How to create a financial forecast for a web portal company?
Creating a financial forecast for your web portal company, and ensuring it stays up to date, is the only way to maintain visibility on future cash flows.
This might sound complex, but with the right guidance and tools, creating an accurate financial forecast for your web portal company is not that hard.
In this guide, we'll cover everything from the main goal of a financial projection, the data you need as input, to the tables that compose it, and the tools that can help you build a forecast efficiently.
Without further ado, let us begin!
Why create and maintain a financial forecast for a web portal company?
In order to prosper, your business needs to have visibility on what lies ahead and the right financial resources to grow. This is where having a financial forecast for your web portal company becomes handy.
Creating a web portal company financial forecast forces you to take stock of where your business stands and where you want it to go.
Once you have clarity on the destination, you will need to draw up a plan to get there and assess what it means in terms of future profitability and cash flows for your web portal company.
Having this clear plan in place will give you the confidence needed to move forward with your business’s development.
Having an up-to-date financial forecast for a web portal company is also useful if your trading environment worsens, as the forecast enables you to adjust to your new market conditions and anticipate any potential cash shortfall.
Finally, your web portal company's financial projections will also help you secure financing, as banks and investors alike will want to see accurate projections before agreeing to finance your business.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
What information is used as input to build a web portal company financial forecast?
A web portal company's financial forecast is only as good as the inputs used to build it.
If you are creating (or updating) the forecast of an existing web portal company, then you mostly need your accounting information, key historical operating non-financial data, and your team’s input on what to expect for the coming years.
If you are building financial projections for a web portal company startup, you will need to have done your research and have a clear picture of your competitive environment and go-to-market strategy so that you can forecast sales accurately.
For a new venture, you will also need a precise list of the resources needed to keep the web portal company running on a day-to-day basis and a list of the equipment and expenditures required to start the business (more on that later).
Let's now take a closer look at the elements that make up your web portal company's financial forecast.
The sales forecast for a web portal company
From experience, it usually makes sense to start your web portal company's financial projection with the revenues forecast.
The inputs used to forecast your sales will include the historical trading data of your web portal company (which can be used as a starting point for existing businesses) and the data collected in your market research (which both new ventures and existing businesses need to project their sales forward).
Your web portal company's sales forecast can be broken down into two key estimates:
- The average price
- The number of monthly transactions
To assess these variables accurately, you will need to consider the following factors:
- User Engagement: The level of user engagement on your web portal can greatly impact the average price and number of monthly transactions. If users are highly engaged and spending more time on your portal, they are more likely to make purchases or engage in other revenue-generating activities.
- Competition: The level of competition in the industry can affect the average price of your services. If there are many other web portals offering similar services at lower prices, you may need to adjust your pricing strategy to remain competitive and attract customers.
- Technology Advancements: Advancements in technology can also impact your business's average price. For example, if new and more efficient technologies are developed, you may be able to offer your services at a lower price or with added features, attracting more customers and increasing the number of transactions.
- Economic Conditions: Economic conditions, both globally and locally, can affect the average price and number of transactions on your web portal. In times of economic downturn, consumers may be more hesitant to spend money, whereas in times of economic growth, they may be more willing to make purchases.
- User Demographics: The demographics of your user base can also play a role in the average price and number of monthly transactions. For example, if your target market consists of younger, tech-savvy individuals, they may be more likely to make frequent transactions and spend more money on your portal.
Once you have a sales forecast in place, the next step will be to work on your overhead budget. Let’s have a look at that now.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
The operating expenses for a web portal company
The next step is to estimate the costs you’ll have to incur to operate your web portal company.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your web portal company's operating expenses should normally include the following items:
- Staff costs: This includes salaries, benefits, and any other expenses related to your employees. As a web portal company, you will need a team of developers, designers, and other professionals to maintain and improve your platform.
- Accountancy fees: You will need to hire an accountant to keep track of your financial records, file taxes, and ensure compliance with regulations. This is an essential expense for any business.
- Insurance costs: As a web portal company, you will need to protect your business and employees with various insurance policies, such as general liability insurance and workers' compensation insurance.
- Software licenses: Your web portal company will need to use various software and tools to operate efficiently. This includes content management systems, design software, and project management tools.
- Banking fees: You will incur fees for various banking services, such as business checking accounts, wire transfers, and merchant services. These fees can add up, so it's important to shop around for the best rates.
- Marketing and advertising: To attract users to your web portal, you will need to invest in marketing and advertising efforts. This can include social media ads, email marketing, and partnerships with other websites.
- Web hosting fees: Your web portal will need to be hosted on a server, and you will need to pay hosting fees to keep it up and running. Depending on your traffic and storage needs, these fees can vary.
- Website maintenance: As your web portal grows and evolves, you will need to regularly maintain and update it. This can include fixing bugs, adding new features, and optimizing the user experience.
- Content creation: To keep your web portal relevant and engaging, you will need to create high-quality content, such as blog posts, videos, and infographics. This can be done in-house or outsourced to freelancers.
- Legal fees: It's important to have a lawyer on retainer to handle any legal issues that may arise, such as copyright infringement or contract disputes.
- Office rent: If you have a physical office space for your web portal company, you will need to pay rent or lease fees. This can vary depending on the location and size of your office.
- Utilities: You will need to cover expenses for utilities, such as electricity, internet, and phone services, to keep your office up and running.
- Training and development: As technology and trends in the web portal industry change, you will need to invest in training and development for your team to stay ahead of the competition.
- Travel expenses: If your web portal company operates globally, you may need to travel for meetings, conferences, and networking events. These expenses can include airfare, accommodations, and meals.
- Professional memberships: To stay connected with industry updates and network with other professionals, you may need to pay for memberships to professional organizations.
This list is not exhaustive by any means, and will need to be tailored to your web portal company's specific circumstances.
What investments are needed to start or grow a web portal company?
Your web portal company financial forecast will also need to include the capital expenditures (aka investments in plain English) and initial working capital items required for the creation or development of your business.
For a web portal company, these could include:
- High-performance servers: These are essential for a web portal company to handle large amounts of traffic and data. You may need to purchase dedicated servers or upgrade your existing ones to ensure smooth operations.
- Networking equipment: As a web portal company, you will need to invest in high-speed routers, switches, and other networking equipment to maintain a reliable and fast connection for your users.
- Web portal software: This includes the development and maintenance of your web portal software, such as content management systems, customer relationship management tools, and other necessary software for running your business.
- Data storage and backup solutions: With the increasing amount of data generated and stored by a web portal company, it is crucial to have adequate data storage and backup solutions in place to protect your data and ensure its accessibility.
- Security systems and infrastructure: As a web portal company, you will be responsible for handling sensitive user data, making it essential to invest in robust security systems and infrastructure to protect against cyber threats and data breaches.
Again, this list will need to be adjusted according to the size and ambitions of your web portal company.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
The financing plan of your web portal company
The next step in the creation of your financial forecast for your web portal company is to think about how you might finance your business.
You will have to assess how much capital will come from shareholders (equity) and how much can be secured through banks.
Bank loans will have to be modelled so that you can separate the interest expenses from the repayments of principal, and include all this data in your forecast.
Issuing share capital and obtaining a bank loan are two of the most common ways that entrepreneurs finance their businesses.
What tables compose the financial plan for a web portal company?
Now let's have a look at the main output tables of your web portal company's financial forecast.
The profit & loss forecast
The forecasted profit & loss statement will enable you to visualise your web portal company's expected growth and profitability over the next three to five years.
A financially viable P&L statement for a web portal company should normally show:
- Sales growing above inflation
- Stable or expanding (ideally) profit margins
- A net profit
This will of course depend on the stage of your business: a new venture might be loss-making until it reaches its breakeven point in year 2 or 3, for example.
The projected balance sheet
Your web portal company's projected balance sheet provides a snapshot of your business’s financial position at year-end.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business possesses including cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. They include accounts payable (money owed to suppliers), taxes payable and loans from banks and financial institutions.
- Equity: is the combination of what has been invested by the business owners and the cumulative profits and losses generated by the business to date (which are called retained earnings). Equity is a proxy for the value of the owner's stake in the business.
The cash flow forecast
Your web portal company's cash flow forecast shows how much cash your business is expected to consume or generate in the years to come.
It is best practice to organise the cash flow forecast by nature to better explain where cash is used or generated by the web portal company:
- Operating cash flow: shows how much cash is generated by the operating activities
- Investing cash flow: shows how much will be invested in capital expenditure to maintain or expand the business
- Financing cash flow: shows if the business is raising new capital or repaying financiers (debt repayment, dividends)
Keeping an eye on (and regularly updating) your web portal company's cash flow forecast is key to ensuring that your business has sufficient liquidity to operate normally and to detect financing requirements as early as possible.
If you are trying to raise capital, you will normally be asked to provide a monthly cash flow forecast in your web portal company's financial plan - so that banks or investors can assess seasonal variation and ensure your business is appropriately capitalised.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Which tool should you use to create your web portal company's financial projections?
Building a web portal company financial forecast is not difficult provided that you use the right tool for the job. Let’s see what options are available below.
Using online financial forecasting software to build your web portal company's projections
The modern and easiest way is to use professional online financial forecasting software such as the one we offer at The Business Plan Shop.
There are several advantages to using specialised software:
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You have access to complete financial forecast templates
- You get a complete financial forecast ready to be sent to your bank or investors
- You can easily track your actual financial performance against your financial forecast, and recalibrate your forecast as the year goes by
- You can create scenarios to stress test your forecast's main assumptions
- You can easily update your forecast as time goes by to maintain visibility on future cash flows
- You have a friendly support team on standby to assist you when you are stuck
- It’s cost-efficient and much cheaper than using an accountant or consultant (see below)
If you are interested in this type of solution, you can try our forecasting software for free by signing up here.
Calling in a financial consultant or chartered accountant
Enlisting the help of a consultant or accountant is also a good way to obtain a professional web portal company financial forecast.
The downside of this solution is its cost. From experience, obtaining a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to cost a minimum of £700 or $1,000.
The indicative cost above, is for a small business, and a forecast is done as a one-shot exercise. Using a consultant or accountant to track your actuals vs. forecast and to keep your financial projections up to date on a monthly or quarterly basis will cost a lot more.
If you opt for this solution, make sure your accountant has in-depth knowledge of your industry, so that they may challenge your figures and offer insights (as opposed to just taking your assumptions at face value to create the forecast).
Why not use a spreadsheet such as Excel or Google Sheets to build your web portal company's financial forecast?
You and your financial partners need numbers you can trust. Unless you have studied finance or accounting, creating a trustworthy and error-free web portal company financial forecast on a spreadsheet is likely to prove challenging.
Financial modelling is very technical by nature and requires a solid grasp of accounting principles to be done without errors. This means that using spreadsheet software like Excel or Google Sheets to create accurate financial forecasts is out of reach for most business owners.
Creating forecasts in Excel is also inefficient nowadays:
- Software has advanced to the point where forecasting can be done much faster and more accurately than manually on a spreadsheet.
- With artificial intelligence, the software is capable of detecting mistakes and helping decision-making.
Spreadsheets are versatile tools but they are not tailor-made for reporting. Importing your web portal company's accounting data in Excel to track actual vs. forecast is incredibly manual and tedious (and so is keeping forecasts up to date). It is much faster to use dedicated financial planning tools like The Business Plan Shop which are built specially for this.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Use our financial projection templates for inspiration
The Business Plan Shop has dozens of financial forecasting templates available.
Our examples contain both the financial forecast, and a written business plan which presents, in detail, the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own web portal company, looking at our template is always a good way to get ideas on how to model financial items and what to write when creating a business plan to secure funding.
Takeaways
- Having a financial forecast enables you to visualise the expected growth, profitability, and cash generation for your business over the next three to five years.
- Tracking actuals vs. forecast and keeping your financial projections up-to-date is the only way to get a view on what your web portal company future cash flows may look like.
- Using financial forecasting software is the mordern and easy way to create and maintain your forecasts.
This is the end of our guide on how to build the financial forecast for a web portal company, we hope you found it useful. Don't hesitate to contact us if you want to share your feedback or have any questions.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Also on The Business Plan Shop
- Example of financial forecast
- How to project revenues for a business?
- Example of financial forecast for business idea
Know someone who owns or is thinking of starting a web portal company? Share our forecasting guide with them!
Founder & CEO at The Business Plan Shop Ltd
