A business plan financial forecast connects your sales expectations with costs, cash needs, and the resources required to operate. It is an estimate based on assumptions, so readers need to understand the reasoning behind the numbers.
Build a business plan financial forecast
Start with the customer demand, prices, delivery capacity, and expenses described elsewhere in the plan. Explain the source and timing of major assumptions. Keep historical results separate from projected figures.
Understand three connected statements
- Income statement: Shows revenue, expenses, and profit or loss over a period.
- Cash-flow statement: Shows money entering and leaving the business over a period.
- Balance sheet: Shows assets, liabilities, and equity at a particular date.
These statements are connected, but they are not interchangeable. A profitable sale can appear before the customer pays, so profit and available cash can differ.
Check timing and uncertainty
Consider when customers pay, when suppliers need payment, and when equipment or other commitments require cash. Test a lower-sales or higher-cost scenario to see how the plan changes.
Use the SBA’s financial-projection guidance as a starting point. Ask an appropriately qualified accountant to help with accounting questions and important funding decisions.
Review against actual results
Schedule regular comparisons between the forecast and what happened. Investigate differences and update assumptions transparently. The purpose is better decisions, not making the original prediction look correct.