Financial Forecasting for Your Business Plan
It’s now important to find out whether that exciting figure at the end of your sales forecast is actually close to what you’ll make. When it comes to financial forecasting, it’s imperative that you take a thorough look at any expenses you might encounter in order to plan your future. In many financial plan templates, you will find that this section is split into two; fixed costs and variable costs. Let’s look at each of these in turn.
These are the expenses that are unlikely to change, such as rent, rates and payroll. Lower fixed costs mean less of a risk for businesses, so consider how you can bring these down. Do you need an office right away? Can you work from home and bring the costs down? If you already have fixed costs in mind then jot these down. If you’re still searching for a premises or equipment then write down the average or your best guess. Remember to leave a little wiggle room!
Travel, advertising, tax bills and the suchlike will all come under variable costs. These are the ones that make many new business owners nervous! It’s likely you’ve already worked out a rough idea of your stock costs (when working out gross profit), but now it’s time to think of the others. Will you ramp up your marketing efforts closer to Christmas? How much higher will your tax bill be in the second year of trading? Do your research and use your sales forecast to put together these variable costs.
Financial forecasting for your business plan – Next up: Cash flow statement, income projections and templates