In that sense, the document you need to write should be written as a storytelling instrument, designed, and formulated to tell people a story they will want to read AND remember.

Second, it should give you a way to showcase your main business objectives for the next few years, as well as the strategy you will put into place to get there and deliver on your promises.

Third, your business plan should also provide a market analysis, and a description of your main target segment. That gives the reader a better understanding of your ecosystem’s potential, but more importantly the exercise forces you to look around, open your eyes and do some meaningful research.

You wouldn’t want to drive blindfolded, would you?

Of course, your document should also have a financial component – which is the topic of this article – and there the challenge is to ensure that your financial projections make sense, that they are clear, accurate and easy to follow.

Long things short, investors and bankers expect you to match a very specific business plan outline and format (there’s a code!) and you don’t have much wiggle room there – so be careful in your approach!

What is a Financial Plan & what should it include?

Now, let’s get into the core of this article: financial plans and financial projections. What are they, why are they important – there is a lot to explore.

First things first, what is a financial plan? How important is it in a business plan? And what type of elements is it made of? What are the projected financial statements you need to provide? Oh, and what do we mean by ‘financial projections’ in the first place, by the way?

What is the role of a financial plan in business plan?

A financial plan is the financial part of your business plan. Its purpose is simple: explain to the reader what should be the ins and outs of your project from a financial perspective, and help them see if their own business projections are aligned with yours.

On the one hand, the idea is to put numbers on your project, to make it tangible and show that your vision includes the end and the means.

On the other, it is also to show that you are capable of defending your big idea as well as the projected financials that need to come with it – something that many wannabe entrepreneurs are actually unable to do…

As a side note, and as silly as that might sound, this means that your business plan should include a lot more than just a financial plan and a smart cash flow projection!

That point brings us back to the one we made earlier when we said that a business plan should follow a specific structure (go read that article!), but we mention it again because we want things to be very clear: your business plan should be a matter of storytelling, not just a matter of financial projections!

Typically, we often see accountants work on business plans, and what they produce is rarely enough because they only deliver financial estimates that make no real sense to non-accountants (even less to the entrepreneurs at stake) and leave aside the rest of the topics – particularly the storytelling!

Said differently? The numbers are one aspect of the story, but you still have to come up with the pitch – which is where the rest of the business plan comes in handy.

Make sure to deliver an easy-to-read mix!

Your financial plan must provide your financial projections

To get into the technical part of the discussion, the financial plan in your business plan should include your financial projections, organized in a very formal format.

That makes two distinct points to consider!

On the one hand, you should be able to show with clear numbers what money should come in and when (that’s the income forecasts), for this year but also for the next, the ones after that for three to five years.

On the other, you should also be able to show what money needs to go out to make the business roll. What are the production costs, the fixed and variable expenses, the salaries, and of course the various marketing expenses needed to generate the development you are planning on getting to.

On that point, remember that your cost of client acquisition should also be part of the formalized projections – otherwise your numbers will be flawed (and doomed).

Ultimately, you need to be very clear as to when your new business (or existing business) should break even, as to when should profits be expected, as to when lenders and investors will get their money back, so forth and so on.

It must include specific financial documents people will expect to see

From a very formal perspective, you shouldn’t be trying to make one single projection sheet. Nope! Your readers will expect to see three important financial documents in the financial section of the business plan you will introduce to them.

A profit and loss statement – also known as your P&L statement, or as an income statement
A cash flow statement
And a balance sheet.

First, the P&L table or income statement should show what money is expected to come in or go out, but it should also show if and when the business will make a profit or a loss, year by year, for the next five years.

The sales forecast and the operating expenses should be easy to understand at that stage, and you should also be able to provide your estimated gross profit, your gross margin, as well as your net profit and net margin.

In case you are wondering, your gross profit corresponds to your sales minus your cost of production. Your net profit corresponds to the gross profit minus all the remaining costs.

It’s okay to read that twice…

Not being profitable is also okay, by the way. That’s the game. However, you must be able to explain why you won’t be profitable in a given year, and how you plan on filling the gap in the bank – otherwise your business dies, right?

Second, the cashflow statement should explain your cash flow management strategy and indicate when you will need to fill the bank account in, and why.

For instance, important account receivables could justify a temporary cashflow need, but the gaps left from the previous years should also be visible. Obviously, the funding needs should also be there and aligned with the financial situation of the business.

Third, the balance sheet is a summary of the previous two tables, except that it shows the various elements in terms of assets or liabilities. For instance, the account receivables we mentioned just before would be an asset (because some money is owed to the business) while account payables would be a liability (since the business owes money to someone else).

Does all this sound a little complex?

That’s because it is.

No need to worry, though. We have you covered and will provide all the templates and tools you need further below. For now, just keep reading.

So, what’s the financial plan in a business plan for?

To conclude, the financial plan in business plan should act as a financial cartography of what you have in mind for that business of yours.

The financial plan should illustrate the plan you have for the business in terms of numbers
It should include precise financial projections of what you think can be achieved
It should clearly illustrate your cashflow management strategy
And it should summarize the information clearly
All of this through highly standardized tables financiers will understand very easily

What documents should a financial business plan contain?

Getting your financial business plan right is a lot simpler than it seems.

Now, when you’re pitching that business of yours to potential partners, investors or lenders, you’ll need to provide them with a series of financial statements.

Yet, how to produce those documents without jumping into a living nightmare? How to come up with cash flow projections that make sense instead of being purely random?

Word of caution: financial planning for businesses is typically complex.

The question is not only fair, but it is also super-duper common and literally blocks tons of entrepreneurs and small business owners on a daily basis.

Because financial planning for businesses is typically complex.

Because most people aren’t comfortable with numbers.

And because the vast majority of small business owners simply don’t know where to start.

That’s probably why you were looking for either a financial plan pdf template or an example of financial plan for small business owners a few minutes ago, isn’t it?

Typically, here is what happens.

Some try and do their best, but then they don’t feel confident with pitching and defending their financial analysis, so they keep delaying and nothing happens.

Others end up having recourse to external help, even though external business plan consultants usually aren’t a good idea at that stage.

And the rest gives up.

That’s a shame, especially if consider that financial planning for a small business and building a financial plan for a business plan are only a matter of having access to the right method and tools!

Yes, a big (big) part of the work is to guestimate, but the rest is about trusting the process with the right logic, method and tools – and there’s nothing you can’t manage here.

Especially with the right tools!

How to build your financial forecasts?

Now that you understand the different sections of a financial plan, let us talk about how to build financial forecasting.

In plain English, this part of the exercise is where you’ll estimate your company’s income and expenses for the next few years. Therefore, you should keep a few things in mind.

One, you need to have a good understanding of your business in order to create realistic forecasts.

Sounds silly? Maybe, but this is a mistake people make way too much, and when they fail at justifying their financial projections, everything else goes down.

Two, you absolutely want to make sure that your projections can explore various trends, i.e. your pessimistic, optimistic, and most likely scenarios.

If everything goes extremely well, we’ll get there.
If everything goes wrong, we’ll get there.
But… we should reasonably expect to achieve this and that if we obtain the funding we need…

Can you see the idea?

Be sure to also factor in any potential changes or risks that could affect your business.

For example, if you’re expecting a new competitor to enter the market, you’ll need to account for that in your projections. By being realistic and accounting for as many variables as possible, you’ll give yourself the best chance of success so give it some thought!

Pragmatically, how do I come up with reasonable financial forecasts for my business plan?

It’s all a question of common sense, really.

How much do you plan on selling?
What are your short, medium and long term financial goals?
What would be the cost of production?
What margin does that leave you with?
What fixed costs would you expect?
How about variable costs?
Have you included transaction fees and credit card fees in your costs?
What is the cost of insurance premiums?
Will there be any debt to repay?
What type of budget do you need for marketing purposes?
What is the cost of acquisition of the client?
What operational margin does it leave before the taxman comes in?
What kind of money do you need to meet your long term goals?
Have you planned for any emergency fund at all?

Right, that’s a long list. But! Answering those questions should give you a strong basis to build financial projections that make sense, because that’s literally how you would read your income statement in the end.

If you were trying to translate boring numbers into a meaningful story, that’s exactly where you would start!

Again, we have you covered with all this.

If you are looking for a concrete and practical financial plan example, make sure to download our business plan template down the page. It will give you the basic pro forma financials you’ll need.

If you need to understand the logic behind the template and would rather use an automated spreadsheet to get everything done, however, then it’s time to stop struggling.

The Impactified Business Plan Builder will provide everything you need: the automated tables and two hours of business coaching videos designed to explain all the logic you’ll need – what are you waiting for?

Why Are Financial Projections so Important in the end?

So, overall, why is creating financial projections so important? Are there various types of financial projections anyway? There are several things to keep in mind here.

First, your financial projections are important because they give bankers and investors the numbers they need (to make an informed decision) in a format they expect to see.

Second, your projections show whether your strategy is aligned with the means at your disposal to achieve it and whether you are aware of the financial engineering required to make your business roll.

Third, and in a related way, forecasts will give you, as the entrepreneur in charge, an opportunity to show if you understand the business for real (or if someone else not present during the discussion wrote the plan for you).

All of these documents are important, but you (nobody else!) will need to be able to tell a story around them.

Investors aren’t just looking for numbers! They invest in teams and people before investing in projects, so they want to know that you understand your business and that you have a plan for the future!

So, make sure your financial projections are accurate and be prepared to answer any questions investors have about them.

Understanding the investment process

To understand how to handle the exercise properly, understanding the investment and funding process in general is important.

What do bankers and investors expect when they are looking at a business plan? How do they decide whether to invest or not? And how do the financial projections help them make that decision?

In short, investors are looking for a return on their investment. So, they want to know what they can expect to earn from their investment, and how that compares to the risks they’re taking.

Your projected income statement is important there, but so are your cashflow projections!

Your financial estimates should therefore show how your business will grow and what profits you’ll generate, both in the short-term and long-term. This information will help investors determine whether or not your business is a good investment.

In contrast, bankers have a much lower risk tolerance and are not interested in funding you – they lend money to those who have money to repay the debt (or some assets to engage as collateral in case something goes wrong). Hence, what they look for is not a high return on investment based on risk, but a repayment capacity based on predictability and wise financial management.

Said differently? You need to create financial projections that make sense and adapt your financial pitch to your audience accordingly.

Show investors that there is a great opportunity to make money at a later stage and show bankers you will be able to start repaying as soon as possible.

Again, if you need to explore the question of investors’ mindsets, we elaborate on that in our video module – it’s time to give it a try!

Business valuation and exit thinking

Last but not least, understanding the investment process means that you also need to start thinking in terms of valuation and exit.

Or, said differently, the financial plan in your business plan must lead you to think about what your business will be worth a few years from now, and about how you will be able to make money (for you and your investment partners) by selling it.

On the one hand, exit thinking relates to the idea that investors invest in a business with the expectation that the business will raise more money later on, at which stage a larger investor will come in and buy the existing investors out.

To make your investors some money, therefore, you have to start thinking in terms of exiting the business at some point – which means progressively turning the business into an asset that works on its own, for you and as much as possible without you.

This mindset is absolutely key – think about it!

On the other hand, the discussion leads us to think in terms of business valuation – understand, how much is the business worth, and how much could it be sold for.

That topic is probably getting too technical for this article’s discussion, so we’ll explore it in another post.

Meanwhile, make sure to listen to the exit & valuation video in The Business Plan Builder module . We explain all this and even go as far as giving you an automated valuation calculator in the financial tables part of the tool – again, you have no excuse!

Avoiding the typical mistakes small businesses make with financial planning

To finish with the discussion, what should you keep in mind if you wanted to turn your financial plan into an asset that generates money rather than frustration?

Like it or not, but small business financial planning isn’t an intuitive thing and people tend to make very typical mistakes you should avoid at all costs!

Know your business

First piece of advice, you really (really, really) want to know your business from every angle.

When you are writing the financial plan in your business plan, it’s important to remember that your projections should represent an estimate of future performance. That’s how investors and lenders will read your numbers anyway.

So, your financial projections and forecasts should be based on realistic assumptions and calculations that you should always be prepared to adjust as needed.

In order to make accurate projections, it is therefore extremely important to have a good understanding of your business and the industry it operates in. You should also consult with industry experts and other professionals who can help you make informed decisions about your business.

Do the exercise yourself!

When you’re writing your financial plan, it’s important to avoid making common mistakes. One of the most common errors is underestimating how much money your business will need to operate.

Another is to rely on business plan consultants to write your financial projections without being able to understand the numbers yourself. This can lead to mistakes if the numbers are incorrect, and it can lead to embarrassing ahem! moments if you can’t explain how this or that number ended up in the document.

The best way to ensure accuracy is to do the exercise yourself with the right tools in hand and the brainstorming support of someone you trust to challenge your thoughts and conclusions.

This can be done with your acting CFO or close financial advisor if you have one, or with a fellow entrepreneur if anyone around you has the right mindset to dig into the discussion with you.

Alternatively, hiring a business coach is another way to brainstorm and challenge yourself – follow the link to find out more about that.

Don’t be a tourist. That’s stupid.

Third piece of advice: don’t enter into a discussion with a potential partner as a tourist – this is stupid, and that could very well kill you.

We have seen countless entrepreneurs walk into a room (let alone into a large startup event) saying that they were raising money for their startup. Yet, more often than not, their financial targets are not set or beyond approximative, which means they can’t explain why they need money and how they are going to spend it.

When you do that, the only thing you do is be stupid and make sure everyone knows about it.

First, because they won’t take you seriously. Would you invest money into someone who can’t tell you how they’ll use it and with what return on investment expectations?

And second, because the people you talk to will most likely ask you to come back to them once you have more information to provide. Which either means “don’t come back before six months to a year” or “please don’t come back at all, I have better things to do with my time and more competent people to talk to”.

Don’t be a tourist or you’ll just burn yourself. That’s stupid.

Turn your numbers into a story

The fourth piece of advice is going to be a repeat from earlier, but it’s important so let’s be redundant.

Now that you’ve written your financial projections, it’s time to go beyond the numbers and start telling your business story. The financial plan in your business plan is a great place to start but remember that it’s just one part of your overall pitch.

You’ll also need to be ready to pitch your idea, product, or service, and be ready to defend your financial plan against questions from investors or lenders.

Think holistically and build a story people will want to listen to, remember and act on. Period!

TL;DR: Get your financial projections right!

Now that you understand the different components of a financial plan, it’s time to learn how to write it. The key to writing a good financial plan is to be realistic. Don’t make assumptions that are unrealistic or impossible to achieve.

Start by estimating your sales and expenses for the first year of business. Be as specific as possible, and remember to include both fixed and variable costs. From there, you can create a cash flow statement that shows how your business will generate and spend money over time.

The goal of a financial plan is to paint a realistic picture of your business’s financial future. So make sure to update your plan as your business changes and grows. With careful planning and accurate numbers, you can ensure that your business will be successful for years to come.

What should your business plan financial plan include?

A profit and loss statement – also known as your P&L statement, or as an income statement
A cash flow statement showing if your business plan financial projections are realistic

What is the purpose of your business plan’s financial projections?

To how the plan you have for the business in terms of numbers
To show a financial overview of what you think can be achieved, by when, with what means
To show you have a cashflow management strategy that makes sense
To show you understand the standardized expectations and know how to play by the book
To show that, overall, your business proposal makes sense whatever the angle!

Need a reliable template and video tutorial to get your financial business plan & financial projections right?

It’s built around over 2 hours of explanatory videos and comes with everything you’ll need to:

Figure out what you need to figure out – powerful, uh?
Understand the business plan code!
Write a top business plan – with just the right amount of words and pages!
Build your financial estimates – with an automated financial projections template excel spreadsheet!
Create a visually appealing pitch deck people will want to read thanks to our designer-made templates!

If you want to stop wasting your time, this is THE most simple business plan template, and you can’t afford to miss it!

Wanna’ start with something free? Our free business plan template is also here to help !

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Hey coach! I’m writing a business plan and I’m wondering how to build the financial projections part of the document. What’s the importance of financial projections exactly – I mean, isn’t it absolute BS? How do I write the financial plan in business plan, and even more importantly, how can I make sense of all those messy tables? Can you help me understand this? Thanks in advance!

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Hey coach! I was wondering – how much does a business plan cost? I need one, and I’m thinking about having it written for me, so I’d love your insights. Also, I’ve heard business plan writers cost a lot of money, so I’m interested if you have tips for writing a low-cost business plan! Thanks!

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How to Write a Financial Projection for Your Business Plan

writing financial projection business plan

Every entrepreneur understands the importance of a solid business plan, but not all grasp the crucial role of financial projections within that blueprint. Financial projections aren’t just about appeasing investors or lenders; they’re about charting a realistic and sustainable course for your business’s future. They offer a window into the anticipated financial health of your enterprise, guiding decisions and flagging potential challenges. Here we navigate the intricacies of crafting a comprehensive financial projection, illuminating the steps to ensure your business’s financial clarity and readiness.

Definition of a Financial Projection

Garner investor trust, secure loans, guide internal decision making, revenue forecast, expense budget, cash flow statement, profit and loss statement, balance sheet, short-term (1 year), medium-term (3-5 years), long-term (5+ years), previous sales figures, past operating expenses, capital expenditures and investments, analyzing market trends, factoring in business growth and expansion, considering economic factors, fixed costs, variable costs, unexpected expenses, expected incoming cash, expected outgoing cash, ensuring positive cash flow, estimating gross profit, factoring in operational costs, predicting net profit, current assets and liabilities, long-term assets and liabilities, owner’s equity, avoid overestimating sales, plan for worst-case scenarios, factor in new data, adjust for external changes, hire or consult a financial expert, utilize financial software, list assumptions explicitly, regularly review and challenge assumptions, stick to a format, cross-check for discrepancies, introduction to financial projections.

In the realm of business planning, there’s a phrase that often circulates: “If you fail to plan, you plan to fail.” While many aspects of a business plan are crucial, understanding and projecting your business’s financial future might be one of the most pivotal. These projections can serve multiple purposes, from seeking funding to ensuring your business remains on a growth trajectory.

So, what exactly is a financial projection? At its core, a financial projection is a forecast of your business’s future financial performance. It’s a prediction of revenues, expenses, and profitability based on past data, current market conditions, and expected future trends. Imagine it as a roadmap for where you expect your business’s finances to be in the upcoming months and years.

Importance of Financial Projections in Business Planning

Underestimating the significance of financial projections is a common pitfall. These aren’t mere numbers on a sheet; they are a visualization of your business’s heartbeat. Financial projections:

For investors, your financial projection provides a glimpse into your business acumen, illustrating if you’ve done your homework and are aware of potential challenges ahead.

When approaching lenders, they’ll want to be assured of your business’s capability to repay. Your projections offer this assurance, showing your anticipated income and expenses [1] .

For your internal team, these figures act as a lighthouse, ensuring that your business stays on course. They can help identify potential cash flow issues, guide pricing strategies, and determine potential areas of investment or cost-cutting.

Understanding the Basics of a Financial Projection

Before getting into creating your financial projections, it’s essential to grasp some foundational concepts. By understanding the primary components and the typical time frames involved, you’re better positioned to tailor your projections to your business’s unique needs and situations.

Key Components of Financial Projections

Every business, regardless of its size or industry, has some standard financial components that need to be factored into projections. While the depth and complexity may vary, the core elements remain consistent.

The revenue forecast is a prediction of the sales and income your business expects to generate over a particular period. This isn’t just a ballpark figure but should be based on tangible data like historical sales, current orders, and market trends.

This encapsulates all the costs your business is likely to incur. From salaries and rent to marketing expenses and utilities, an expense budget provides a comprehensive view of where your money will be going. It’s crucial for ensuring profitability and identifying areas where cost-efficiency can be improved.

Arguably one of the most critical components, the cash flow statement provides insights into how cash moves in and out of your business. It ensures that your business remains liquid, can pay its bills, and can invest in growth opportunities when they arise.

Often referred to as the income statement, this document gives an overview of your business’s profitability over time. It considers both revenues (income) and expenses to determine if the business is making a profit or incurring a loss.

Acting as a snapshot of your business’s financial health at a particular point in time, the balance sheet outlines your assets (what the company owns), liabilities (what the company owes), and equity (the owner’s or shareholders’ stake in the company) [2] .

Time Period for Projections

Financial projections aren’t a one-size-fits-all endeavor. Depending on your business goals, the nature of your industry, and specific needs, the projection period can vary. Generally, these projections can be categorized into short, medium, and long-term.

These projections provide a granular view of the business’s financial path in the immediate future. Especially beneficial for startups or businesses undergoing significant changes, short-term projections often have monthly or quarterly breakdowns.

Taking a broader perspective, medium-term projections are essential for businesses looking to expand, introduce new products, or enter new markets. They offer a more extended glimpse into the business’s financial health, enabling strategic planning and long-term decision-making.

For established businesses or those in industries with lengthy product development cycles, long-term projections can be invaluable. These offer a panoramic view of the business’s trajectory, helping to shape large-scale investments, mergers, or other significant financial decisions.

Steps to Create a Financial Projection

Crafting a financial projection might seem daunting, especially if you’re diving into it for the first time. However, with a systematic approach, it becomes a manageable task, allowing you to translate your business vision into numerical realities.

Gather Historical Data

Starting with a review of your business’s past performance provides a foundation upon which future projections can be built. Historical data not only offers a perspective of where you’ve been but can help in predicting future trends.

Begin with a thorough analysis of your past sales data. This can include monthly sales, seasonal fluctuations, and year-on-year growth. If your business is new and lacks historical sales data, consider analyzing competitors or similar businesses in your industry.

Scrutinize previous costs, identifying any patterns. Did marketing expenses peak at a particular time of the year? Were there unexpected costs that recurred? Recognizing these trends can guide your projections.

Review past investments, including machinery, property, or other significant purchases. Understand their depreciation and how they influenced your financial position.

Estimate Future Revenues

With historical data in hand, you can now start forecasting future income. This requires a mix of analysis, market understanding, and sometimes, a bit of educated guesswork [3] .

Stay abreast of market developments, sector growth, and broader economic indicators. For instance, if there’s a growing demand for eco-friendly products and your business is in that niche, you can anticipate higher sales.

Consider any expansion plans, be it opening a new store, launching a new product line, or tapping into a new market segment. These ventures will likely impact your revenue streams.

External factors like inflation, economic downturns, or changes in regulatory environments can all affect your business revenues. It’s crucial to factor these into your revenue projections.

Forecast Operating Expenses

Understanding your future costs is just as vital as predicting revenues. A business might have skyrocketing sales, but if expenses aren’t managed, it could still operate at a loss.

Start with costs that remain relatively constant, such as rent, salaries, and utilities. These are predictable and can be easily factored into your projections.

These expenses fluctuate based on business activity. For instance, if you produce more goods, your raw material costs might increase. Forecasting variable costs requires a good understanding of your business operations.

While we can’t predict all unexpected costs, having a contingency or emergency fund is prudent. This can cover unexpected repairs, legal fees, or other unforeseen expenditures.

Project the Cash Flow

The lifeblood of any business, cash flow ensures you can meet your financial obligations, from paying suppliers to covering payroll.

Factor in all sources of incoming cash, not just sales. This can include loans, investments, or any other influx of funds.

Look at all anticipated expenses, both regular and one-off payments. This could range from monthly utility bills to yearly tax payments [4] .

It’s essential that the cash coming into the business is more than what’s going out. Consistently negative cash flow can lead to insolvency.

Compile Profit and Loss Statement

Now, with both projected revenues and expenses at your disposal, you can determine your business’s potential profitability.

Deduct the cost of goods sold (COGS) from your total revenue to get the gross profit. This gives an initial glimpse into the business’s profitability without factoring in other operational costs.

Subtract all operational expenses (both fixed and variable) from your gross profit. This will provide an accurate picture of your net operational profit.

After deducting any additional expenses or obligations, like taxes or loan repayments, you will arrive at the net profit. This is the true bottom line, indicating the health and profitability of your business.

Design the Balance Sheet

A balance sheet provides a comprehensive snapshot of your business’s financial standing at a specific point in time.

List all short-term assets (like cash or inventory) and liabilities (like short-term loans or accounts payable).

Include assets that are expected to provide value over a longer period, like machinery or property. Similarly, factor in long-term debts or obligations.

This represents the owner’s stake in the business. It’s derived by subtracting total liabilities from total assets.

Tips for Creating Accurate Financial Projections

Drafting a financial projection is both an art and a science. While the steps outlined above provide a structured approach, there are certain nuances and best practices that can make the difference between a generic forecast and a truly insightful financial projection.

Stay Conservative in Your Estimates

It’s natural to be optimistic about your business’s prospects, especially if you’re passionate about your venture. However, when it comes to financial forecasting, it’s wise to err on the side of caution [5] .

While it’s tempting to predict a steep upward trend, it’s more prudent to take a conservative stance. This doesn’t mean underselling your business but rather being realistic in your predictions.

Always have a contingency plan. Whether it’s an economic downturn, unexpected expenses, or a key deal falling through, your projection should be resilient enough to weather such challenges.

Regularly Update Projections

The business environment is dynamic, and what might seem like a sure thing today can change tomorrow. Thus, it’s essential to keep your projections updated.

As you gather more data on sales, expenses, and market trends, continuously refine your projections to reflect this new information.

Economic fluctuations, regulatory changes, or even global events can impact business operations. Stay informed and adjust your projections accordingly.

Seek Expertise When Needed

While as a business owner you know your enterprise inside and out, there’s no harm in seeking external expertise, especially when it comes to financial planning.

A seasoned financial expert can bring a fresh perspective, spot potential pitfalls, and even suggest strategies you hadn’t considered.

Modern financial software tools come equipped with features that can automate parts of the projection process, provide templates, and even offer predictive analytics.

Validate Assumptions

Every projection is based on a set of assumptions. While some assumptions are based on hard data, others might be based on market insights or trends.

By clearly stating the assumptions on which your projections are based, you make them transparent for stakeholders and easier for yourself to revisit.

Don’t let your assumptions become set in stone. As the business landscape evolves, revisit these assumptions, challenge them, and refine as needed.

Ensure Consistency

Consistency in how you approach, structure, and revise your financial projections ensures that they remain reliable and easy to understand.

Whether it’s the categories you use, the time frames you consider, or even the software tools you deploy, maintaining consistency makes it easier to track changes, spot trends, and make comparisons.

Ensure that your financial projections align with other aspects of your business plan. For example, if you’re predicting a steep rise in sales, your marketing and operations plans should reflect strategies to drive and accommodate that growth.

[1] 6 steps to making financial projections for your new business [2] Writing a Business Plan—Financial Projections [3] What are Financial Projections and Why Do You Need Them? [4] How to Create a Financial Forecast for a Startup Business Plan [5] Business Plan – Financial Projections Section

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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Original text

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

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

What Are Financial Projections Used for?

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

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

What’s Included in Financial Projections?

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

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

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

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

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

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

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

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

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

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

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

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

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.

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What is financial planning?

Key takeaways

Financial planning involves defining your goals, understanding your financial picture, and taking steps to advance those goals.
Financial planning professionals can help you with a variety of needs, including budgeting, investment management, and retirement planning.
Wherever you are on your financial journey, a sound financial plan can give you peace of mind and confidence.

Financial planning can help you chart a course to get what you want out of life. By helping you figure out how much money you have and where it should go, financial planning is a way to set goals and get on a path to achieve them.

Feed your brain. Fund your future.

Financial planning is creating a comprehensive plan to reach your financial goals. By considering your whole financial life, it provides guidance on reaching both small, short-term targets as well as larger, long-term ones.

You can create a financial plan on your own or work with a professional financial planner who has the knowledge and time to integrate many aspects of finances into a plan, can identify risks and opportunities, and can help keep you on track in making progress toward your goals.

Why is financial planning important?

Financial planning is important because it helps you identify and prioritize your goals. It also aims to give you a complete picture of where you stand financially and identify changes you may need to make to increase the likelihood of achieving your goals—for example, which account types and financial products make sense for your personal situation. Some advantages of investing like compounding potential returns are realized over time so having a plan and starting early is important for the long term.

A financial plan can also help you uncover vulnerabilities, like not having enough saved in an emergency fund or being underinsured. And it may make you feel more confident and comfortable with the choices in your investment portfolio when the markets go up and down. That's why having a financial plan is important for people of all ages and financial backgrounds—not just older, wealthy people. Note that a financial plan is not a set-it-and-forget-it exercise, but an ongoing process that changes as your circumstances do. Your goals as a single person may be different from those of a married couple with children, for example.

Types of financial planning

Financial planning is a broad term that can cover a range of different techniques and goals. Most financial plans include multiple types of financial planning to take a holistic view and may address some or all of the following.

Cash-flow analysis

You may think of this as budgeting . Cash flow analysis helps you get a sense of what you have coming in each month and how you're using it. You need positive cash flow so that you can generate funds to pay down debt, build an emergency fund, or invest. By getting into the nitty-gritty of your cash flow, you can make conscious choices about where you want your money going and identify areas you may be able to trim or cut out entirely.

Debt management When you have multiple types of debt repayments competing for your dollars (think: credit card debt, student loans , and a mortgage), it can be difficult to figure out which you should prioritize paying first. Financial planning focused on debt management can help you identify ways to lower interest payments and strategize ways to repay your debts that work best for you while keeping you on track to meet your other financial goals and budgeting demands.

Retirement planning We all know we should be saving for later, but the question of how much to save for retirement —and in what accounts—can be tricky, particularly as you get closer to the age you hope to set up your permanent out-of-office message.

Retirement planning for those decades from retirement may be as simple as working their way up to contributing the maximum pre-tax salary allowance to a retirement account, like a 401(k) or individual retirement account (IRA) . For those near retirement, it may involve how to generate retirement income, such as figuring out which retirement accounts to draw from first, covering essential expenses, and how to manage Social Security income. A plan could give you peace of mind that you won't outlive your assets.

Investment planning Both retirement savers and those who are looking to build wealth outside of a retirement account can benefit from investment planning that aligns with their time horizon, financial situation, and risk tolerance . Investment planning can help you analyze and manage your portfolio holdings to better ensure your investments are working as well as they can for you. It may also reinforce the nature of market cycles—short-term downturns are expected but have historically always been followed by upturns, for example. Good investment planning may help keep you calm during rough stretches in the market and resist panic selling.

Education planning There are no ifs, ands, or buts—paying for an education is expensive. And it becomes even pricier if you're hoping to set aside enough for multiple children's educations. Education planning helps you figure out how much you need to save and the best strategies and accounts to cover education costs from pre-K to post-grad.

Tax planning If you're a W-2 worker (most 9-to-5ers are) without a complex financial situation, you may not need much more to do your taxes than self-service tax software. But for those with more complicated finances or people trying to determine the best way to manage income in retirement, financial planning can help you figure out the most tax-efficient way to manage your money. From taking advantage of tax deferral for savings goals, to qualifying for deductions and credits, to minimizing taxes to heirs, taxes touch many areas of financial planning.

Estate planning Don't let the name fool you. When it comes to financial planning, estate planning is less about sprawling manor homes and more about making sure you make your wishes known through documents like wills and trusts. Many estate planning techniques start with careful planning while you're living. Planning for what happens after you or your partner is gone can be hard to think about, but it's an important step in financial planning for all types of people, even those who are younger and who don't have large bank balances. It also helps you plan for who makes decisions if you become unable to and who becomes guardian for your children if necessary—important things regardless of wealth level.

Insurance planning Managing risk is fundamental so you don't encounter financial catastrophe that prevents you from achieving your goals. You probably know the importance of having health insurance, but there are countless other types of insurance that might help you during times of hardship. Financial planning can make sure you understand how disability and life insurance , as well as long-term care coverage, among other types of insurance, fit into your financial picture to help protect you and those you love.

How much does financial planning cost?

How much financial planning costs depends on whether you decide to go it alone or work with a professional. If you DIY, there are low- to no-cost online tools and resources that can help you put together your own financial plan . For instance, Fidelity has a range of online calculators you can use to estimate how much you need to save to retire by a certain age, or you could a use a robo-advisor to manage your investments. If you prefer to work with a pro, they may charge based on a percentage of the assets they handle for you, by the hour, or a one-time flat fee.

How to create a financial plan

Ready to start financial planning ? Check out our guide on how to make a financial plan . As you draft your plan, either on your own or with a pro, remember that a solid financial plan is more than just numbers. It's a map that puts you in the driver's seat to fund the life you envision for yourself now and in the future.

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IMAGES

34 Simple Financial Projections Templates (Excel,Word)
34 Simple Financial Projections Templates (Excel,Word)
34 Simple Financial Projections Templates (Excel,Word)
34 Simple Financial Projections Templates (Excel,Word)
FREE 9+ Sample Financial Business Plan Templates in Google Docs
How to Make Financial Projections for a Startup

VIDEO

Creating a Detailed Financial Projection for Your Restaurant Business
Mastering Consulting Metrics: Unveiling the Secrets of Financial Analysis
How to make financial projections or financial plan or financial forecast?
The Basics of Financial Projections for a Business Plan
Financial Model Template Overview for Online Travel Agency Startup
Differences Between a Startup Business Plan and Traditional Business Plan

COMMENTS

How To Create Financial Projections for Your Business Plan
Learn how to forecast your sales, expenses, and profits for your business plan using cash flow, income statement, and balance sheet. Find out what information to include, how to collect data, and what tools to use for financial projections.
How To Create Financial Projections for Your Business
Learn how to forecast your business's future revenues and expenses based on comparative data analysis, industry research, and more. Find out why financial projections are critical for attracting investors, planning for growth, and managing cash flow.
Business Plan Financial Projections
There are three main financial statements that you will need to include in your business plan financial projections: 1. Income Statement Projection. The income statement projection is a forecast of your company's future revenues and expenses. It should include line items for each type of income and expense, as well as a total at the end.
A Beginner's Guide to Financial Projections in 2024
Learn what financial projections are, why you need them, and how to create them for your small business. Find out how to use accounting software, historical data, and market research to forecast your sales, expenses, and income.
Writing a Business Plan—Financial Projections
Learn how to create financial projections for your startup, including sales forecast, expenses budget, cash flow statement, balance sheet, and profit and loss statement. Follow the generally accepted accounting principles and get an accountant's review to impress investors.
How to Create Financial Projections for Your Business
Learn how to make financial projections for a startup or an existing business using three core statements: income, cash flow, and balance sheet. See examples, tips, and templates to help you forecast your revenues and expenses.
How to Make Financial Projections for Business
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 ...
Financial Projections for Startups and Small Businesses
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 ...
Financial Projection
Financial Projection Explained. The process of financial projection in business plan explains the estimates and the future forecasts made regarding the business's financial condition and performance during a particular period. It may be for the coming year or the next few financial years. These estimates and projections are calculated based on some factors like past performance of the ...
Business Plan Financial Projections: How To Create Accurate Targets
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.
How to Write a Financial Plan: Budget and Forecasts
Financial ratios and metrics. With all of your financial statements and forecasts in place, you have all the numbers needed to calculate insightful financial ratios. While these metrics are entirely optional to include in your plan, having them easily accessible can be valuable for tracking your performance and overall financial situation.
Financial Projections: How to write the financial plan in business plan
The financial plan should illustrate the plan you have for the business in terms of numbers. It should include precise financial projections of what you think can be achieved. It should clearly illustrate your cashflow management strategy. And it should summarize the information clearly.
How to Write the Financial Section of a Business Plan
Use the numbers that you put in your sales forecast, expense projections, and cash flow statement. "Sales, lest cost of sales, is gross margin," Berry says. "Gross margin, less expenses, interest ...
How to make financial projections for a new business
2. Create financial projections. Plug your expenses and revenues into a cash flow projection that shows monthly inflows and outflows of money for the first 12 months of operations. For the second year, you can make quarterly or yearly projections. To create the projections, you can use an Excel spreadsheet or tools available in your accounting ...
How to Write a Financial Projection for Your Business Plan
Financial projections aren't just about appeasing investors or lenders; they're about charting a realistic and sustainable course for your business's future. They offer a window into the anticipated financial health of your enterprise, guiding decisions and flagging potential challenges. Here we navigate the intricacies of crafting a ...
Financial Projections: Accurately Plan Your Business' Future
Financial projections are the most common way to present financial information to investors. Getting a loan. If you're applying for a business loan with a bank or other financial institution, they'll likely want to see financial projections in your business plan. Banks are generally more risk-averse than investors.
Financial Projection Templates to Help You with Planning
A financial projection is a forecast of a business's future financial performance. It helps you estimate critical financial figures, such as revenues, expenses and profits, over a specific period. By creating financial projections, business owners can plan, make informed decisions, and prepare for various possibilities.
PDF Business Plan Financial Projections: How To Create Accurate Targets
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.
Free Financial Projection and Forecasting Templates
The elements in a financial projection template include future sales, costs, profits, and cash flow. This template illustrates expected receivables, payables, and break-even dates. This tool helps you plan for your business's financial future and growth. Here are the standard elements in a financial projection template:
Business Plan Financial Templates
This financial plan projections template comes as a set of pro forma templates designed to help startups. The template set includes a 12-month profit and loss statement, a balance sheet, and a cash flow statement for you to detail the current and projected financial position of a business. ‌. Download Startup Financial Projections Template.
Financial Projections Template
Download Template. Financial projections use existing or estimated financial data to forecast your business's future income and expenses. They often include different scenarios to see how changes to one aspect of your finances (such as higher sales or lower operating expenses) might affect your profitability.
Financial Projections
It is an essential part of any business plan. It helps create budgets, identify potential risks & investment opportunities, and make decisions. What is Financial Projection? Financial projections are a set of predictions about the Company's financial future. Projections also use information like the company's current and past data.
How To Create Financial Projections for Your Business Plan
Business plan financial projections are a company's estimates, or forecasts, of its financial performance at some point in the future. For existing businesses, draw on historical data to detail how your company expects metrics like revenue, expenses, profit, and cash flow to change over time.
What is financial planning?
Why is financial planning important? Financial planning is important because it helps you identify and prioritize your goals. It also aims to give you a complete picture of where you stand financially and identify changes you may need to make to increase the likelihood of achieving your goals—for example, which account types and financial products make sense for your personal situation.

Business Plan Financial Projections

What Are Business Plan Financial Projections?

1. Income Statement Projection

Sample Income Statement

Sample Cash Flow Statements

Sample Balance Sheet

Cost Assumptions

Capital Expenditures, Funding, Tax, and Balance Sheet Items

Capital Expenditures

Balance Sheet Items

Financial Projection Scenarios

Conduct a Ratio Analysis

Be Realistic

Sales Forecast

Create Multi-Year Financial Projections

Business Plan Financial Projections FAQs

What are annual income statements?

What are the necessary financial statements?

How do I create financial projections?

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Expenses Budget

Cash Flow Statement

Profit and Loss Statement

Balance Sheet

Break-Even Projection

Additional Tips

How to Create Financial Projections for Your Business

What are Financial Projections?

Necessary Financial Statements

Income Statement Projection

Cash Flow Projection

Balance Sheet Projection

How to Finish Your Business Plan and Financial Projections in 1 Day!

Creating Financial Projections

Create a List of Assumptions

Cost Assumptions

Assumptions related to Capital Expenditures, Funding, Tax, and Balance Sheet Items

Create Two Scenarios

Conduct a Ratio Analysis

Be Realistic

Create Multi-Year Financial Projections

Other Resources for Writing Your Business Plan

Other Helpful Business Plan Articles & Templates

Resources for Your Growing Business

Key Takeaways

How to Create a Financial Projection

What Is Financial Projection?

1. Start With A Sales Projection

2. Create Your Expense Projection

3. Create Your Balance Sheet Projection

4. Make Your Income Statement Projection

5. Finally, Create Your Cash Flow Projection

Income Statement

Cash Flow Statement

Balance Sheet

Financial Projections Advantages

FAQs on Financial Projections

Why are financial projections important?

What is an example of a financial projection?

Are financial forecasts and financial projections the same?

What is the most widely used method for financial forecasting?

What is the purpose of a financial projection?

Michelle Alexander, CPA

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