financial projection example in business plan

Original text

Financial projections use existing or estimated financial data to forecast your business’s future income and expenses. They often include different scenarios so you can 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 tools you need.

What are financial projections used for.

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

• If you’re starting a business, financial projections help you plan your startup budget, assess when you can 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, both startups and existing businesses will 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 in business
• Income statements for the first 3 years in business
• Balance sheet
• Break-even analysis
• Financial ratios
• Cost of goods sold (COGS), and
• Amortization and depreciation for your business.

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

All of 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 to account 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 projections are always 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 be useful in fine-tuning 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 actual financial statements on a regular basis to see how well your business is meeting 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 that you save a copy of this spreadsheet under a different name before doing so. 

For assistance in completing this template, we recommend downloading the  Financial Projections Template Guide in English  or  Espanol .

You can also see a completed sample by downloading the  Ann's Nursery Example .

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: Module 4 - 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.

Copyright © 2023 SCORE Association, SCORE.org

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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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.

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How to Write the Financial Section of a Business Plan

An outline of your company's growth strategy is essential to a business plan, but it just isn't complete without the numbers to back it up. here's some advice on how to include things like a sales forecast, expense budget, and cash-flow statement..

A business plan is all conceptual until you start filling in the numbers and terms. The sections about your marketing plan and strategy are interesting to read, but they don't mean a thing if you can't justify your business with good figures on the bottom line. You do this in a distinct section of your business plan for financial forecasts and statements. The financial section of a business plan is one of the most essential components of the plan, as you will need it if you have any hope of winning over investors or obtaining a bank loan. Even if you don't need financing, you should compile a financial forecast in order to simply be successful in steering your business. "This is what will tell you whether the business will be viable or whether you are wasting your time and/or money," says Linda Pinson, author of Automate Your Business Plan for Windows  (Out of Your Mind 2008) and Anatomy of a Business Plan (Out of Your Mind 2008), who runs a publishing and software business Out of Your Mind and Into the Marketplace . "In many instances, it will tell you that you should not be going into this business." The following will cover what the financial section of a business plan is, what it should include, and how you should use it to not only win financing but to better manage your business.

Dig Deeper: Generating an Accurate Sales Forecast

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How to Write the Financial Section of a Business Plan: The Purpose of the Financial Section Let's start by explaining what the financial section of a business plan is not. Realize that the financial section is not the same as accounting. Many people get confused about this because the financial projections that you include--profit and loss, balance sheet, and cash flow--look similar to accounting statements your business generates. But accounting looks back in time, starting today and taking a historical view. Business planning or forecasting is a forward-looking view, starting today and going into the future. "You don't do financials in a business plan the same way you calculate the details in your accounting reports," says Tim Berry, president and founder of Palo Alto Software, who blogs at Bplans.com and is writing a book, The Plan-As-You-Go Business Plan. "It's not tax reporting. It's an elaborate educated guess." What this means, says Berry, is that you summarize and aggregate more than you might with accounting, which deals more in detail. "You don't have to imagine all future asset purchases with hypothetical dates and hypothetical depreciation schedules to estimate future depreciation," he says. "You can just guess based on past results. And you don't spend a lot of time on minute details in a financial forecast that depends on an educated guess for sales." The purpose of the financial section of a business plan is two-fold. You're going to need it if you are seeking investment from venture capitalists, angel investors, or even smart family members. They are going to want to see numbers that say your business will grow--and quickly--and that there is an exit strategy for them on the horizon, during which they can make a profit. Any bank or lender will also ask to see these numbers as well to make sure you can repay your loan. But the most important reason to compile this financial forecast is for your own benefit, so you understand how you project your business will do. "This is an ongoing, living document. It should be a guide to running your business," Pinson says. "And at any particular time you feel you need funding or financing, then you are prepared to go with your documents." If there is a rule of thumb when filling in the numbers in the financial section of your business plan, it's this: Be realistic. "There is a tremendous problem with the hockey-stick forecast" that projects growth as steady until it shoots up like the end of a hockey stick, Berry says. "They really aren't credible." Berry, who acts as an angel investor with the Willamette Angel Conference, says that while a startling growth trajectory is something that would-be investors would love to see, it's most often not a believable growth forecast. "Everyone wants to get involved in the next Google or Twitter, but every plan seems to have this hockey stick forecast," he says. "Sales are going along flat, but six months from now there is a huge turn and everything gets amazing, assuming they get the investors' money."  The way you come up a credible financial section for your business plan is to demonstrate that it's realistic. One way, Berry says, is to break the figures into components, by sales channel or target market segment, and provide realistic estimates for sales and revenue. "It's not exactly data, because you're still guessing the future. But if you break the guess into component guesses and look at each one individually, it somehow feels better," Berry says. "Nobody wins by overly optimistic or overly pessimistic forecasts."

Dig Deeper: What Angel Investors Look For

How to Write the Financial Section of a Business Plan: The Components of a Financial Section

A financial forecast isn't necessarily compiled in sequence. And you most likely won't present it in the final document in the same sequence you compile the figures and documents. Berry says that it's typical to start in one place and jump back and forth. For example, what you see in the cash-flow plan might mean going back to change estimates for sales and expenses.  Still, he says that it's easier to explain in sequence, as long as you understand that you don't start at step one and go to step six without looking back--a lot--in between.

• Start with a sales forecast. Set up a spreadsheet projecting your sales over the course of three years. Set up different sections for different lines of sales and columns for every month for the first year and either on a monthly or quarterly basis for the second and third years. "Ideally you want to project in spreadsheet blocks that include one block for unit sales, one block for pricing, a third block that multiplies units times price to calculate sales, a fourth block that has unit costs, and a fifth that multiplies units times unit cost to calculate cost of sales (also called COGS or direct costs)," Berry says. "Why do you want cost of sales in a sales forecast? Because you want to calculate gross margin. Gross margin is sales less cost of sales, and it's a useful number for comparing with different standard industry ratios." If it's a new product or a new line of business, you have to make an educated guess. The best way to do that, Berry says, is to look at past results.
• Create an expenses budget. You're going to need to understand how much it's going to cost you to actually make the sales you have forecast. Berry likes to differentiate between fixed costs (i.e., rent and payroll) and variable costs (i.e., most advertising and promotional expenses), because it's a good thing for a business to know. "Lower fixed costs mean less risk, which might be theoretical in business schools but are very concrete when you have rent and payroll checks to sign," Berry says. "Most of your variable costs are in those direct costs that belong in your sales forecast, but there are also some variable expenses, like ads and rebates and such." Once again, this is a forecast, not accounting, and you're going to have to estimate things like interest and taxes. Berry recommends you go with simple math. He says multiply estimated profits times your best-guess tax percentage rate to estimate taxes. And then multiply your estimated debts balance times an estimated interest rate to estimate interest.
• Develop a cash-flow statement. This is the statement that shows physical dollars moving in and out of the business. "Cash flow is king," Pinson says. You base this partly on your sales forecasts, balance sheet items, and other assumptions. If you are operating an existing business, you should have historical documents, such as profit and loss statements and balance sheets from years past to base these forecasts on. If you are starting a new business and do not have these historical financial statements, you start by projecting a cash-flow statement broken down into 12 months. Pinson says that it's important to understand when compiling this cash-flow projection that you need to choose a realistic ratio for how many of your invoices will be paid in cash, 30 days, 60 days, 90 days and so on. You don't want to be surprised that you only collect 80 percent of your invoices in the first 30 days when you are counting on 100 percent to pay your expenses, she says. Some business planning software programs will have these formulas built in to help you make these projections.
• Income projections. This is your pro forma profit and loss statement, detailing forecasts for your business for the coming three years. 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, and taxes, is net profit."
• Deal with assets and liabilities. You also need a projected balance sheet. You have to deal with assets and liabilities that aren't in the profits and loss statement and project the net worth of your business at the end of the fiscal year. Some of those are obvious and affect you at only the beginning, like startup assets. A lot are not obvious. "Interest is in the profit and loss, but repayment of principle isn't," Berry says. "Taking out a loan, giving out a loan, and inventory show up only in assets--until you pay for them." So the way to compile this is to start with assets, and estimate what you'll have on hand, month by month for cash, accounts receivable (money owed to you), inventory if you have it, and substantial assets like land, buildings, and equipment. Then figure out what you have as liabilities--meaning debts. That's money you owe because you haven't paid bills (which is called accounts payable) and the debts you have because of outstanding loans.
• Breakeven analysis. The breakeven point, Pinson says, is when your business's expenses match your sales or service volume. The three-year income projection will enable you to undertake this analysis. "If your business is viable, at a certain period of time your overall revenue will exceed your overall expenses, including interest." This is an important analysis for potential investors, who want to know that they are investing in a fast-growing business with an exit strategy.

Dig Deeper: How to Price Business Services

How to Write the Financial Section of a Business Plan: How to Use the Financial Section One of the biggest mistakes business people make is to look at their business plan, and particularly the financial section, only once a year. "I like to quote former President Dwight D. Eisenhower," says Berry. "'The plan is useless, but planning is essential.' What people do wrong is focus on the plan, and once the plan is done, it's forgotten. It's really a shame, because they could have used it as a tool for managing the company." In fact, Berry recommends that business executives sit down with the business plan once a month and fill in the actual numbers in the profit and loss statement and compare those numbers with projections. And then use those comparisons to revise projections in the future. Pinson also recommends that you undertake a financial statement analysis to develop a study of relationships and compare items in your financial statements, compare financial statements over time, and even compare your statements to those of other businesses. Part of this is a ratio analysis. She recommends you do some homework and find out some of the prevailing ratios used in your industry for liquidity analysis, profitability analysis, and debt and compare those standard ratios with your own. "This is all for your benefit," she says. "That's what financial statements are for. You should be utilizing your financial statements to measure your business against what you did in prior years or to measure your business against another business like yours."  If you are using your business plan to attract investment or get a loan, you may also include a business financial history as part of the financial section. This is a summary of your business from its start to the present. Sometimes a bank might have a section like this on a loan application. If you are seeking a loan, you may need to add supplementary documents to the financial section, such as the owner's financial statements, listing assets and liabilities. All of the various calculations you need to assemble the financial section of a business plan are a good reason to look for business planning software, so you can have this on your computer and make sure you get this right. Software programs also let you use some of your projections in the financial section to create pie charts or bar graphs that you can use elsewhere in your business plan to highlight your financials, your sales history, or your projected income over three years. "It's a pretty well-known fact that if you are going to seek equity investment from venture capitalists or angel investors," Pinson says, "they do like visuals."

Dig Deeper: How to Protect Your Margins in a Downturn

Related Links: Making It All Add Up: The Financial Section of a Business Plan One of the major benefits of creating a business plan is that it forces entrepreneurs to confront their company's finances squarely. Persuasive Projections You can avoid some of the most common mistakes by following this list of dos and don'ts. Making Your Financials Add Up No business plan is complete until it contains a set of financial projections that are not only inspiring but also logical and defensible. How many years should my financial projections cover for a new business? Some guidelines on what to include. Recommended Resources: Bplans.com More than 100 free sample business plans, plus articles, tips, and tools for developing your plan. Planning, Startups, Stories: Basic Business Numbers An online video in author Tim Berry's blog, outlining what you really need to know about basic business numbers. Out of Your Mind and Into the Marketplace Linda Pinson's business selling books and software for business planning. Palo Alto Software Business-planning tools and information from the maker of the Business Plan Pro software. U.S. Small Business Administration Government-sponsored website aiding small and midsize businesses. Financial Statement Section of a Business Plan for Start-Ups A guide to writing the financial section of a business plan developed by SCORE of northeastern Massachusetts.

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Business Plan Financial Projections

• November 3, 2022

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.

Necessary Financial Statements

There are three main financial statements that you will need to include in your business plan financial projections:

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

for the period ending December 31, 20XX

Product A Sales $10,000

Product B Sales $15,000

Total Revenue $25,000

Cost of Goods Sold $6,000

Salaries and Wages $8,000

Rent $1,500

Marketing and Advertising $2,500

Total Expenses $20,000

Net Income $5,000

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

ABC Company Cash Flow Projection

for the Year Ended December 31, 20XX

Cash flows from operating activities:

Cash receipts from customers $ 1,000,000

Cash payments to suppliers and employees $    600,000

Interest and taxes paid $      50,000

Net cash provided by operating activities $    350,000

Cash flows from investing activities:

Purchase of equipment $ 200,000

Sale of investments $   10,000

Net cash used in investing activities $ 190,000

Cash flows from financing activities:

Proceeds from issuance of debt $ 1,000,000

Repayment of debt $      50,000

Proceeds from issuance of equity $      10,000

Net cash provided by financing activities $ 1,060,000

Net increase in cash and cash equivalents $ 1,220,000

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

ABC Company Balance Sheet Projection

as of December 31, 20XX

Cash and cash equivalents $ 500,000

Accounts receivable $ 200,000

Inventory $ 100,000

Prepaid expenses $   50,000

Total assets $ 850,000

Liabilities and equity:

Accounts payable $    300,000

Short-term debt $ 1,000,000

Long-term debt $      50,000

Total liabilities $ 1,350,000

Common stock $ 100,000

Retained earnings $ (600,000)

Total equity $ (500,000)

Total liabilities and equity $ 850,000

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.

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

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.

It is important to track your company’s funding sources over time to ensure that it has a healthy mix of financing options. A healthy balance is necessary for a successful business.

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.

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

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.

It is important to track your company’s debt levels and asset values over time to ensure that they are in line with your projections. 

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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What are financial projections and why do you need them.

by Mary Girsch-Bock | Updated Aug. 5, 2022 - First published on May 18, 2022

Image source: Getty Images

If you run a multimillion-dollar empire, it’s likely that your accounting staff is using enterprise-level software that can quickly and easily produce financial projections.

But if you’re a sole proprietor, freelancer, or micro-business owner, you’re likely to use data from your accounting software in order to prepare financial projections, but the software won’t help you in the preparation itself.

While that may sound confusing, it just means that most software applications such as QuickBooks Online , Sage 50cloud Accounting , and Xero can create the financial statements needed for you to prepare your financial projections, but the software itself will not be used in the actual creation of the projections.

At a glance: How you can create and utilize financial projections

• Three financial statements -- a balance sheet , income statement , and cash-flow statement -- are required for any financial projections you create.
• New businesses need financial projections, too. If you’re still in the planning stages, be aware that you will still need to prepare projections for your business plan.
• You’ll likely be using a template to prepare your projections. While accounting software provides the basis for your financial projections, most small business accounting software applications aren’t capable of producing financial projections.

Overview: What are financial projections?

Financial projections are an important part of managing your business. Preparing financial projections may seem like a daunting task for small business owners, but if you can create financial statements, you can create financial projections. Similar to creating a budget , financial projections are a way to forecast future revenue and expenses for your business.

Frequently used as a way to attract future investors, financial projections are also an important component when preparing a business plan for a new business or creating a strategic plan for your current business.

You can create both short-term and long-term financial projections, with most business owners using both types of projections:

Short-term projections: Short-term projections usually cover a year and are typically broken down by month.

Long-term projections : Long-term projections typically cover the next three to five years and are usually used when creating a strategic plan, or for attracting investors.

What are financial projections used for?

Financial projections can be used in a variety of ways, but they’re usually used to attract investors or when applying for a bank loan or line of credit.

Here are a few situations that would call for financial projections:

• You’re creating a business plan: One of the first things potential investors or banks want to see is a financial projection for your business, even if it isn’t operational yet.
• You’re hoping to attract investors: When looking to invest in a business, investors typically look for financial viability. No one will invest in a business without a financial projection that outlines variables such as expenses, revenue, and growth patterns .
• You’re applying for a loan or line of credit: Again, banks or other financial institutions are interested in the financial health of your business. This means providing them not just with current financial statements that outline current business performance, but also where you see your business next year, and the year after.
• You want to get a better handle on your business: You may not be in the market to attract investors or obtain a bank loan, but you do want to be able to map out your potential growth and create budgets allowing your business grow and thrive. Financial projections can help here, too.

How to create financial projections for your small business

When you’re creating financial projections for your business, the same information is required whether your business is up and running or still in the planning stages.

The difference is whether you can create your projections using historical financial data, or if you’ll need to start from scratch. This includes creating projections based on your own experience in the field, or by doing some market research in the industry in which your business will operate.

Step 1: Create a sales projection

Sales projections are an important component of your financial projections. For existing businesses, you can base your projections on past performance obtained from your financial statements . For instance, if your sales tend to be higher in the summer and fall, you’ll want to include that in your projections.

You’ll also need to take under consideration some outside factors, such as the current and projected health of the economy, whether your inventory may be affected by additional tariffs, and whether there’s been a downturn in your industry.

While we all want to be optimistic about our businesses, be sure to plan realistically.

This is one of Microsoft Excel's templates for sales forecasting. Image source: Author

Those still in the planning stages can follow the exact same plan (minus historical data), but you’ll need to do some additional research into the health of similar businesses in your proposed industry in order to plan as accurately as possible.

Step 2: Create an expense projection

Creating an expense projection may initially seem a bit simpler, because it’s easier to predict possible expenses than it is to predict the buying habits of current or potential customers.

For those working from history, you can predict with some certainty what your fixed expenses are, such as your rent or mortgage, along with recurring expenses such as utilities and payroll.

However, it’s much harder to predict those one-time expenses that have the potential to destroy your business.

What if the roof leaks in your business and destroys 75% of your inventory? What if you import the majority of your inventory from China, and you’re hit with escalating prices?

The “what ifs” can drive any of us crazy. All you can do is project expenses to the best of your ability, and maybe tack on an additional 15% to your initial number.

Step 3: Create a balance sheet projection

If you’re using accounting software and your business has been operational for at least a few months, you’ll be able to create a balance sheet directly from your software.

A balance sheet shows the financial position of your business, listing assets, liabilities, and equity balances for a particular time frame.

When creating your financial projections, you can use your current balance sheet totals to better predict where your business will be one to three years down the road.

For those of you in the planning stages, create a balance sheet based on the information you have collected from industry research.

Step 4: Create an income statement projection

Current business owners can easily create an income statement projection by using your current income statement to estimate your projected numbers.

This Excel template can be used to display revenue, cost of goods sold, expenses, and other income to identify net income. Image source: Author

An income statement provides a view of the net income of your business after things such as cost of goods sold, taxes, and other expenses have been subtracted.

This can give you a good idea of how your business is currently performing as well as serve as the basis for estimating net income for the next one to three years.

If you're in the planning stages, producing a possible income statement demonstrates that you’ve done your research and have created a good-faith estimate of your income for the next three years.

If you’re not sure where to start, visit market research firms such as Allied Market Research, which can give you an overview of your targeted industry, including product sales, target markets, and current and expected industry growth levels.

Step 5: Create a cash flow projection

The last step in completing your financial projection is the cash flow statement . The cash flow statement ties into both the income statement and the balance sheet, displaying any cash or cash-related activities that affect your business.

The cash flow statement shows how money is being spent, a must for those looking to attract an investor or obtain financing.

Again, you can use your current cash flow statement if your business has been operational for at least six months, while those of you in the start-up phase can use the data you’ve collected in order to create a credible cash flow projection .

Benefits of using accounting software for your financial projections

If you’re an existing business owner, you’re likely using accounting software to track your financial transactions. If so, the availability of financial reports such as a balance sheet, income statement, and cash flow statement are valuable resources when creating financial projections.

Here are some of the benefits of using accounting software:

• Accuracy: Unless you’re still in the planning stages, having the ability to create various financial reports and transactional histories from your software application helps to ensure your financial projections are based on accurate numbers.
• Availability of data: Being able to pull financial reports can go a long way in preparing financial projections. While you’ll likely create the projections themselves using a spreadsheet application such as Microsoft Excel , the data for your projections is readily available for you and others to access and review.
• Credibility: Being able to include supporting financial statements created by your accounting software with your financial projections lends credibility to your business and signals that you’re serious.

If you’re looking for a template to use to create financial projections, SCORE offers a downloadable financial projections template from Excel.

Finding the best way to create financial projections

While you’ll likely be using a template to create your financial projections, don’t underestimate the important role accounting software plays in creating accurate financial projections -- a necessity if you’re looking for investors or additional financing for your business.

If you’re still using manual ledgers or spreadsheet software to manage your business, it may be time to step up to the next level of professionalism by choosing and implementing an accounting software application that works for your business.

If you’re not sure which accounting software is right for you, be sure to check out our accounting software reviews .

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Financial Projection Template

Building up forecast from payroll schedules, operating expenses schedules and sales forecast to the three financial statements

Our financial projection template will help you forecast future revenues and expenses by building up from payroll schedules, operating expenses schedules, and sales forecast to the three financial statements.

Below is a screenshot of the financial projection template:

Download the Free Template

Enter your name and email in the form below and download the free template now!

Components of a financial projection template

This financial projection template contains the following sections:

#1 Payroll (current year)

In the payroll (current year) worksheet, you will input the payroll expenses for each of the full-time employees, part-time employees, and contractors. The model helps you break down the salary, taxes, employee insurance, pension, and employee bonus expenses so you can easily track the total amount for each of the items. These individual monthly payrolls then roll up to the summary tables, which automatically calculate the average hourly wage and net pay for each month (all expenses except bonuses) by staff type.

#2 Payroll (forecast)

In the payroll ( forecast ) worksheet, you will put your own assumptions for the growth rate of the number of workers for the period of forecast. These are the only manual inputs required for the model. Once the assumptions are filled in, the pre-entered formulas will generate the payroll forecast for the rest of the period and calculate average hourly wages by staff type. You’ll also be able to estimate the total amount of taxes, employee insurance, and pension expenses for each of the years.

#3 Sales (current year)

In the sales (current year) worksheet, you’ll input the per-unit sales price, the number of units sold, and the per-unit cost of goods sold for each product line under the “sales breakdown” section. The model will automatically calculate the monthly revenue , COGS , and gross margin for each product line, which are linked to the summary tables at the top of the worksheet. You’ll be able to quickly understand the sales and margin for each product for the current year.

#4 Sales (forecast)

In the sales (current year) worksheet, assumptions on sales growth rate are entered for the forecast period to generate the predicted revenue, COGS, and gross margin for the following years.

#5 Operating expenses (current year)

The operating expenses (current year) worksheet is for you to enter the actual operating expenses for the current year. These will help build up the forecast for operating expenses and the income statement.

#6 Operating expenses (forecast)

In the operating expenses (forecast) worksheet, the operating expenses forecast for the next few years will be calculated using the assumptions for each of the expense items.

#7 Income statement (current & forecast)

The income statements for the current year and forecast period are built up by linking to values in the sales worksheets and operating expenses worksheets.

#8 Balance sheet (current year)

This balance sheet worksheet consists of two main sections: balance sheet and supporting schedules. Balance sheet items such as accounts receivable , inventory , accounts payable , and retained earnings will be manually input, while items such as cash, property and equipment , and long-term debt will be linked to other parts of this financial projection template. For example, the debt & interest schedule under the supporting schedules section will help you compute the amount of debt closing and interest expenses , which will then be linked back up to the balance sheet as long-term debt and to the income statement as interest expense.

#9 Balance sheet (forecast)

This balance sheet forecast worksheet is built up by taking the current year balance sheet and calculating the following years’ values using assumptions such as accounts receivable days, inventory days , accounts payable days , and capital expenditures .

#10 Cash flow statement (current year & forecast)

The cash flow statements for the current year and forecast period are constructed using figures calculated in the income statement, balance sheet, and supporting schedules. The closing cash balance for each month will be linked back to the balance sheet, shown as cash under current assets .

#11 Financial ratio analysis

The final section of this financial projection template is the financial ratio analysis. This worksheet will show you the list of all commonly used financial ratios including profitability ratios , efficiency ratios, liquidity ratios, leverage ratios , and coverage ratios , which are calculated using all the worksheets previously built. The ratios will allow you to understand the financial stability of the company and its expected performance in the following years.

More Free Templates

For more resources, check out our business templates library to download numerous free Excel modeling, PowerPoint presentations, and Word document templates.

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Financial Projections

Financial projections definition.

Financial projections forecast a company’s expected financial performance and position by presenting expected metrics such as projected revenue, expenses, capital expenditures , cash flows, etc. Projections take the company’s data and financial statements into account along with various external factors.   It can project data over a specific period, typically lasting between a year, 5 years, or 10 years. An organization or individual puts together these projections to forecast future expenditures, earnings, assets, liabilities, profits, cash flows, capital spending requirements, etc.

Key Takeaways

• A financial projection predicts the business’s upcoming finances. They project future numbers, like costs, revenues, debt, cash flow, etc. 
• It uses a balance sheet, cash flow, and income statement to make the projections.
• Projections are detail-oriented and conclude outcomes for hypothetical plans, while a financial forecast speculates an overall overview of the company’s future. 
• 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. 
• The financial projection will also include assumptions made by management or other stakeholders . 
• The assumptions mainly involve estimating changes in sales, prices, production costs, and taxes. 
• Businesses use them for budgeting purposes, evaluating investment opportunities & risks, forecasting cash flow needs, and various business & financing decisions. 
• Companies create it at the start of each year to understand their end-year financial situation. 
• It is a valuable practice because it enables setting goals, identifying potential funding requirements, etc.

What Does Financial Projections Include?

Businesses can make projections to procure specific results. Thus, depending on the need, projections include specific financial metrics. Overall it takes into consideration the primary financial statements.

a) Balance Sheet

Organizations can assess their financial situation using a balance sheet. Equity firms must project their financial results three years in advance to calculate their break-even point . The three items that make up a balance sheet are,

• Assets – These are the company’s material possessions that have a monetary, material, or inventory value.
• Liabilities – A company’s liabilities are pending debts, accounts payable, or loans. 
• Equity – It is the net difference between the company’s total assets and liabilities.

Here’s how a projected balance sheet looks like (Source: EDUCBA’s Financial Analyst Training ):

b) Income Statement

The income statement summarizes how much money you’ve made, usually monthly or yearly. It is also known as the Profit and Loss statement and provides a quick snapshot of a company’s financial health. Some measures of the income statements are,

• Revenue: It is in line with the money earned from offered goods or services. 
• Expense: You must be sure to account for all costs that the business will incur, including direct costs like equipment rental, materials, employee salaries, etc. Also include general and administrative expenses like advertising, bank fees, insurance, office leasing, legal and accounting fees, etc. 
• Net Income: Net income is the final metric. We calculate it after subtracting all taxes, expenses, and interests from the revenue. 

Here’s what a projected income statement looks like:

Cash Flow Projections

Cash flow projections help understand the company’s near-term cash needs. They show the amount of money coming in from operations and going out in expenses. Some measures of the cash flows are,

• Cash Revenue: This provides insight into whether the company has enough cash to meet expenses. It also identifies bottlenecks that need fixing. Therefore, the company can keep up with the business’s costs. The opposite of a cash flow bottleneck is an operating surplus. It means incoming revenue is more than outgoing expenditures. 
• Cash Disbursements: It is a record of the company’s daily financial transactions. It can recognize negative and positive cash flows. It also helps determine the company’s solvency as well.

Here’s what a projected cash flow statement looks like:

How to Create Financial Projections?

1. financial projections for business plans.

The primary method of projections is to project the various financial statements. First, we need to build the revenue and cost schedules. After this, we create projections for the balance sheet , income statement, and cash flow statements. Finally, we use those projections for business planning. However, during the process, we should keep in mind a few guidelines.

2. Make Assumptions & Identify Unpredictable Variables

• Assumptions are essential for effective projections. Thus, making appropriate and relevant assumptions is necessary.
• Make assumptions for cost, capital, and various metrics that act as crucial factors for the projection.
• We can estimate predictable variables using data from prior years, whereas we have to model unpredictable variables based on hypothetical scenarios.

3. Include Several Scenarios

• High-level financial projections take into account a variety of potential outcomes. They include different factors that influence the economic performance of the company. Growth rates, profit margins, and overheads are a few factors.
• While starting, one can suppose one of three possible outcomes: pessimistic, base, and optimistic. One can assess the variation in annual results based on these variables.
• In the pessimistic scenario, consider low sales growth, reduced profit margins , etc. Alternatively, we examine growth and profit margins above average in the optimistic scenario. Finally, the base scenario considers growth and profit margins in line with the historical average.

4. Use available Historical Data

• When a public company has been running for three years or longer, they have access to a sizable amount of historical data regarding revenue, debt, depreciation, interest expense , etc in its annual report.
• Analyze the data for patterns and use them to generate precise financial projections.
• For instance, if, historically, direct costs increase 1% for every 2% increase in sales, this trend may continue in the forthcoming years.

5. Think about your Financing Requirements

• Any projection that calls for a change in sales, positive or negative, will affect the company’s need for financing.
• For example, to increase sales, product-based businesses need to expand their inventory & capacity. At the same time, service-based companies must upgrade their infrastructure.
• For these investments, the company will need capital. Thus, they should factor potential capital requirements into the projections. 
• They should also clearly state the company’s plans for ensuring additional liquidity, whether those plans involve bank loans, retained earnings, or capital contributions from partners.

6. Maintain Realism & Monitor

• It is preferable to be cautious rather than overly optimistic. The latter mindset may lead to poor investment and cost management decisions.
• Put the current year’s business projections into practice. Thus, companies can alter those suggestions in time if any problems arise.
• Create multi-year projections. Five-year projections are more beneficial for businesses. However, do monitor your forecasts and make adjustments as necessary.

Financial Projections for Startups/Small Businesses

Financial projections for startups and small businesses are no different than for other companies. However, as these firms do not have historical or substantial data, they need assistance. Here are a few suggestions for such businesses.

A) Benefit from Existing Businesses

• Some business owners already have the needed experience in related fields. That information aids them in creating accurate financial projections.
• Startups with no historical data can choose another similar-industry company of the same size. They can use the company’s available information to create projections for their own business.

B) Understand your Market

• Understanding the particular market for the business can help with accurate projections. Including the market trends over the years will give a glimpse of their business in the same market.
• An effective business plan must include information from market research, such as consumer data and demographics. It enables businesses to modify their models per their users.

C) Hire Experts

• Companies can also hire industry experts to evaluate their small businesses and create projections. Apart from the analysts, they can also employ people with expertise in specific departments. 
• The experts must align with the company’s future goals. For instance, an accountant with prior experience in the industry will help assess and ascertain advantages and costs. 

Financial Projections Examples

Download the Excel template here – Financial Projection Excel Template

Let us project the income statement using an example.

Company A wants to forecast the next year’s performance, for which it needs to project the income statement. 

• The particulars of this year’s income statement are, 

Revenue = $46,000; COGS = $22,000; Operating Expense = $9,000; Interest Expense = $3,500;

• It states that Sales may increase by 20% next year.
• The COGS can increase upto 55%
• The operating expenses are subject to increasing 9% while the interest expense stays the same.
• As the revenue falls between $40,525 and $86,375, the taxes are 22% .

Project the income statement for the next year.

Here, we calculated the other metrics using the formulas.

Let us project the income statement step by step.

• Project revenue by 20% (i.e. $46,000×1.20%)
• Project COGS by 55% of revenue (i.e. $55,200×0.55%)
• Calculate the gross profit (i.e. $55,200-$30,360)
• Project the operating expense with an increase of 9% (i.e. $55,200×0.09%)
• Calculate operating income (i.e. $24,840-$4,968)
• Calculate profit before tax (PBT) while interest expense stays the same (i.e. $19,872-$3,500)
• Apply 22% tax to PBT (i.e. $16,372×0.22%)
• Finally, calculate net income (i.e. $16,372-$3,602)

Here is the table with applied formulas.

This is the income statement projection for the year 2022.

Why are Financial Projections Important?

• Financial projections can help analyze the business and prepare adequate budgets.
• Companies can utilize them to raise capital by acquiring investments. It can also retain existing investors’ and creditors’ convictions in the business.
• A routine projection helps the business deal with change on both the inside and the outside. Companies can use strategic planning to assess their current state and chart a clear course forward. 
• Businesses can identify opportunities and problems by routinely reevaluating the company’s competitors, markets, and strengths. Variations in projections provide early warning of the issues.
• A projection also involves a commitment to achieving specific goals and establishing benchmarks to track development. 
• When deviations occur, the projection can offer a framework for determining the costs and benefits of various corrective measures.

Financial Projections vs. Forecast

Forecasting and projections go hand in hand. Both project the future success of the business. However, they go about it in very different ways. 

• Companies create forecasts to construe the company’s short-term finances. They usually predict the future for a one-year timespan. However, projections include both long-term and short-term goals. It can be helpful for five years.
• Forecasts are more accurate and give approximate financial figures. Alternatively, projections answer the what-if scenarios and not precise financial statistics. 
• As businesses use forecasts as future suppositions, the assumptions for forecasts must be thorough. However, projections can be flexible as they do not predict the exact future but gauge results for different action plans.
• Businesses use forecasts to present their business value to the world. They use it to raise capital from investors and creditors. On the contrary, projections can be helpful for the company’s internal use. They conclude outcomes for various strategic plans.
• Forecasting is a general overview of the entire organization and doesn’t provide specifics. A projection goes in-depth because it includes outside factors, economic conditions, consumer sentiment, and competitor data.

Financial Projections Advantages

• Financial projections provide accurate forecasts of the future of your business. This information is invaluable for making decisions, both large and small. 
• These projections show whether the company has a steady source of income or if they rely heavily on only one client or project. 
• They can predict company profits or losses over time. It can help plan an elaborate budget plan.
• It helps plan the future by setting objectives and preventing significant setbacks. 

1. What is Financial Projection?

Answer: Financial projections are the forecasts of future values such as sales, profits, taxes, and earnings. These projections provide a baseline for understanding your company’s financial health. It involves predicting when events like economic cycles will impact your business. They are also used to map out possible scenarios of how a company’s earnings will change over time.

2. Which Software is used to Create Financial Projections?

Answer: There are several software available in the market to create financial projections. Most of them charge for monthly and yearly packages. Some examples are Insight software , Cube Software , and Quickbooks . Therefore, to learn about financial forecasting from scratch, you can also register for crucial Financial Modeling Courses .

3. What are the Assumptions in Financial Projections?

Answer: Assumptions are the most critical elements of financial projections. While projecting all the statements, the analysts make detailed assumptions. They base the predictions on hypothetical scenarios, what-if situations, and guesswork about the company’s future. Thus, t provides the business with financial and planning guidelines.

4. How do we Present Financial Projections?

Answer: First and foremost, the company makes accurate assumptions regarding its future goals. Afterward, they project the financial statements: cash flow, income statements, and balance sheets. Consequently, they create reports and establish planning guidelines accordingly. Finally, with time, they monitor the projections and make changes as necessary.

5. How to make a Financial Projection Report?

Answer: We include the primary financial statements to make a financial projection report. Finally, we add all the projected statements like cash flow, balance sheet, and income statement to the report. 

Recommended Articles

This article explains everything about Financial Projections. To know more, read the following articles,

• Financial Forecasting
• Financial Instrument
• Working Capital Projections
• Income Statement Template

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How to Write the Financial Section of a Business Plan

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When you are starting a small business or a startup, you will need to make financial projections for your business.

Financial plan in business plan helps understand the chances of your business becoming a financial success. Investors want to see a financial plan to know how much money they’ll invest and what the expected return over investment is for them.

We have briefly discussed the process of writing a financial plan in business plan. One thing that can make or break your financial plan in business plan is your honesty about numbers.

Try not to be over-optimistic. See the growth pattern of similar businesses and project closely to them. Don’t overestimate the effects of your competitive advantage.

What is Financial Plan in Business Plan?

A financial plan in business plan is an overview of your business financial projections.

Business plan financial projections include financial reports including Profit & Loss, cash flow statement, and balance sheet.

A financial plan will also discuss sales forecast, employees’ salaries and other expenses forecast, business breakeven analysis, and important business rations that help measure growth.

How to Write A Business Plan Financial Section

A business plan financial section is about making simple forecasts and creating a few financial reports. You don’t need to know accounting, nor is it necessary for creating financial projections.

We have outlined and simplified the process of creating a financial plan for business plan. Simply follow the process and take help from our examples and templates to write an excellent financial plan section of a business plan.

Review your Business Goals and Strategic Plan

You have set business goals in your business plan. A strategic plan is how you will navigate to financial success. 

Everything in a business plan that contributes toward your business goals. Before writing financial projections, consider these goals and milestones:

• Expansion plans 
• Adding more people to your team 
• Resources required to meet your business goals 
• Cash flow needs of your business in the short and long term
• Financing needs to meet business goals 

Create Financial Projections

 Financial projections in a business plan will include the following:

• Profit and loss statement

Cash Flow Statement 

• Balance Sheet

Sales Forecast 

• Personnel Plan
• Business Ratios and Breakeven Analysis 

We will explore each in detail in the following section. By the end of the article, you will fully understand how to create financial plan in business plan. 

Profit and Loss Statement

A profit and loss statement is the first financial report you will create when writing financial plan in business plan.

A profit and loss statement reports your business income or loss over a certain period of time.

Profit and loss statement is also known by other names including its short form i.e., P & L statement, income statement, and pro forma income statement.

A profit and loss statement includes total revenues, expenses, and costs. A P&L statement is made for different time intervals like quarterly, bi-annual and annual. It shows net income after the cost of goods sold, expenses, taxes, depreciation, and amortization.

Before creating a P&L statement for your business, you may need to look for the right format for your business structure. For example, you will need a different format for a profit and loss statement for a sole proprietorship and a different one for an LLC.

Check income statement examples to understand and create one yourself. 

Profit and Loss Statement Template

Download our free profit and loss statement templates &  examples, and make a professional income statement for financial plan in business plan. 

Parts of a Profit and Loss Statement 

Every profit and loss statement includes the following elements:

• Total Revenues 
• Cost of Sales or Cost of Goods Sold 
• Gross Margin 

Depending on the business type, a P&L statement may include insurance, taxes, depreciation, and amortization. Make sure to include a forecast for all heads in financial plan in business plan.

Calculate Operating Income 

Start your profit and loss statement by calculating operating income; use this formula. 

Gross Margin – Operating Expenses = Operating Income

Typically, operating income is equal to EBITDA (earnings before interest, taxes, depreciation, and amortization). 

Operating income is also called the gross profit and it does not deduce taxes or other accounting adjustments from the income.

Calculate Net Income 

Use this formula to calculate net income. 

Operating Income – (Interest + Taxes + Depreciation + Amortization Expenses) = Net Income

A cash flow statement is typically prepared every month. You can create monthly and quarterly cash flow statement in financial plan in business plan.

A cash flow statement informs about the cash your business brought income, the cash it paid out, and how much is still available with the bank.

A cash flow statement gives an understanding of your income sources and expenses. When you forecast your financial reports, a cash flow statement will show your expected income sources and expenses.

A cash flow statement will help potential lenders and investors understand how you plan to make money. It provides reliable data about cash in and cash out. Keep it realistic and in line with the industry number for the most part. An exception may be an innovation or a breakthrough you bring to the market.

Your profit and cash flow are not the same. It is possible to have a cashless, profitable business or a business in loss with plenty of cash. A good cash flow helps you keep your business open and turn things around.

A cash flow statement also reflects your behavior with money. It shows if you spend on spur of the moment or think strategically. When creating a cash flow statement in a business plan, you will need to understand two basic concepts of accounting; cash accounting and accrual accounting.

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Difference between Cash and Accrual Accounting 

The difference between cash and accrual accounting is Accrual accounting records revenues/income and expenses when they occur while cash accounting records income/revenue and expenses when the money actually changes hands. 

You will need to decide if you will use cash accounting or accrual accounting. However, the final choice will depend on your business type and product. 

For example, you are selling tickets to a show or you are taking preorders for your new product. Under cash accounting, you will record all income now and expenses when you have actually shipped the product or organized the show. 

However, with accrual accounting, you will record both income and expenses when you have shipped the product or held the show. 

Here, cash accounting will show the months with cash abundance as profitable and the months of spending, like shipping of the products of event organization, as a loss. It is hard to see a pattern and get actionable insight with cash accounting. 

It is a good time to decide about the accounting method you will use when you are writing a financial plan in business plan. 

Check with your accounting consultant and discuss accrual and cash accounting to select the one most suitable for your business.

Balance Sheet 

A balance sheet is a summary of the financial position of your business. 

A balance sheet includes assets, liabilities, and equity. A balance sheet is based on this formula and it is always equal on both sides of the equation. 

Assets = Liabilities + Equity

Here, Assets include your inventory, cash at hand and bank, property, vehicles, accounts receivables, etc. Liabilities are debts, loans and account payables. Equity includes shares proceeds, retained earnings, and owner’s money. 

Download Balance Sheet Template from WiseBusinessPlan and make a balance sheet easy. 

A sales forecast is your projection about the sales you will make in a certain time. Investors and lenders will be interested in seeing your sales forecast. They will estimate your chances of meeting the forecast and projections. 

Keep your sales forecast consistent with the financial reports like the cash flow statement and profit & loss statement.

How To Make A Sales Forecast For A Business Plan?

First, decide the period for the sales forecast, like one month or a quarter. Then, do the following steps to make a sales forecast for that period. 

• List goods or services your business sells
• Forecast sales for each product or service 
• Set per unit price for your goods or services 
• Find sales volume by multiplying units sold with unit price 
• Calculate the cost of goods sold 
• Multiply the cost of goods sold by the number of units sold, this is your total cost 
• Take the total cost amount from the total sales amount

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Personnel Plan 

A personnel plan shows the costs and value of the employees you will hire. 

Very small businesses, startups, or solopreneurs may not need a personnel plan but any business with employees, or plans to hire employees, will need this. 

Forecast the cost of each employee and the value they will provide. You don’t need to discuss everything about employees, just do a short cost-benefit analysis for each position or employee.

Breakeven Analysis and Business Ratios

Breakeven analysis tells you the number of sales you need to bring in to cover all of your business expenses. 

Use this formula to calculate the breakeven point for your business. 

Break-Even Point (units) = Fixed Costs /  (Sales price per unit – Variable costs per unit) 

Business ratios are like signals for your business. You can quickly spot a growth or fall with a ratio. Some business ratios also help you see business health. 

You are not required to include business ratio forecasts however, it is good to know about them when writing a business plan. 

Here are some of the most used business ratios.

• Gross margin
• Return on sales
• Return on assets
• Return on investment
• Debt-to-equity
• Current ratio
• Working capital
• gross margin
•  return on investment (ROI)
• Debt-to-equity.

Use Financial Plan as a Tool for Business Management

One mistake that most people make is thinking that building a business plan is a one time thing. 

Your business plan and your financial projections can help you measure your business growth. You can use these numbers as a yard stick to see if you are meeting your projections or not. 

Here is how you can your business plan as a management tool for your business. 

Schedule monthly and quarterly business review meetings. Compare your actual data for that period with your forecast data and see how you are moving towards your business goals. Adjust your forecast or projections with the help of actual data to keep your growth trajectory in the right direction.

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Financial forecast example for new businesses and startups

The financial forecast is an essential step when creating a business plan. The financial forecast allows you to anticipate the revenues and expenses of your new business over a given period.

Even if the exercise is sometimes delicate to carry out, it is nevertheless essential for any entrepreneur. Indeed, it allows you to define quantified objectives, which, if meticulously tracked, will allow you to grow your business in good conditions.

To help you, here's a financial forecast example as well as tools you can use to create yours. 

Financial forecast examples for new businesses

Example of a sales forecast.

The sales forecast is used to estimate the company's turnover. It is generally presented by category of products and services, types of customers, or time slots.

In our financial forecast example, we have included below a sales forecast for a hostel, organised by categories of services with the bed's occupancy forecast broken down based on seasonality:

To ensure a fair and realistic evaluation of your company's revenues, You will need to base your forecast on thorough and reliable market analysis, including an analysis of what your competition offers. You will also need to think carefully about your pricing policy and distribution strategy beforehand.

Examples of financial statements to include in your forecast

Your forecast will need to include 3 financial statements:

• The P&L statement
• The cash flow statement
• The balance sheet

P&L statement

The profit and loss statement enables you to assess:

• the growth of the company by analyzing the evolution of the turnover over several years;
• the profitability of the company by looking at the difference between the expected revenues and the costs which will need to be incurred to generate these sales.

The main shortcoming of the projected income statement is that it does not take into account cash flows. Your profits should turn into cash at some point, but based on when your clients pay you, how much inventory you keep, or when you pay your suppliers, the cash flow could be very different from your profit.

To overcome this shortcoming, we need to look at the forecasted cash flow statement included in our financial forecast example.

Cash flow statement

The cash flow statement shows all anticipated cash movements for a given year.

It enables you to evaluate:

• the ability to generate operating cash flow;
• the company's investment and financing policies.

The cash flow statement is highly complementary to the P&L statement. Together they provide a clear view of the company's profitability, the cash generated by the operations, the investments made and the financing flows.

Balance sheet

The forecasted balance sheet, the last link in the chain, provides an overview of the company's net worth at a given moment in time and is part of our financial forecast example. It enables you to evaluate:

• the value of the company's assets;
• the weight of its working capital;
• the level of financial indebtedness;
• the book value of shareholders' equity.

The forecasted balance sheet complements the other two tables. Nevertheless, it has two weak points:

• It provides a snapshot of the company's net worth at a specific moment in time - giving a very static view of the company. Especially given the balance sheet is usually produced several months after the end of the financial year (and therefore the information it contains is already stale!)
• It gives an accounting vision of the company, based on historical cost, and not a financial vision, based on market value.

Where can I find other financial forecast examples?

At The Business Plan Shop, we offer an online software that includes a financial forecasting tool and helps you throughout the drafting of the business plan on top of financial forecast examples included in our business plan templates . 

Using a software like ours to realize your business plan has several advantages:

• You can easily create your financial forecast by letting the software take care of the calculations and financial aspects for you.
• You are guided in the drafting process by detailed instructions and examples for each part of the plan.
• You get a professional document, formatted and ready to be sent to your bank or investors.

If you are interested in our solution, you can try our software for free here .

Our article is coming to an end. We hope that our financial forecast example has given you a better understanding of what this exercise is all about.

The forecast is a crucial element of a business plan that will be of particular interest to your financial partners if you are looking for financing; but don't forget that it is also a mean for you, as an entrepreneur, to evaluate the viability of your new business idea.

Also on The Business Plan Shop

• How to do financial projections for a new business?
• How to establish a Profit & Loss forecast in your business plan?
• How to do a financial forecast for a restaurant?

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Financial Management

Financial Projections for Startups and Small Businesses

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

What Are Financial Projections?

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

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

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

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

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

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

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

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

What Are Financial Projections Used For?

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

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

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

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

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

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

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

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

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

• Create a sales forecast.

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

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

• Create an expense budget.

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

• Create the income statement projection.

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

• Create the cash flow projection.

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

• Create the balance sheet projection.

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

• Use projections for planning.

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

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

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

Plan & Forecast More Accurately

Benefits of Using Accounting and Planning Software for Financial Projections

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

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

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

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

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

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

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The Essentials Of Careful Financial Planning And Forecasting For Businesses

Effective financial planning and forecasting are essential components of any successful business strategy.

Business owners, entrepreneurs, and others can confidently plan for their financial future and achieve long-term success by analyzing past performance and projecting future outcomes.

To support you in this process, we have created a comprehensive guide on planning and forecasting, offering valuable insights and practical tips to help you create effective plans and forecasts to ensure your finances thrive.

With the right planning and forecasting approach, you can confidently steer your business toward sustained growth and profitability.

What Are Financial Plans?

Financial planning describes a process where businesses devise a plan to use their available capital and financial resources to meet specific financial goals based on reliable information collected through financial forecasting.

A financial plan is typically organized into a step-by-step format to help businesses understand strategies to generate future income and scale their organization.

Financial plans include essential information on a company’s current financial state, goals and objectives for its economic future, and specific issues you must tackle before meeting your objectives.

Financial Plan Examples

A financial plan may include information involving a company’s monthly revenue, cost of goods sold, and current/future expenses.

Depending on the company, specific financial goals and sections may differ; however, a typical financial plan example would follow the layout below:

• Financial overview of the company.
• Financial assumptions–all financial projections for business plan guidelines depend on realistic assumptions supporting a financial plan’s values. You create assumptions based on credible resources and information.
• Key financial indicators and ratios–in this section, businesses highlight indicators and ratios taken from financial statements to better understand their financial position and health. This section can include factors like working capital and operations, liquidity, debt , and profitability ratios.
• Break-even analysis. This section explains the number of units a company will need to sell to cover future expenses and make a profit. It includes details for a company’s variable and fixed costs.
• Financial statements. This section details a company’s profit and loss and cash flow statements , allowing for financial modeling to calculate future cash flows.
• Balance sheet. Finally, a financial plan includes a projected balance sheet statement detailing how a business will manage its assets, such as its receivables and inventory.

Financial Planning Methods

The two primary methods for financial planning are cash flow-based planning and goal-based planning.

• Cash flow-based planning: This method describes a financial planning tool where organizations determine potential income, allocate budgets, and plan for upcoming changes in expenses and income.
• Goal-based planning: A goal-based financial plan outlines how a company will achieve specific financial goals based on its current assets, savings, and future aspirations.

What Is A Financial Forecast?

Financial forecasting is a critical component of financial planning.

Companies use historical data, market trends , and relevant factors to understand:

• how the business performed in previous years
• how companies within the same industry are performing
• the current economic state
• the demand level
• future possibilities

Financial forecasts include various essential elements of a comprehensive plan, including the following factors:

• Fixed costs that are unlikely to change
• Variable costs , including utilities, supplies, wages, and additional resources that businesses need to estimate costs for upcoming periods

Forecasting financials requires the following:

• Collecting past financial statements and historical data, including revenue, losses, investments, equity, liabilities, expenditures, income, earnings, and fixed costs.
• A financial forecast method, either qualitative or quantitative
• Frequent analysis of up-to-date financial data

Financial Forecasting Examples

A business might use numerous financial forecasting examples to plan its economic future. One example is forecasting an organization’s future sales to make wiser financial decisions and achieve its current goals.

These forecasts can predict future performance based on past trends and current data.

Financial Forecasting Methods

Companies use seven primary financial forecasting methods to understand their short- and long-term financial outlooks. These methods are quantitative and qualitative strategies. The quantitative methods include the following:

• Percent of sales forecasting
• Straight line forecasting
• Moving averages
• Simple linear regression
• Multiple linear regression

The qualitative methods are the following:

• Delphi method
• Market research

Additionally, various types of financial forecasting are essential to devising an accurate business plan and financial projections for business plan breakdowns.

Below is an overview of the different financial forecasting types businesses encounter when creating their financial goals.

• Historical data financial forecasting
• Sales forecasting methodologies
• Cash flow financial forecasting

Financial forecasting tools and software are crucial to simplify the financial forecasting process and accurately measure a company’s performance.

These tools include any asset that analyzes and dissects internal business information and external economic conditions.

Some tools commonly used in financial forecasting are:

• tools that analyze customer buying patterns
• machine learning technology
• fraud detection software
• customer relationship management (CRM)
• customer segmentation

Forecasting tools collect essential operation and financial information and performance indicators to help businesses make accurate and informed predictions.

Financial Planning vs. Forecasting

Financial forecasting describes a company’s estimation of its future revenue, income, and expenses based on historical data.

Forecasting is a projection of the most probable future outcomes based on what a company knows to be true.

Financial planning is a broader topic that outlines the steps to earning future income and paying for business expenses.

Financial plans are strategic road maps to ensure that a company knows each step it needs to take to reach its financial goals. These plans sometimes include information about a company’s plans for its future revenue.

Forecasting Is a Part Of Financial Planning

Forecasting is a vital segment of financial planning. Forecasting allows companies to create a step-by-step business plan based on accurate financial projections.

Forecasting helps companies create a plan that covers all possibilities for future market performance to ensure that fluctuations don’t catch the business off guard.

Forecasting outlines conditions and macroeconomic factors that allow businesses to create a plan for short and long-term financial outlooks.

While financial planning outlines how a company can reach its goals, forecasting supplies the evidence to ensure that a business can meet these goals.

Advantages Of Financial Planning And Forecasting

Financial planning and forecasting techniques are essential for businesses that want to prepare for the future and any challenges that may arise.

The benefits of financial projections are endless, and companies must take action to implement high-quality techniques into their planning.

To start, consider the following advantages of financial forecasting:

• Creates a foundation for businesses to understand demand fluctuations and market influences that could impact the cost of goods sold
• Helps companies to reduce financial risk
• It helps make reasonable budgeting decisions.
• It helps raise awareness within a company for numerous external and internal factors.
• Provides insights for future financial decisions
• Helps organizations prepare for worst and best-case scenarios while navigating an uncertain, fluctuating market
• Allows businesses to prepare for predictable economic changes

Additionally, some of the critical advantages of financial planning include the following:

• Provides essential information for potential financial emergencies so companies have a deeper understanding of navigating these situations
• Ensures financial security for companies in the future
• Sets a company’s performance standards
• Helps businesses create actionable and practical goals to foster growth
• Offers a guide for essential financial decision-making
• Improves financial outcomes

Key Steps For Successful Financial Planning And Forecasting In Business

Create detailed budgets.

Financial plans are only successful when based on reasonable, detailed budgets. Budgeting includes a company’s financial expectations to guide financial decision-making.

Companies traditionally use a static budget to understand revenue and expenses in a specific period, typically annually.

Some businesses use rolling forecasts for shorter periods, such as quarterly analysis. This technique creates a budget based on financial performance, allowing a company to identify and make necessary adjustments to its economic plan.

Set Realistic Goals

Careful financial planning and forecasting require realistic goals to help a business grow without setting unrealistic expectations.

High-quality and accurate forecasts allow companies to understand how their finances will increase or decrease in the future, allowing for manageable goals for revenue and cost.

Conduct SWOT Analysis

A thorough Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis is essential to assess a company’s current financial position and plan.

A SWOT analysis is necessary for a company to understand what it excels in and what factors need more focus in the future.

A SWOT analysis identifies weaknesses that hold businesses back, allowing for a tailored, successful strategy to improve financial performance. This analysis examines internal and external factors for a well-rounded understanding of financial health.

Monitor And Adjust

The final step to careful financial planning and forecasting is the ability to monitor and adjust plans as necessary.

While financial planning and forecasts are valuable assets, they aren’t always accurate because of how much a market can fluctuate over time and without warning.

By monitoring the market, companies can understand internal and external developments and update their plans and forecasts accordingly.

Strengthen Your Business And Your Finances With Camino Financial

Careful business planning and forecasting are essential to any company looking for greater financial stability.

If you already have a financial plan in mind, but need the resources to make it a reality, fret not.

Camino Financial offers small business loans to help your business grow and thrive.

We offer a fast application process and flexible repayment plans.

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What is a Financial Projection?

A financial projection shows the expected revenues , expenses , and cash flows of a business over a forecast period. This forecast may be used internally as the basis for a more detailed budget , or it may be presented to outsiders. In the latter case, a financial projection may be used to convince a lender to provide a business with a loan , or investors to buy shares in the firm.  A financial projection is based on a combination of historical results, expectations for changes in the relevant market, and other changes in the circumstances of the business, such as an investment in a new product line .

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What is Financial planning in a business plan

If one is new to the field of business and entrepreneurship, then Finance is unquestionably the vital section of the business plan. Even if your ideas and innovations are important what matters the most at the end of the day is the marketing strategies and how much your vision can help in making an earning. Hence it is vital to explain your start-up with good figures which are done with the help of accurate numbers included in the business plans and briefing about it in such a way that genuinely makes your business more attractive and profitable to the investors.

What is a business plan? 

In simple words, it is a guide for the company to achieve its goal. It is a written document that describes in detail how a business, especially a start-up , what are its objectives or how it is about to achieve its goal. This can be considered as a roadmap to success with detailed plans and budgets saying how they will be achieved. It lays a road map from marketing, financial and operating point of view as well.

Business plans are documents which are vital papers used to attract investors even before the company has shown a proven record. They do this by giving a vision to the investor and trying to convince them that their business idea is worth investing for.  From that, there comes a firm assurance and hence the business idea is sound and has every chance of success. For any newcomer, preparing a business plan is an important first step. It is this rigid milestone that will help the entry towards the path of success.

When you are about to begin a new venture, a business plan gives you a clear idea which in turn can determine whether your business idea is viable or not; that is, there is no point in business if there aren’t any chances of earning. A business plan is also a good way for companies to maintain a regular track.

We can also describe the business plan as a living document that you can use to prove two sources as it shows that one’s dreams are no longer just a dream but can be made into a viable reality. In the majority of cases, the main barrier in commencing a business is the fact that they don’t have enough money to be in the business or to start the business they wish to begin. In the case of start-ups, a ready business plan is essential to show potential investors how the proposed business can bring profit.

What is Financial Plan ?

In the world of start-ups, the importance of perfect business planning is beyond explanation. Plan length of business is different for different businesses. As mentioned no two businesses have the same sort of plans but they all have the same elements from which financial planning can be considered as a vital key in the making of a business plan.

A financial plan is a document containing the current money situation and long term goals of an individual as well as the strategies for achieving the goals. A financial plan can be done independently or with the help of a specialist who is a certified financial  planner where he will have a deep evaluation of the person’s current financial state and ,future goals and expectations.

It gives you a clear picture of current finances and how it can be utilised to achieve your goals. This is also a process which will reduce the amount of stress about money and help you to set a long term goal. It is very important as it shows how to make use of your assets in an orderly manner.

The main purpose of financial planning is that it helps you to make strong business decisions about what are the resources that the company requires and what are the strategies that the company needs to be successful. It helps to obtain necessary financing, thus helping it grow.

Financial Planning can be explained with six steps:-

1. Setting up of Financial Goals:-

 The secret of a successful business is setting up proper financial goals.

2. Track your Money:-

Since the financial plan is a guide for good business flow,  having an accurate idea about your savings or pay-downs is helpful to develop medium and long term plans.

3. Emergency expenses:-

Collecting cash for emergency expenses is the bedrock of the financial plan. 

4. Investing your savings:-

 Investing isn’t always meant for the rich alone. Building credit is another way to shock proof of your budget.

  5. Have a check of high-interest debt:-

Sometimes it happens that the interest rates most of the time, we end up repaying 2 or 3 times what we have actually borrowed. Paying down the ‘toxic’ high-interest debt like title loans,rent-to-own payment, credit card balances etc. are the crucial steps in any financial plan.

6. Setting up of a moat:-

It is essential to build a moat to protect you and your family from financial setbacks.  Financial moats can be improved by:-

• Retirement accounts should be increased
• Padding your emergency fund until you earn a constant profit.
• By using insurance so that a sudden illness or accident can alter you thus, ensuring financial stability.

Financial planning is at the heart of all successful business ventures. As mentioned earlier, it consists of details of statement and financial projections, forming the overall core of your business plan. Financial planning is supposed to be completed within a year and revised monthly for better results. In addition to impressing  your investors that you are serious and knowledgeable with the business the financial  planning allows them to evaluate :

•The short and long term prospects 

• Profit potential 

•Your company’s  weakness as well as strengths

•Opportunities and challenges 

•What type of financing  can make your business successful  

For a strong financial plan,  there should be careful calculations and reliable numbers. If you are starting a new business then your financial plan should consist of:- 

• Start-up costs

•Cash flow projection 

•Projected Balance sheet 

•Balance and income statement (if it isn’t a new business)

•Break-even analysis

Start-up Costs

If you are about to start a business, first you are supposed to determine start-up costs. They are the first time expenditures that you have to spend before opening your business. It includes all costs such as furniture, supplies, equipment, renovations, license permits and incorporation fees; if necessary.

Cash flow projections  

All the business activities, large or small depends on cash. Cash flow projections show the expected amount of money that you can earn in a business along with what will be spent on expenses It is the cash that you expect from sales.

Projection of cash flow projections

The first is to calculate how much revenue you expect to generate from the sales every month. For that:

• consider the best and worst.
• reach to the clients who can  repay loan on a regular-schedule basis 
• set a credit policy .
• which bills should be delayed and what to be paid. The projections must be completed on an ongoing basis.

Income statements 

It shows your actual business expenses and revenues, the difference between the net profit over some time it sometimes often referred to as profit and loss statement or an operating statement.

From a regular check-in, the projected income statement (at least every three months) can help you identify an emerging problem in your business.

Balance Sheets

It is a snapshot record which contains all the details of what your business assets (owns) are or on as well as its liabilities (owes). Assets can be money, property,  vehicle, inventory etc. The projected balance sheet is what predicts the net worth of your business over a specific period in future. It should be from at least one year to three years into the future

Break-even Analysis

It is a useful tool which calculates at what point your company will be able to make a profit . This is where the total costs equal total revenues. It is based on three factors:- Selling price, fixed cost and variable cost.

  Methods Of Financing for Businesses

After you have completed financial statement, projections and calculations, you will have a clear idea on how to finance your business.

The two main financings are:- 

• Equity Financing

The financing in which you and your partner put the money or raise from the investor’s for the business.

Equity financing is not a debt or loan, but the investors just share the profits or losses.

2. Debt  Financing 

With your equity capital, you are now in a position to approach lenders for a business loan.  It is the money you borrow for business. Unlike equity financing, it should be repaid with interest over a specific period. The lenders won’t be getting the profit however, they must be repaid-with interest no matter whether the business is in profit or loss. The potential lenders include banks, credit unions , private investors, trust companies etc.

In the end, financial planning is a crucial step in mapping out a company’s financial future. In that sense, it is financial planning which gives clarity to your business plan and thus to one’s life!

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Home » Business Plans

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

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

Table of Content

What is a Business Plan Financial Statement?

Income statement, balance sheet, cash flow statement, 1. start by preparing a revenue forecast and a forecast profit and loss statement, 2. using your planned revenue model, prepare a spreadsheet, 3. if you plan to sell any goods, then include a forecast of goods sold, 4. quantify your marketing plan, 5. forecast the cost of running the business, including general and administrative costs, 6. in the form of a spreadsheet, forecast the payroll, additional tips for writing a business plan financial statement.

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

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

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

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

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

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

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

• Income Statement
• Balance Sheet
• Cash-Flow Statement

Now, let’s briefly discuss each.

Components of a Business Plan Financial Statement

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

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

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

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

How to Prepare a Business Plan Financial Projections Statement

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

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

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

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

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

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

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

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

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

More on Business Plans

Home » Business Plans

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

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

Table of Content

What is a Business Plan Financial Statement?

Income statement, balance sheet, cash flow statement, 1. start by preparing a revenue forecast and a forecast profit and loss statement, 2. using your planned revenue model, prepare a spreadsheet, 3. if you plan to sell any goods, then include a forecast of goods sold, 4. quantify your marketing plan, 5. forecast the cost of running the business, including general and administrative costs, 6. in the form of a spreadsheet, forecast the payroll, additional tips for writing a business plan financial statement.

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

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

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

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

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

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

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

• Income Statement
• Balance Sheet
• Cash-Flow Statement

Now, let’s briefly discuss each.

Components of a Business Plan Financial Statement

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

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

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

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

How to Prepare a Business Plan Financial Projections Statement

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

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

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

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

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

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

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

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

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

More on Business Plans

Moving Company Financial Projection Template

Create accurate financial projections for your moving company effortlessly. Our custom template generates pro forma statements based on your unique income and expenses, perfect for business plans, loan applications, or pitch decks.

Template price: $

• 5 Year Projected Financial Statements
• CPA Developed & Completely Customizable
• Video Guide Included
• Free Support & Projections Review
• Compatible with Google Sheets

Developed by our CPA projections expert specifically for moving companies

Produce investor- and lender-ready projections in just a few hours, our cpa developed template enables you to create professional projections based on your unique assumptions., create investor- and lender-ready projections in hours, not days..

Designed Specifically for Moving Companies - With over 50,000 businesses trusting ProjectionHub for financial projections in their business plans, loan applications, and pitch decks, you can rely on our moving company financial projection template to guide your success.

Watch a demo of the template

Save time & money - get organized with our template, get the moving company projection template today for just $79.

The template price: $

100% money-back guarantee for 30 days!

Step 1: Purchase and download the template

After purchase, you will download an unlocked Excel file with a ready-to-use financial projection template for your business model. You can also open the file to use in Google Sheets!

Step 2: Enter your assumptions on the input tabs

Moving company revenue projections.

• Craft a detailed income forecast for your moving company by considering factors like customer acquisition costs, growth rates, residential and commercial moving services, packing and unpacking services, and additional revenue sources. These inputs are automatically integrated into your projected financial statements.

Moving Company Operating Expenses

• Effortlessly plan your moving company's monthly expenses. Account for specific startup costs in the first 6 months and set recurring expenses as either static or a percentage of revenue, allowing them to scale with the business's growth. Calculated expenses are seamlessly incorporated into the projected financial statements.

Moving Company General Assumptions

• Understanding the costs involved in starting a moving company is crucial. This template collects your unique data on assets to be purchased, loan funds, investment funds, inventory, accounts payable, and more. It then calculates complex items like amortization, depreciation, and interest expense, generating a projected balance sheet.

Moving Company Salaries Planning

• Plan for the salaried employees required for your moving company and how labor costs will scale with revenue growth. This section also calculates employer taxes, benefits, and owner compensation.

Step 3: The model is automatically updated based on your assumptions

Moving company financial overview.

• The At-A-Glance tab presents a financial summary, showcasing data visualizations, ratios, and comprehensive financial summaries, including break-even analysis.

Moving Company Financial Pro Formas

• There are six different Moving Company Financial Statement tabs: the annual formats of the income statement, cash flow statement, and balance sheet, and the month-by-month breakdowns of the same financial statements. Our balance sheets always balance, automatically.

Investor & Lender Friendly

• This template and the financial statements make it easy to present to lenders or potential investors. You can also provide a copy of your template to them, allowing them to view your unique assumptions and modify them to see the outcomes.

Tables, charts, graphs, and dashboards include:

Tables, charts, graphs and dashboards include:.

Profit and loss at a glance table

Use of start-up funds graph

Key ratios table

Cash generated from operating activities graph

5 years of monthly and annual income statement, cash flow, and balance sheet reports

​Cash generated from operating activities graph

Investor dashboard

5 years of monthly and annual income statement, cash flow and balance sheet reports

Step 4: If you need help, we're here

We can fill out or modify any of the templates we sell, and we’re always happy to answer questions.

When you call us, you can speak directly to the developers of the model, not a call center or customer service representative.

Contact us in the most convenient way for you. We're here to help you

If the model doesn’t work for you, we’re happy to provide a refund.

Questions? Get in touch.

What ProjectionHub Customers Think

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If you hired a CPA to build this template from scratch it would take at least 20 hours of billable time to build a similar template. At an average hourly rate of $100 per hour it would cost you $2,000.

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The ProjectionHub Team

Grace cisna, cpa.

Before joining ProjectionHub, Grace served as an auditor for a public accounting firm in Indianapolis. There, she audited start-up tech companies, major regional hospitals, public manufacturers and everything in between.

As an auditor, she gained insight to the inner workings of all kinds of business models. Grace is a CPA, has a bachelor’s degrees in Accounting and French and a Master’s of Accountancy all from the University of Iowa, where she also taught introductory accounting classes to undergraduates.

Grace loves to use her accounting expertise to serve as an advisor to her clients, helping them understand what it takes to make a business succeed.

Adam Hoeksema — Co-founder ProjectionHub

Adam is the co-founder of ProjectionHub which is a SaaS web application that helps entrepreneurs create financial projections for their business.

Since 2012, over 40,000 entrepreneurs from around the world have used ProjectionHub to help create financial projections.

Adam also serves as the Executive Director of Bankable. Bankable is a Small Business Administration (SBA) lender that makes loans from $500 to $250,000 to Indiana small businesses that are unable to secure financing from a traditional bank.

Adam has managed the loan program since loan #1 in 2010. Since 2010, Bankable has closed over 1,200 loans totaling over $38,000,000. Adam is an entrepreneur at heart and loves working with entrepreneurs to launch and grow their business.

We are available to help you complete your projections

Troubleshoot.

We'll answer your questions about how the template works

We can help you customize your template, add revenue models, expenses or custom charts, tables and graphs -> with our financial modeling services

Frequently Asked Questions

What are the typical operating expenses for a moving company.

Typically, operating expenses range between 60% and 75% of total revenue.

Operating expenses for moving companies can vary depending on factors such as location, fleet size, and the scope of services provided. Common expenses include labor, fuel, vehicle maintenance, insurance, rent, and marketing.

How much can a moving company owner make?

A small local moving company can generate an annual profit of $50,000 to $100,000, while larger, more established companies can see profits in excess of $200,000 per year.

The income of a moving company owner depends on factors like location, business size, and the range of services provided.

What type of moving company is the best investment?

The best type of moving company to invest in depends on your specific goals, resources, and market demand. Local moving companies have lower start-up costs and can be profitable in areas with high demand for residential moves. In contrast, long-distance and commercial moving companies typically require more resources, expertise, and infrastructure, but they can generate higher revenues. It's essential to create a set of projections for different moving company models to determine the best return on investment based on projected start-up costs and future cash flows.

How to create impressive financial projections?

1. start with solid data: use historical financial data and industry benchmarks to create realistic assumptions for revenue growth, expenses, and profit margins., 2. use multiple scenarios: create different financial projections for best-case, worst-case, and most-likely scenarios to account for potential fluctuations in the market., 3. be conservative: it’s better to underestimate revenue and overestimate expenses than the opposite. conservative projections demonstrate that you have a realistic understanding of the market and the potential challenges your business may face., 4. include supporting information: provide detailed explanations for your assumptions and include any supporting information such as market research, customer data, or product development plans..

5. Get feedback: Ask for feedback from trusted advisors, mentors, or other business owners to ensure your financial projections are comprehensive and accurate.

6. Update regularly: Financial projections should be regularly reviewed and updated to reflect changes in the market, industry trends, and the performance of your business.

7. Break it down: Break down your financial projections into quarterly or monthly forecasts to provide more detail and accuracy.

8. Consider different funding scenarios: If you are seeking funding from investors or lenders, create financial projections that show how their investment will impact your business.

9. include a sensitivity analysis: a sensitivity analysis can help demonstrate the potential impact of changes in key assumptions, such as changes in pricing or production costs., 10. use a professional template: consider using a professional financial projection template or software to help ensure accuracy and consistency., 11. get expert help: if you are unsure about how to create financial projections, consider hiring an accountant or financial advisor to provide guidance and support., get a quick consultation.

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Plan Projections

ideas to numbers .. simple financial projections

Home > Industry Templates > Food Truck Revenue Projection Template

Food Truck Revenue Projection Template

The food truck revenue projection template provides a quick and easy method to estimate the sales revenue generated by a food truck business for the next 5 years.

Using the Food Truck Revenue Projection Template

Enter the footfall.

This is the estimated number of people who pass the food truck each day .

Enter the Customer %

For each of the years 1 to 5 enter the percentage of the passing footfall which uses the food truck. The template calculates the average number of daily customers.

Enter the Number of Meals % and Average Meal Price

Enter the percentage of customers who purchase a meal, and the average selling price of a meal.

Enter the Number of Drinks % and Average Drinks Price

Enter the percentage of customers who purchase a drink, and the average selling price of a drink.

The food truck financial projections template calculates the average daily revenue from the sale of drinks, and the average food truck sales per day from the business.

Enter the Number of Days the Food Truck is Open

For each year enter the number of days the food truck is open for business.

The template calculates the annual revenue from the sale of meals and drinks. Additionally the template totals them to give the revenue from daily operations.

Enter the Number of Catering Functions and the Function Price.

Enter the number of catering functions for the year together with the average function price.

The template calculates the annual revenue from catering together with the food truck annual sales revenue.

Food Truck Revenue Projection Template Download

The food truck sales projection template is available for download in Excel format by following the link below.

About the Author

Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.

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Business Plan With Financial Projections

DEC.24, 2010

What Are Business Plan Financial Projections

Business plan financial projections, also known as financial forecasting, are essential to any successful business plan. This is because they provide a realistic estimate of the financial position of a business at a future date. Projections can range from short-term projections, such as the next three months, to long-term projections, such as the next five years.

The business plan with financial projections sample includes the income statement, balance sheet, and cash flow statement estimates. They are used to project future performance, identify future financial needs, and determine the company’s ability to meet those needs.

The most basic financial projection is a forecast of revenues and expenses in a finance business plan . This is often called a pro forma income statement and is used to project how much money the business will make or lose in the upcoming period. The pro forma income statement includes estimated revenues, expenses, and profits. It also provides information about the business’s expected capital investments, such as the purchase of new equipment or additional inventory.

The payday loan business plan balance sheet projection provides information about the company’s assets, liabilities, and net worth. This is used to estimate the company’s financial position at a future date. It includes information about the company’s current assets, such as cash, accounts receivable, and inventory, as well as projected investments in the company’s future. This is important for forecasting the company’s ability to meet its future financial obligations.

The cash flow statement is used to indicate the company’s cash flow. It is essential for forecasting the company’s ability to meet its short-term financial needs. This statement includes information about the company’s cash inflows and outflows, such as sales, expenses, and investments.

In addition to the three primary financial projections, it is essential to include assumptions about the business environment. These assumptions include the expected growth rate of the industry, the expected impact of competitors, and the expected costs of doing business. These assumptions help to provide a more accurate picture of the expected financial results of the business.

2. What Are Financial Projections Used For

Financial projections are used to assess the financial health of a business and its potential for success. Financial projections help lenders and investors evaluate the risk associated with lending or investing in a business and assess the potential return on their investment. Management can also use financial projections to assess the company’s performance and make decisions about investments, operations, and strategies.

They can be used to develop budgets and plan for future growth and expansion. The financial advisor business plan financial projections can provide a snapshot of a company’s current financial state, as well as help to identify potential opportunities and risks. They are an essential tool in the decision-making process of any business as they help with financial projections for the business plan.

3. Components of Financial Projections for Business Plan

• Important Assumptions: These are the assumptions on which the financial projections are based. The holding company business plan includes the current interest rate, long-term interest rate, and tax rate.
• Break-even Analysis: This is a financial analysis that shows when the business will begin to make a profit. It takes into account fixed costs, variable costs, and revenue.
• Projected Profit and Loss: This is an estimate of the business’s income and expenses over a certain period. It can help to make decisions about pricing, marketing, and other operational strategies.
• Projected Cash Flow: This shows the expected inflows and outflows of cash over a certain period of time. It can help identify potential financing needs and how much cash will be available for investments and expansion.
• Projected Balance Sheet: This is an estimate of the business’s financial position at a particular moment in time, and it is necessary for a business plan for investors . It looks at the assets, liabilities, and equity of the business.
• Business Ratios: These are comparison metrics that measure the performance of a business. They can help to identify areas of strength and weaknesses, as well as compare the performance of the business to that of similar businesses.

4. How to Do Financial Projections for a Business Plan

financial projections are essential for any startup business plan. They provide an estimate of the future performance of a business and form the basis for the budgeting process to know how to come up with financial projections for your business plan. Financial projections for a trucking business should include important assumptions, a break-even analysis, projected profit and loss statements, cash flows, balance sheets, and business ratios. The OGS Capital business plan comes with 3 years of financial projections, and 1st year is detailed by month.

Important Assumptions

When making financial projections, it is important to make reasonable and achievable assumptions. Considering the current market conditions and the company’s competitive position is important. It is also important to consider the company’s historical performance and any changes that may have occurred recently. At OGS Capital our experts know how to create financial projections for a successful business plan.

These assumptions include the size of the fleet, the cost of fuel, the cost of labor, and the expected demand for trucking services. Other assumptions should include the cost of insurance, the cost of repairs and maintenance, and any applicable taxes. These assumptions for projected turnover in a business plan will provide the basis for the projections and it is important that your business plan projections should be as realistic as possible.

The examples of financial projections for a business plan for a trucking business company are based on the following assumptions:

Brake-even Analysis

The break-even analysis is an important component of financial projections. This analysis is used to determine the point at which the business will start to make a profit. This involves calculating the total fixed costs of running the business and the total variable costs, such as fuel and labor.

The break-even point can be calculated by dividing the fixed costs by the average price per unit of service. Once the break-even point is determined, the business can use this point to set goals for profitability.

For a trucking business, the break-even analysis would consider the fixed costs associated with operating the business, such as maintenance, fuel, and insurance. It is also important to consider variable costs, such as driver costs and customer demand.

The following is a breakdown of the trucking business company’s fixed and variable costs:

A monthly break-even analysis of a trucking business company is shown in the following table.

Projected Profit and Loss

The profit and loss projection for business plan statement is used to calculate the projected income and expenses of the business. This business plan financial forecast statement should include all the fixed and variable costs associated with running the trucking business and any other expected income and expenses. The profit and loss statement will provide an estimate of the net income for each month.

For a trucking business plan with projections, the key items on the projected profit and loss statement include revenue from freight and related services, operating expenses such as fuel and maintenance, and capital expenditures.

A trucking business will make the following profits and losses.

Profit Monthly

The profit for each month can be calculated by subtracting the total expenses from the total income for that month. This calculation estimates the net profit for each month of the year in a one-page business plan with financial projections.

Profit Yearly

The profit for the year can be calculated by adding up the total net profits for each month of the year. The calculation provides an estimate of the net profit for the entire year.

Gross Margin Monthly

The gross margin for each month can be calculated by subtracting the total expenses from the total income for that month. This calculation provides an estimate of the gross margin for each month of the year.

Gross Margin Yearly

The gross margin for the year can be calculated by adding up the total gross margins for each month of the year. This calculation provides an estimate of the gross margin for the entire year.

Projected Cash Flow

The projected cash flow statement calculates the expected cash inflows and outflows of the business. This statement should include all of the expected revenue, expenses, and investments. The cash flow statement will provide an estimate of the net cash flow for each month.

The chart below shows a trucking company’s cash flow projections.

An example of a trucking business company’s pro forma cash flow can be found in the following table. The cash flow statement includes general assumptions.

Projected Balance Sheet

The projected balance sheet is used to calculate the expected assets, liabilities, and equity of the business. This statement should include all of the expected assets, liabilities, and equity at the end of the year. The balance sheet will provide an estimate of the net worth of the business at the end of the year.

A trucking business company’s pro forma balance sheet shows its total assets, total liabilities, current subtotal liabilities, total capital, and total liabilities.

Business Ratios

The business ratios are used to assess the performance of the business. This includes the return on investment, the profit margin, and the debt-to-equity ratio. These ratios indicate how well the business is performing and can be used to compare the performance of the business to other businesses in the same industry.

A trucking business company’s business ratios, ratio analysis, and total assets are shown in the following table.

5. “Unlock Your Business’s Maximum Potential with Proven Financial Projections from OGS Capital”

Are you seeking to secure investor funding or expand your business?

A comprehensive business plan with financial projections is essential to achieving your goals. OGS Capital is an experienced consulting firm that can help you strategize and craft a business plan that will give you the vision and guidance needed to succeed.

Our experienced business consultants have years of experience working with small and large companies in the corporate world. Our team of professionals can help you define and prioritize your objectives, identify target markets and develop a comprehensive strategy for success. With our help, you can create the perfect plan to get the funding you need and the growth you desire.

We have the resources and expertise to provide a comprehensive business plan with financial projections. Our consultants use their knowledge of the marketplace and our analysis of financial data to develop models of potential sales and revenue streams. We provide a business plan with revenue projections which includes detailed cost and expense projections, allowing you to understand the financial implications of different strategies.

At OGS Capital, we understand the importance of creating a plan that accurately reflects your company’s goals and objectives. We offer various services to ensure your plan is tailored to your specific needs. We provide a comprehensive approach to financial analysis and modeling and can help you develop the right strategy for your business.

We are committed to providing the highest quality of service, and our consultants are dedicated to helping you succeed. With our help, you can create a comprehensive business plan with financial projections that will give you the vision and guidance needed to achieve your goals.

How do you make financial projections in Excel?

At OGS Capital, we do financial projections in Excel using a combination of financial models and assumptions. Our financial models are based on industry best practices and are tailored to the specific needs of the client. We also use a combination of historical data and industry forecasts to develop realistic financial projections. Our financial projections are also supplemented with sensitivity analysis and scenario analysis to give our clients a better understanding of the risks and opportunities associated with the business. The financial projections also include a detailed balance sheet, income statement, cash flow statement, and other financial metrics.

What is a financial plan for a small business?

A financial plan for a small business is a detailed document that outlines the business’s financial goals and objectives and how it will achieve them. The plan typically includes a budget, cash flow forecast, income statement, balance sheet, and other financial statements. Additionally, a financial plan should include a strategy for managing risk and leveraging opportunities, such as an investment strategy. Finally, it should include a plan for monitoring and evaluating the progress of the business toward its goals.

OGSCapital’s team has assisted thousands of entrepreneurs with top-rate business plan development, consultancy and analysis. They’ve helped thousands of SME owners secure more than $1.5 billion in funding, and they can do the same for you.

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Rental Properties Business Plan Template

Written by Dave Lavinsky

Rental Property Business Plan

Over the past 20+ years, we have helped over 10,000 entrepreneurs and business owners create business plans to start and grow their rental property business. On this page, we will first give you some background information with regards to the importance of business planning. We will then go through a rental property business plan template step-by-step so you can create your plan today.

Download our Ultimate Business Plan Template here >

What Is a Business Plan?

A business plan provides a snapshot of your rental property business as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategy for reaching them. It also includes market research to support your plans.  

Why You Need a Business Plan

If you’re looking to purchase a rental property, multiple rental properties, or add to your existing rental properties business, you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your rental property business in order to improve your chances of success. Your rental property business plan is a living document that should be updated annually as your company grows and changes.  

Sources of Funding for Rental Property Companies

With regards to funding, the main sources of funding for rental properties are personal savings, credit cards, mortgages, and angel investors. With regards to bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to confirm that your financials are reasonable. But they will want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a business.

The second most common form of funding for a rental property is angel investors. Angel investors are wealthy individuals who will write you a check. They will either take equity in return for their funding, or, like a bank, they will give you a loan. Venture capitalists will not fund a rental property company. They might consider funding a rental property company with a national presence, but never an individual location. This is because most venture capitalists are looking for millions of dollars in return when they make an investment, and an individual location could never achieve such results.

How to Write a Business Plan for a Rental Property Company

Your business plan should include 10 sections as follows:

Executive Summary

Your executive summary provides an introduction to your business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.

The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of rental property you are operating and the status; for example, are you a startup, or do you have a portfolio of existing rental properties that you would like to add to?

Next, provide an overview of each of the subsequent sections of your plan. For example, give a brief overview of the rental properties industry. Discuss the type of rental property you are offering. Detail your direct competitors. Give an overview of your target customers. Provide a snapshot of your marketing plan. Identify the key members of your team. And offer an overview of your financial plan.  

Company Analysis

In your company analysis, you will detail the type of rental properties you are offering.

For example, you might offer the following options:

• Single family homes – This type of rental property is often owned by a single individual, rather than a company, who acts as both landlord and property manager.
• Multi-family properties – These types of properties can be subcategorized by the number of units per site. Buildings with 2 – 4 units are the most common (17.5%), while multistory apartment complexes with more than 50 units represent the next-largest, at 12.6% of the industry.
• Short-Term Rental properties – These are fully furnished properties that are rented for a short period of time – usually on a weekly basis for vacation purposes.

In addition to explaining the type of rental property you operate, the Company Analysis section of your business plan needs to provide background on the business.

Include answers to question such as:

• When and why did you start the business?
• What milestones have you achieved to date? Milestones could include occupancy goals you’ve reached, number of property acquisitions, etc.
• Your legal structure. Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.

Industry Analysis

In your industry analysis, you need to provide an overview of the rental properties industry.

While this may seem unnecessary, it serves multiple purposes.

First, researching the rental property industry educates you. It helps you understand the market in which you are operating.

Secondly, market research can improve your strategy, particularly if your research identifies market trends.

The third reason for market research is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.

The following questions should be answered in the industry analysis section of your rental property business plan:

• How big is the rental properties industry (in dollars)?
• Is the market declining or increasing?
• Who are the key competitors in the market?
• Who are the key suppliers in the market?
• What trends are affecting the industry?
• What is the industry’s growth forecast over the next 5 – 10 years?
• What is the relevant market size? That is, how big is the potential market for your rental property. You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population or tourist arrivals.

Customer Analysis

The customer analysis section of your rental property business plan must detail the customers you serve and/or expect to serve.

The following are examples of customer segments: households, tourists, etc.

As you can imagine, the customer segment(s) you choose will have a great impact on the type of rental property you offer. Clearly, vacationers would want different amenities and services, and would respond to different marketing promotions than long-term tenants.

Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, include a discussion of the ages, genders, locations and income levels of the customers you seek to serve.

Psychographic profiles explain the wants and needs of your target customers. The more you can understand and define these needs, the better you will do in attracting and retaining your customers.  

Finish Your Rental Properties Business Plan in 1 Day!

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Competitive Analysis

Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.

Direct competitors are other rental property companies.

Indirect competitors are other options customers may use that aren’t direct competitors. This includes the housing market, or hotels. You need to mention such competition to show you understand that not everyone who needs housing or accommodation will seek out a rental property.

With regards to direct competition, you want to detail the other rental properties with which you compete. Most likely, your direct competitors will be rental properties in the vicinity.

For each such competitor, provide an overview of their businesses and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as:

• What types of customers do they serve?
• What lease lengths or amenities do they offer?
• What is their pricing (premium, low, etc.)?
• What are they good at?
• What are their weaknesses?

With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.

The final part of your competitive analysis section is to document your areas of competitive advantage. For example:

• Will you provide superior properties?
• Will you provide services that your competitors don’t offer?
• Will you make it easier or faster for customers to book the property or submit a lease application?
• Will you provide better customer service?
• Will you offer better pricing?

Think about ways you will outperform your competition and document them in this section of your plan.  

Marketing Plan

Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a rental property business plan, your marketing plan should include the following:

Product : in the product section you should reiterate the type of rental property business that you documented in your Company Analysis. Then, detail the specific options you will be offering. For example, in addition to long-term tenancy, are you offering month-to-month, or short-term rental?

Price : Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your marketing plan, you are presenting the properties and term options you offer and their prices.

Place : Place refers to the location of your rental property. Document your location and mention how the location will impact your success. For example, is your rental property located in a tourist destination, or in an urban area, etc. Discuss how your location might draw customer interest.

Promotions : the final part of your rental property marketing plan is the promotions section. Here you will document how you will drive customers to your location(s). The following are some promotional methods you might consider:

• Advertising in local papers and magazines
• Reaching out to local websites
• Social media marketing
• Local radio advertising

Operations Plan

While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.

Everyday short-term processes include all of the tasks involved in running your rental property business, such as customer service, maintenance, processing applications, etc.

Long-term goals are the milestones you hope to achieve. These could include the dates when you expect 100% occupancy, or when you hope to reach $X in sales. It could also be when you expect to acquire a new property.  

Management Team

To demonstrate your rental property business’ ability to succeed as a business, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.

Ideally you and/or your team members have direct experience in rental property management. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.

If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act like mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in real estate, and/or successfully running small businesses.  

Financial Plan

Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet and cash flow statements.

Income Statement

An income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenues and then subtracts your costs to show whether you turned a profit or not.

In developing your income statement, you need to devise assumptions. For example, will you have 1 rental unit or 10? And will revenue grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.

Balance Sheets

Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $200,000 on purchasing and renovating your rental property, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a bank writes you a check for $200,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.

Cash Flow Statement

Your cash flow statement will help determine how much money you need to start or grow your business, and make sure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt.

In developing your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a rental property business:

• Location build-out including design fees, construction, etc.
• Cost of equipment like computers, software, etc.
• Payroll or salaries paid to staff
• Business insurance
• Taxes and permits
• Legal expenses

Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your property blueprint or map.  

Putting together a business plan for your rental properties company is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. You will really understand the rental property industry, your competition and your customers. You will have developed a marketing plan and will really understand what it takes to launch and grow a successful rental properties business.  

OR, Let Us Develop Your Plan For You

Since 1999, Growthink has developed business plans for thousands of companies who have gone on to achieve tremendous success.

Click here to see how Growthink’s professional business plan consulting services can create your business plan for you.

Rental Properties Business Plan FAQs

What is the easiest way to complete my rental properties business plan.

Growthink's Ultimate Business Plan Template  allows you to quickly and easily complete your Rental Properties Business Plan.

What is the Goal of a Business Plan's Executive Summary?

The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of rental property business you are operating and the status; for example, are you a startup, do you have a rental properties business that you would like to grow, or are you operating multiple rental property businesses.

Other Helpful Business Plan Articles & Templates

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Business Plan Financial Projections: How To Create Accurate Targets

• Written by Keith Murphy
• 16 min read

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

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

What Are Business Plan Financial Projections?

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

Most businesses use two types of financial projections:

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

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

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

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

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

Financial Projections: Core Components

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

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

How to Create Financial Projections

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

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

1. Start with a Sales Projection

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

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

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

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

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

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

Using these figures, you can create an income statement:

2. Cash Flow Statement

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

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

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

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

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

3. The Balance Sheet

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

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

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

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

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

Best Practices for Effective Financial Projections

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

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

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

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

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

Financial Projections Help You Reach Your Goals for Growth

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

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