The financial forecast is an essential step when creating a business plan. The financial forecast allows you to anticipate 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, we'll present examples of each part of the financial forecast in this article, 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.
Below is an example of a sales forecast for a hostel, organised by categories of services with the beds 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 a 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
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.
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.
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. 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 examples of financial forecasts?
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.
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 sample have 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