How to create a financial forecast for an IT services company?

Developing and maintaining an up-to-date financial forecast for your IT services company is key in order to maintain visibility on your business’s future cash flows.
If you feel overwhelmed at the thought of putting together an IT services company financial forecast then don’t worry as this guide is here to help you.
We'll cover everything from: the main objectives of a financial forecast, the data you need to gather before starting, to the tables that compose it, and the tools that will help you create and maintain your forecast efficiently.
Let's get started!
Why create and maintain a financial forecast for an IT services 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 IT services company becomes handy.
Creating an IT services 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 IT services 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 an IT services 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 IT services 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 an IT services company financial forecast?
A IT services 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 IT services 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 an IT services 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 IT services 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 IT services company's financial forecast.
The sales forecast for an IT services company
From experience, it is usually best to start creating your IT services company financial forecast by your sales forecast.
To create an accurate sales forecast for your IT services company, you will have to rely on the data collected in your market research, or if you're running an existing IT services company, the historical data of the business, to estimate two key variables:
- The average price
- The number of monthly transactions
To get there, you will need to consider the following factors:
- Economic conditions: Economic downturns can lead to decreased demand for IT services, resulting in lower prices and fewer transactions. Conversely, a strong economy can create more opportunities for businesses to invest in IT services, leading to higher prices and more transactions.
- Technological advancements: As technology continues to evolve, new services and solutions may become available that can command higher prices and attract more transactions. On the other hand, if your company specializes in outdated technologies, it may be difficult to compete and maintain prices.
- Competition: The level of competition in the IT services industry can greatly impact your average price and number of transactions. If there are many competitors offering similar services, you may need to lower your prices to remain competitive.
- Client demand: The specific needs and preferences of your clients can also affect your pricing and transaction volume. If your target market is primarily small businesses, they may have tighter budgets and require lower prices. However, if you focus on larger corporations, you may be able to charge higher prices for more complex and specialized services.
- Industry trends: Keeping up with industry trends is crucial for an IT services company. If there is a growing demand for a particular service, you may be able to charge a premium price. On the other hand, if a once-popular service becomes obsolete, it may be necessary to adjust prices and shift focus to other offerings.
Once you have an idea of what your future sales will look like, it will be time to work on your overhead budget. Let’s see what this entails.
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 an IT services company
The next step is to estimate the costs you’ll have to incur to operate your IT services company.
These will vary based on where your business is located, and its overall size (level of sales, personnel, etc.).
But your IT services company's operating expenses should normally include the following items:
- Staff costs: This includes the salaries, bonuses, benefits, and other compensation for your employees, such as IT technicians, software developers, and customer support staff.
- Accountancy fees: You may need to hire an accountant or accounting firm to help you with financial record-keeping, tax preparation, and other financial services.
- Insurance costs: As an IT services company, you may need to invest in various types of insurance, such as professional liability insurance, cyber liability insurance, and general liability insurance.
- Software licenses: You will need to purchase licenses for the software and tools you use to provide your IT services, such as operating systems, productivity software, and security software.
- Banking fees: This includes fees for maintaining business bank accounts, wire transfers, and credit card processing fees.
- Marketing and advertising costs: You may need to invest in marketing and advertising strategies to promote your IT services and attract new clients.
- Office rent and utilities: This includes the cost of renting office space, as well as utilities such as electricity, water, and internet.
- Travel and transportation expenses: If your IT services company requires you to travel for client meetings or conferences, you will need to budget for travel and transportation expenses.
- Professional development and training: In order to stay competitive in the IT industry, you may need to invest in professional development and training for your employees.
- Equipment and supplies: This includes the cost of purchasing and maintaining necessary equipment and supplies, such as computers, servers, and office supplies.
- Telecommunications costs: As an IT services company, you will need to budget for phone and internet services for your business operations.
- Rent and maintenance for server space: If you host servers for your clients, you will need to budget for the cost of renting server space and maintaining them.
- Legal fees: You may need to seek legal advice or services, such as drafting contracts or protecting intellectual property, which may incur legal fees.
- Employee benefits: Apart from salaries, you may also offer additional benefits to your employees, such as health insurance, retirement plans, and paid time off.
- Office maintenance and cleaning: This includes the cost of keeping your office space clean and well-maintained.
This list is not exhaustive by any means, and will need to be tailored to your IT services company's specific circumstances.
What investments are needed to start or grow an IT services company?
Creating and expanding an IT services company also requires investments which you need to factor into your financial forecast.
Capital expenditures and initial working capital items for an IT services company could include elements such as:
- Hardware: This includes items such as servers, routers, switches, and other necessary equipment for providing IT services to clients. It is important to regularly upgrade and replace hardware to ensure efficient and reliable service.
- Software: As an IT services company, you will need to invest in various software programs to provide services to clients. This may include operating systems, security software, and productivity tools.
- Office Equipment: In addition to hardware and software, you will also need to invest in office equipment such as computers, printers, and scanners for your employees to use. These items may need to be replaced or upgraded over time.
- Networking Infrastructure: A reliable and secure network is crucial for an IT services company. This may include items such as firewalls, switches, and wireless access points.
- Data Center Expenses: If you plan to have your own data center, you will need to budget for expenses such as rent, utilities, and maintenance. This is a significant investment but can greatly benefit your IT services company.
Again, this list is not exhaustive and will need to be adjusted according to the circumstances of your IT services 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 IT services company
The next step in the creation of your financial forecast for your IT services 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 an IT services company?
Now let's have a look at the main output tables of your IT services company's financial forecast.
The forecasted profit & loss statement
The profit & loss forecast gives you a clear picture of your business’ expected growth over the first three to five years, and whether it’s likely to be profitable or not.

A healthy IT services company's P&L statement should show:
- Sales growing at (minimum) or above (better) inflation
- Stable (minimum) or expanding (better) profit margins
- A healthy level of net profitability
This will of course depend on the stage of your business: numbers for an established IT services company will look different than for a startup.
The projected balance sheet
Your IT services company's forecasted balance sheet enables you to assess your financial structure and working capital requirements.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business owns and uses to produce cash flows. It includes resources such as cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. It includes items such as accounts payable (money owed to suppliers), taxes due and loans.
- 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 projection
The cash flow forecast of your IT services company will show how much cash the business is expected to generate or consume over the next three to five years.

There are multiple ways of presenting a cash flow forecast but from experience, it is better to organise it by nature in order to clearly show these elements:
- Operating cash flow: how much cash is generated by the IT services company's operations
- Investing cash flow: what is the business investing to expand or maintain its equipment
- Financing cash flow: is the business raising additional funds or repaying financiers (debt repayment, dividends)
Your cash flow forecast is the most important element of your overall financial projection and that’s where you should focus your attention to ensure that your IT services company is adequately funded.
Note: if you are preparing a financial forecast in order to try to secure funding, you will need to include both a yearly and monthly cash flow forecast in your IT services company's financial plan.
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 IT services company's financial projections?
Building an IT services 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 IT services company's projections
The modern and easiest way is to use an online financial forecasting tool 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 projection software for free by signing up here.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional IT services company financial projection.
As you can imagine, this solution is much more expensive than using software. From experience, the creation of a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to start around £700 or $1,000 excluding taxes.
The indicative estimate above, is for a small business, and a forecast done as a one-off. Using a financial consultant or accountant to track your actuals vs. forecast and to keep your financial forecast up to date on a monthly or quarterly basis will naturally cost a lot more.
If you choose this solution, make sure your service provider has first-hand experience in your industry, so that they may challenge your assumptions and offer insights (as opposed to just taking your figures at face value to create the forecast’s financial statements).
Why not use a spreadsheet such as Excel or Google Sheets to build your IT services 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 IT services 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 IT services 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 forecast templates available.
Our examples contain a complete business plan with a financial forecast and a written presentation of the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own IT services company, looking at our financial forecast template is a good way to:
- Understand what a complete business plan should look like
- Understand how you should model financial items for your IT services company

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 IT services 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 an IT services 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
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- Sample financial forecast for business idea
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