How to Create Financial Projections for Your Business
Written by Dave Lavinsky
As an entrepreneur, you spend months, even years coming up with ideas to start or grow your business. Then you write a business plan and try to convince someone (a co-founder, a banker, or an investor) that your idea is worthy of investment. The most crucial part of convincing them is your financial projections.
By creating financial projections, you have the opportunity to see the potential financial forecasting and impact of your ideas. Your financial projections (also known as your financial model) will help you understand the viability of your thoughts and help potential investors or lenders grasp the potential ROI (return on investment) of funding you.
This article will show you how to make financial projections for a startup business plan or an existing business. You will learn what to include in your financial projections, why they are essential, and how you can create them effectively.
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What are Financial Projections?
Financial projections are forecasts or estimations of your company’s future revenues and expenses, serving as a crucial part of business planning. To complete them you must develop multiple assumptions with regards to items like future sales volumes, employee headcount and the cost of supplies and other expenses. Financial projections help you create better strategies to grow your business.
Your financial projections will be the most analyzed part of your business plan by investors and/or banks. While never a precise prediction of future performance, an excellent financial model outlines the core assumptions of your business and helps you and others evaluate capital requirements, risks involved, and rewards that successful execution will deliver.
Having a solid framework in place also will help you compare your performance to the financial projections and evaluate how your business is progressing. If your performance is behind your projections, you will have a framework in place to assess the effects of lowering costs, increasing prices, or even reimagining your model. In the happy case that you exceed your business projections, you can use your framework to plan for accelerated growth, new hires, or additional expansion investments.
Hence, the use of financial projections is multi-fold and crucial for the success of any business. Your financial projections should include three core financial statements – the income statement, the cash flow statement, and the balance sheet. The following section explains each statement in detail.
Necessary Financial Statements
The three financial statements are the income statement, the cash flow statement, and the balance sheet. You will learn how to create each one in detail below.
Income Statement Projection
The projected income statement is also referred to as a profit and loss statement and showcases your business’s revenues and expenses for a specific period.
To create an income statement, you first will need to chart out a sales forecast by taking realistic estimates of units sold and multiplying them by price per unit to arrive at a total sales number. Then, estimate the cost of these units and multiply them by the number of units to get the cost of sales. Finally, calculate your gross margin by subtracting the cost of sales from your sales.
Once you have calculated your gross margin, deduct items like wages, rent, marketing costs, and other expenses that you plan to pay to facilitate your business’s operations. The resulting total represents your projected operating income, which is a critical business metric.
Plan to create an income statement monthly until your projected break-even, or the point at which future revenues outpace total expenses, and you reflect operating profit. From there, annual income statements will suffice.
Consider a sample income statement for a retail store below:
Cash Flow Projection
As the name indicates, a cash flow statement shows the cash flowing in and out of your business. The cash flow statement incorporates cash from business operations and includes cash inflows and outflows from investment and financing activities to deliver a holistic cash picture of your company.
Investment activities include purchasing land or equipment or research & development activities that aren’t necessarily part of daily operations. Cash movements due to financing activities include cash flowing in a business through investors and/or banks and cash flowing out due to debt repayment or distributions made to shareholders.
You should total all these three components of a cash flow projection for any specified period to arrive at a total ending cash balance. Constructing solid cash flow projections will ensure you anticipate capital needs to carry the business to a place of sustainable operations.
Below is a simple cash flow statement for the same retail store:
Balance Sheet Projection
A balance sheet shows your company’s assets, liabilities, and owner’s equity for a certain period and provides a snapshot in time of your business performance. Assets include things of value that the business owns, such as inventory, capital, and land. Liabilities, on the other hand, are legally bound commitments like payables for goods or services rendered and debt. Finally, owner’s equity refers to the amount that is remaining once liabilities are paid off. Assets must total – or balance – liabilities and equity.
Your startup financial documents should include annual balance sheets that show the changing balance of assets, liabilities, and equity as the business progresses. Ideally, that progression shows a reduction in liabilities and an increase in equity over time.
While constructing these varied business projections, remember to be flexible. You likely will need to go back and forth between the different financial statements since working on one will necessitate changes to the others.
Below is a simple balance sheet for the retail store:
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Creating Financial Projections
When it comes to financial forecasting, simplicity is key. Your financial projections do not have to be overly sophisticated and complicated to impress, and convoluted projections likely will have the opposite effect on potential investors. Keep your tables and graphs simple and fill them with credible data that inspires confidence in your plan and vision. The below tips will help bolster your financial projections.
Create a List of Assumptions
Your financial projections should be tied to a list of assumptions. For example, one assumption will be the initial monthly cash sales you achieve. Another assumption will be your monthly growth rate. As you can imagine, changing either of these assumptions will significantly impact your financial projections.
As a result, tie your income statement, balance sheet, and cash flow statements to your assumptions. That way, if you change your assumptions, all of your financial projections automatically update.
Below are the key assumptions to include in your financial model:
For EACH essential product or service you offer:
- What is the number of units you expect to sell each month?
- What is your expected monthly sales growth rate?
- What is the average price that you will charge per product or service unit sold?
- How much do you expect to raise your prices each year?
- How much does it cost you to produce or deliver each unit sold?
- How much (if at all) do you expect your direct product costs to grow each year?
For EACH subscription/membership, you offer:
- What is the monthly/quarterly/annual price of your membership?
- How many members do you have now, or how many members do you expect to gain in the first month/quarter/year?
- What is your projected monthly/quarterly/annual growth rate in the number of members?
- What is your projected monthly/quarterly/annual member churn (the percentage of members that will cancel each month/quarter/year)?
- What is the average monthly/quarterly/annual direct cost to serve each member (if applicable)?
- What is your monthly salary? What is the annual growth rate in your salary?
- What is your monthly salary for the rest of your team? What is the expected annual growth rate in your team’s salaries?
- What is your initial monthly marketing expense? What is the expected annual growth rate in your marketing expense?
- What is your initial monthly rent + utility expense? What is the expected annual growth rate in your rent + utility expense?
- What is your initial monthly insurance expense? What is the expected annual growth rate in your insurance expense?
- What is your initial monthly office supplies expense? What is the expected annual growth rate in your office supplies expense?
- What is your initial monthly cost for “other” expenses? What is the expected annual growth rate in your “other” expenses?
Assumptions related to Capital Expenditures, Funding, Tax, and Balance Sheet Items
- How much money do you need for Capital Expenditures in your first year (to buy computers, desks, equipment, space build-out, etc.)?
- How much other funding do you need right now?
- What percent of the funding will be financed by Debt (versus equity)?
- What Corporate Tax Rate would you like to apply to company profits?
- What is your Current Liabilities Turnover (in the number of days)?
- What are your Current Assets, excluding cash (in the number of days)?
- What is your Depreciation rate?
- What is your Amortization number of Years?
- What is the number of years in which your debt (loan) must be paid back?
- What is your Debt Payback interest rate?
Create Two Scenarios
It would be best if you used your assumptions to create two sets of financial projections that exhibit two very different scenarios. One is your best-case scenario, and the other is your worst-case. Investors are usually very interested in how a business plan will play out in both these scenarios, allowing them to better analyze the robustness and potential profitability of a business.
Conduct a Ratio Analysis
Gain an understanding of average industry financial ratios, including operating ratios, profitability ratios, return on investment ratios, and the like. You can then compare your own estimates with these existing ratios to evaluate costs you may have overlooked or find historical financial data to support your projected performance. This ratio analysis helps ensure your financial projections are neither excessively optimistic nor excessively pessimistic.
It is easy to get carried away when dealing with estimates and you end up with very optimistic financial projections that will feel untenable to an objective audience. Investors are quick to notice and question inflated figures. Rather than excite investors, such scenarios will compromise your legitimacy.
Create Multi-Year Financial Projections
The first year of your financial projections should be presented on a granular, monthly basis. For subsequent years, annual projections will suffice. It is advised to have three- or five-year projections ready when you start courting investors. Since your plan needs to be succinct, you can add yearly projections as appendices to your main plan.
You should now know how to create financial projections for your business plan. In addition to creating your full projections as their own document, you will need to insert your financial projections into your plan. In your executive summary, Insert your topline projections, that is, just your sales, gross margins, recurring expenses, EBITDA (earnings before interest, taxes, depreciation, and amortization), and net income). In the financial plan section of your plan, insert your key assumptions and a little more detail than your topline projections. Include your full financial model in the appendix of your plan.
Other Resources for Writing Your Business Plan
- How to Write an Executive Summary
- How to Expertly Write the Company Description in Your Business Plan
- How to Write the Market Analysis Section of a Business Plan
- The Customer Analysis Section of Your Business Plan
- Completing the Competitive Analysis Section of Your Business Plan
- How to Write the Management Team Section of a Business Plan + Examples
- Financial Assumptions and Your Business Plan
- Everything You Need to Know about the Business Plan Appendix
- Business Plan Conclusion: Summary & Recap
Other Helpful Business Plan Articles & Templates
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How to make financial projections for business.
Writing a solid business plan should be the first step for any business owner looking to create a successful business.
As a small business owner, you will want to get the attention of investors, partners, or potential highly skilled employees. It is, therefore, important to have a realistic financial forecast incorporated into your business plan.
We’ll break down a financial projection and how to utilize it to give your business the best start possible.
Accurate financial projections are essential for businesses to succeed. In this article, we’ll explain everything you need to know about creating financial projections for your business. Here’s what you need to know about financial projections:
- A financial projection is a group of financial statements that are used to forecast future performance
- Creating financial projections can break down into 5 simple steps: sales projections, expense projections, balance sheet projections, income statement projections, and cash flow projections
- Financial projections can offer huge benefits to your business, including helping with forecasting future performance, ensuring steady cash flow, and planning key moves around the growth of the business
Here’s What We’ll Cover:
What Is a Financial Projection?
How to Create a Financial Projection
What goes into a financial projection, what are financial projections used for.
Financial Projections Advantages
Frequently Asked Questions
What Is Financial Projection?
A financial projection is essentially a set of financial statements . These statements will forecast future revenues and expenses.
Any projection includes your cash inflows and outlays, your general income, and your balance sheet.
They are perfect for showing bankers and investors how you plan to repay business loans. They also show what you intend to do with your money and how you expect your business to grow.
Most projections are for the first 3-5 years of business, but some include a 10-year forecast too.
Either way, you will need to develop a short and mid-term projection broken down month by month.
As you are just starting out with your business, you won’t be expected to provide exact details. Most financial projections are rough guesses. But they should also be educated guesses based on market trends, research, and looking at similar businesses.
It’s incredibly important for financial statements to be realistic. Most investors will be able to spot a fanciful projection from a mile away.
In general, most people would prefer to be given realistic projections, even if they’re not as impressive.
Financial projections are created to help business owners gain insight into the future of their company’s financials.
The question is, how to create financial projections? For business plan purposes, it’s important that you follow the best practices of financial projection closely. This will ensure you get accurate insight, which is vital for existing businesses and new business startups alike.
Here are the steps for creating accurate financial projections for your business.
1. Start With A Sales Projection
For starters, you’ll need to project how much your business will make in sales. If you’re creating a sales forecast for an existing business, you’ll have past performance records to project your next period. Past data can provide useful information for your financial projection, such as if your sales do better in one season than another.
Be sure also to consider external factors, such as the economy at large, the potential for added tariffs and taxes in the future, supply chain issues, or industry downturns.
The process is almost the same for new businesses, only without past data to refer to. Business startups will need to do more research on their industry to gain insight into potential future sales.
2. Create Your Expense Projection
Next, create an expense projection for your business. In a sense, this is an easier task than a sales projection since it seems simpler to predict your own behaviors than your customers. However, it’s vital that you expect the unexpected.
Optimism is great, but the worst-case scenario must be considered and accounted for in your expense projection. From accidents in the workplace to natural disasters, rising trade prices, to unexpected supply disruptions, you need to consider these large expenses in your projection.
Something always comes up, so we suggest you add a 10-15% margin on your expense projection.
3. Create Your Balance Sheet Projection
A balance sheet projection is used to get a clear look at your business’s financial position related to assets, liabilities , and equity, giving you a more holistic view of the company’s overall financial health.
For startup businesses, this can prove to be a lot of work since you won’t have existing records of past performance to pull from. This will need to be factored into your industry research to create an accurate financial projection.
For existing businesses, it will be more straightforward. Use your past and current balance sheets to predict your business’s position in the next 1-3 years. If you use a cloud-based, online accounting software with the feature to generate balance sheets, such as the one offered by FreshBooks, you’ll be able to quickly create balance sheets for your financial projection within the app.
Click here to learn more about the features of FreshBooks accounting software.
4. Make Your Income Statement Projection
Next up, create an income statement projection. An income statement is used to declare the net income of a business after all expenses have been made. In other words, it states the profits of a business.
For currently operating businesses, you can use your past income statements and the changes between them to create accurate predictions for the next 1-3 years. You can also use accounting software to generate your income statements automatically.
You’ll need to work on rough estimates for new businesses or those still in the planning phase. It’s vital that you stay realistic and do your utmost to create an accurate, good-faith projection of future income.
5. Finally, Create Your Cash Flow Projection
Last but not least is to generate your projected cash flow statement. A cash flow projection forecasts the movement of all money to and from your business. It’s intertwined with a business’s balance sheet and income statement, which is no different when creating projections.
If your business has been operating for six months or more, you can create a fairly accurate cash flow projection with your past cash flow financial statements. For new businesses, you’ll need to factor in this step of creating a financial forecast when doing your industry research.
It needs to include five elements to ensure an accurate, useful financial forecast for your business. These financial statements come together to provide greater insight into the projected future of a business’s financial health. These include:
A standard income statement summarizes your company’s revenues and expenses over a period. This is normally done either quarterly or annually.
The income statement is where you will do the bulk of your forecasting.
On any income statement, you’re likely to find the following:
- Revenue: Your revenue earned through sales.
- Expenses: The amount you’ve spent, including your product costs and your overheads.
- Pre-Tax Earnings: This is your income before you’ve paid tax.
- Net Income: The total revenues minus your total expenses.
Net income is the most important number. If the number is positive, then you’re earning a profit, if it’s negative, it means your expenses outweigh your revenue and you’re making a loss.
Cash Flow Statement
Your cash flow statement will show any potential investor whether you are a good credit risk. It also shows them if you can successfully repay any loans you are granted.
You can break a cash flow statement into three parts:
- Cash Revenues: An overview of your calculated cash sales for a given time period.
- Cash Disbursements: You list all the cash expenditures you expect to pay.
- Net Cash Revenue: Take the cash revenues minus your cash disbursements.
Your balance sheet will show your business’s net worth at a given time.
A balance sheet is split up into three different sections:
- Assets: An asset is a tangible object of value that your company owns. It could be things like stock or property such as warehouses or offices.
- Liabilities: These are any debts your business owes.
- Equity: Your equity is the summary of your assets minus your liabilities.
Looking for an easy-to-use yet capable online accounting software? FreshBooks accounting software is a cloud-based solution that makes financial projections simple. With countless financial reporting features and detailed guides on creating accurate financial forecasts, FreshBooks can help you gain the insight you need to let your business thrive. Click here to give FreshBooks a try for free.
Financial projections have many uses for current business owners and startup entrepreneurs. Provided your financial forecasting follows the best practices for an accurate projection, your data will be used for:
- Internal planning and budgeting – Your finances will be the main factor in whether or not you’ll be able to execute your business plan to completion. Financial projections allow you to make it happen.
- Attracting investors and securing funding – Whether you’re receiving financing from bank loans, investors, or both, an accurate projection will be essential in receiving the funds you need.
- Evaluating business performance and identifying areas for improvement – Financial projections help you keep track of your business’s financial health, allowing you to plan ahead and avoid unwelcome surprises.
- Making strategic business decisions – Timing is important in business, especially when it comes to major expenditures (new product rollouts, large-scale marketing, expansion, etc.). Financial projections allow you to make an informed strategy for these big decisions.
Financial Projections Advantages
Creating clear financial projections for your business startup or existing company has countless benefits. Focusing on creating (and maintaining) good financial forecasting for your business will:
- Help you make vital financial decisions for the business in the future
- Help you plan and strategize for growth and expansion
- Demonstrate to bankers how you will repay your loans
- Demonstrate to investors how you will repay financing
- Identify your most essential financing needs in the future
- Assist in fine-tuning your pricing
- Be helpful when strategizing your production plan
- Be a useful tool for planning your major expenditures strategically
- Help you keep an eye on your cash flow for the future
Your financial forecast is an essential part of your business plan, whether you’re still in the early startup phases or already running an established business. However, it’s vital that you follow the best practices laid out above to ensure you receive the full benefits of comprehensive financial forecasting.
If you’re looking for a useful tool to save time on the administrative tasks of financial forecasting, FreshBooks can help. With the ability to instantly generate the reports you need and get a birds-eye-view of your business’s past performance and overall financial help, it will be easier to create useful financial projections that provide insight into your financial future.
FAQs on Financial Projections
More questions about financial forecasting, projections, and how these processes fit into your business plan? Here are some frequently asked questions by business owners.
Why are financial projections important?
Financial projections allow you to gain insight into your business’s economic trajectory. This helps business owners make financial decisions, secure funding, and more. Additionally, financial projections provide early warning of roadblocks and challenges that may lay ahead for the company, making it easier to plan for a clear course of action.
What is an example of a financial projection?
A projection is an overall look at a business’s forecasted performance. It’s made up of several different statements and reports, such as a cash flow statement, income statement, profit and loss statement, and sales statement. You can find free templates and examples of many of these reports via FreshBooks. Click here to view our selection of accounting templates.
Are financial forecasts and financial projections the same?
Technically, there is a difference between forecasting and projections, though many use the terms interchangeably. Financial forecasting often refers to shorter-term (<1 year) predictions of financial performance, while financial projections usually focus on a larger time scale (2-3 years).
What is the most widely used method for financial forecasting?
The most common method of accurate forecasting is the straight-line forecasting method. It’s most often used for projecting the growth of a business’s revenue growth over a set period. If you notice that your records indicate a 4% growth of revenue per year for five years running, it would be reasonable to assume that this will continue year-over-year.
What is the purpose of a financial projection?
Projection aims to get deeper, more nuanced insight into a business’s financial health and viability. It allows business owners to anticipate expenses and profit growth, giving them the tools to secure funding and loans and strategize major business decisions. It’s an essential accounting process that all business owners should prioritize in their business plans.
Michelle Alexander, CPA
About the author
"Michelle Alexander is a CPA and implementation consultant for Artificial Intelligence-powered financial risk discovery technology. She has worked in external audit compliance and various finance roles in Government and Big 4 environments. In her spare time you’ll find her traveling the world, shopping for antique jewelry, and painting watercolour floral arrangements. Catch up with her on linkedin: www.linkedin.com/in/michelletongalexander"
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Free Financial Templates for a Business Plan
By Andy Marker | July 29, 2020
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In this article, we’ve rounded up expert-tested financial templates for your business plan, all of which are free to download in Excel, Google Sheets, and PDF formats.
Included on this page, you’ll find the essential financial statement templates, including income statement templates , cash flow statement templates , and balance sheet templates . Plus, we cover the key elements of the financial section of a business plan .
Financial Plan Templates
Download and prepare these financial plan templates to include in your business plan. Use historical data and future projections to produce an overview of the financial health of your organization to support your business plan and gain buy-in from stakeholders
Business Financial Plan Template
Use this financial plan template to organize and prepare the financial section of your business plan. This customizable template has room to provide a financial overview, any important assumptions, key financial indicators and ratios, a break-even analysis, and pro forma financial statements to share key financial data with potential investors.
Download Financial Plan Template
Word | PDF | Smartsheet
Financial Plan Projections Template for Startups
This financial plan projections template comes as a set of pro forma templates designed to help startups. The template set includes a 12-month profit and loss statement, a balance sheet, and a cash flow statement for you to detail the current and projected financial position of a business.
Download Startup Financial Projections Template
Excel | Smartsheet
Income Statement Templates for Business Plan
Also called profit and loss statements , these income statement templates will empower you to make critical business decisions by providing insight into your company, as well as illustrating the projected profitability associated with business activities. The numbers prepared in your income statement directly influence the cash flow and balance sheet forecasts.
Pro Forma Income Statement/Profit and Loss Sample
Use this pro forma income statement template to project income and expenses over a three-year time period. Pro forma income statements consider historical or market analysis data to calculate the estimated sales, cost of sales, profits, and more.
Download Pro Forma Income Statement Sample - Excel
Small Business Profit and Loss Statement
Small businesses can use this simple profit and loss statement template to project income and expenses for a specific time period. Enter expected income, cost of goods sold, and business expenses, and the built-in formulas will automatically calculate the net income.
Download Small Business Profit and Loss Template - Excel
3-Year Income Statement Template
Use this income statement template to calculate and assess the profit and loss generated by your business over three years. This template provides room to enter revenue and expenses associated with operating your business and allows you to track performance over time.
Download 3-Year Income Statement Template
For additional resources, including how to use profit and loss statements, visit “ Download Free Profit and Loss Templates .”
Cash Flow Statement Templates for Business Plan
Use these free cash flow statement templates to convey how efficiently your company manages the inflow and outflow of money. Use a cash flow statement to analyze the availability of liquid assets and your company’s ability to grow and sustain itself long term.
Simple Cash Flow Template
Use this basic cash flow template to compare your business cash flows against different time periods. Enter the beginning balance of cash on hand, and then detail itemized cash receipts, payments, costs of goods sold, and expenses. Once you enter those values, the built-in formulas will calculate total cash payments, net cash change, and the month ending cash position.
Download Simple Cash Flow Template
12-Month Cash Flow Forecast Template
Use this cash flow forecast template, also called a pro forma cash flow template, to track and compare expected and actual cash flow outcomes on a monthly and yearly basis. Enter the cash on hand at the beginning of each month, and then add the cash receipts (from customers, issuance of stock, and other operations). Finally, add the cash paid out (purchases made, wage expenses, and other cash outflow). Once you enter those values, the built-in formulas will calculate your cash position for each month with.
Download 12-Month Cash Flow Forecast
3-Year Cash Flow Statement Template Set
Use this cash flow statement template set to analyze the amount of cash your company has compared to its expenses and liabilities. This template set contains a tab to create a monthly cash flow statement, a yearly cash flow statement, and a three-year cash flow statement to track cash flow for the operating, investing, and financing activities of your business.
Download 3-Year Cash Flow Statement Template
For additional information on managing your cash flow, including how to create a cash flow forecast, visit “ Free Cash Flow Statement Templates .”
Balance Sheet Templates for a Business Plan
Use these free balance sheet templates to convey the financial position of your business during a specific time period to potential investors and stakeholders.
Small Business Pro Forma Balance Sheet
Small businesses can use this pro forma balance sheet template to project account balances for assets, liabilities, and equity for a designated period. Established businesses can use this template (and its built-in formulas) to calculate key financial ratios, including working capital.
Download Pro Forma Balance Sheet Template
Monthly and Quarterly Balance Sheet Template
Use this balance sheet template to evaluate your company’s financial health on a monthly, quarterly, and annual basis. You can also use this template to project your financial position for a specified time in the future. Once you complete the balance sheet, you can compare and analyze your assets, liabilities, and equity on a quarter-over-quarter or year-over-year basis.
Download Monthly/Quarterly Balance Sheet Template - Excel
Yearly Balance Sheet Template
Use this balance sheet template to compare your company’s short and long-term assets, liabilities, and equity year-over-year. This template also provides calculations for common financial ratios with built-in formulas, so you can use it to evaluate account balances annually.
Download Yearly Balance Sheet Template - Excel
For more downloadable resources for a wide range of organizations, visit “ Free Balance Sheet Templates .”
Sales Forecast Templates for Business Plan
Sales projections are a fundamental part of a business plan, and should support all other components of your plan, including your market analysis, product offerings, and marketing plan . Use these sales forecast templates to estimate future sales, and ensure the numbers align with the sales numbers provided in your income statement.
Basic Sales Forecast Sample Template
Use this basic forecast template to project the sales of a specific product. Gather historical and industry sales data to generate monthly and yearly estimates of the number of units sold and the price per unit. Then, the pre-built formulas will calculate percentages automatically. You’ll also find details about which months provide the highest sales percentage, and the percentage change in sales month-over-month.
Download Basic Sales Forecast Sample Template
12-Month Sales Forecast Template for Multiple Products
Use this sales forecast template to project the future sales of a business across multiple products or services over the course of a year. Enter your estimated monthly sales, and the built-in formulas will calculate annual totals. There is also space to record and track year-over-year sales, so you can pinpoint sales trends.
Download 12-Month Sales Forecasting Template for Multiple Products
3-Year Sales Forecast Template for Multiple Products
Use this sales forecast template to estimate the monthly and yearly sales for multiple products over a three-year period. Enter the monthly units sold, unit costs, and unit price. Once you enter those values, built-in formulas will automatically calculate revenue, margin per unit, and gross profit. This template also provides bar charts and line graphs to visually display sales and gross profit year over year.
Download 3-Year Sales Forecast Template - Excel
For a wider selection of resources to project your sales, visit “ Free Sales Forecasting Templates .”
Break-Even Analysis Template for Business Plan
A break-even analysis will help you ascertain the point at which a business, product, or service will become profitable. This analysis uses a calculation to pinpoint the number of service or unit sales you need to make to cover costs and make a profit.
Break-Even Analysis Template
Use this break-even analysis template to calculate the number of sales needed to become profitable. Enter the product's selling price at the top of the template, and then add the fixed and variable costs. Once you enter those values, the built-in formulas will calculate the total variable cost, the contribution margin, and break-even units and sales values.
Download Break-Even Analysis Template
For additional resources, visit, “ Free Financial Planning Templates .”
Business Budget Templates for Business Plan
These business budget templates will help you track costs (e.g., fixed and variable) and expenses (e.g., one-time and recurring) associated with starting and running a business. Having a detailed budget enables you to make sound strategic decisions, and should align with the expense values listed on your income statement.
Startup Budget Template
Use this startup budget template to track estimated and actual costs and expenses for various business categories, including administrative, marketing, labor, and other office costs. There is also room to provide funding estimates from investors, banks, and other sources to get a detailed view of the resources you need to start and operate your business.
Download Startup Budget Template
Small Business Budget Template
This business budget template is ideal for small businesses that want to record estimated revenue and expenditures on a monthly and yearly basis. This customizable template comes with a tab to list income, expenses, and a cash flow recording to track cash transactions and balances.
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Professional Business Budget Template
Established organizations will appreciate this customizable business budget template, which contains a separate tab to track projected business expenses, actual business expenses, variances, and an expense analysis. Once you enter projected and actual expenses, the built-in formulas will automatically calculate expense variances and populate the included visual charts.
Download Professional Business Budget Template
For additional resources to plan and track your business costs and expenses, visit “ Free Business Budget Templates for Any Company .”
Other Financial Templates for Business Plan
In this section, you’ll find additional financial templates that you may want to include as part of your larger business plan.
Startup Funding Requirements Template
This simple startup funding requirements template is useful for startups and small businesses that require funding to get business off the ground. The numbers generated in this template should align with those in your financial projections, and should detail the allocation of acquired capital to various startup expenses.
Download Startup Funding Requirements Template - Excel
Personnel Plan Template
Use this customizable personnel plan template to map out the current and future staff needed to get — and keep — the business running. This information belongs in the personnel section of a business plan, and details the job title, amount of pay, and hiring timeline for each position. This template calculates the monthly and yearly expenses associated with each role using built-in formulas. Additionally, you can add an organizational chart to provide a visual overview of the company’s structure.
Download Personnel Plan Template - Excel
Elements of the Financial Section of a Business Plan
Whether your organization is a startup, a small business, or an enterprise, the financial plan is the cornerstone of any business plan. The financial section should demonstrate the feasibility and profitability of your idea and should support all other aspects of the business plan.
Below, you’ll find a quick overview of the components of a solid financial plan.
- Financial Overview: This section provides a brief summary of the financial section, and includes key takeaways of the financial statements. If you prefer, you can also add a brief description of each statement in the respective statement’s section.
- Key Assumptions: This component details the basis for your financial projections, including tax and interest rates, economic climate, and other critical, underlying factors.
- Break-Even Analysis: This calculation helps establish the selling price of a product or service, and determines when a product or service should become profitable.
- Pro Forma Income Statement: Also known as a profit and loss statement, this section details the sales, cost of sales, profitability, and other vital financial information to stakeholders.
- Pro Forma Cash Flow Statement: This area outlines the projected cash inflows and outflows the business expects to generate from operating, financing, and investing activities during a specific timeframe.
- Pro Forma Balance Sheet: This document conveys how your business plans to manage assets, including receivables and inventory.
- Key Financial Indicators and Ratios: In this section, highlight key financial indicators and ratios extracted from financial statements that bankers, analysts, and investors can use to evaluate the financial health and position of your business.
Need help putting together the rest of your business plan? Check out our free simple business plan templates to get started. You can learn how to write a successful simple business plan here .
Visit this free non-profit business plan template roundup or download a fill-in-the-blank business plan template to make things easy. If you are looking for a business plan template by file type, visit our pages dedicated specifically to Microsoft Excel , Microsoft Word , and Adobe PDF business plan templates. Read our articles offering startup business plan templates or free 30-60-90-day business plan templates to find more tailored options.
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How To Create Startup Financial Projections [+Template]
Businesses run on revenue, and accurate startup financial projections are a vital tool that allows you to make major business decisions with confidence. Financial projections break down your estimated sales, expenses, profit, and cash flow to create a vision of your potential future.
In addition to decision-making, projections are huge for validating your business to investors or partners who can aid your growth. If you haven’t already created a financial statement, the metrics in this template can help you craft one to secure lenders.
Whether your startup is in the seed stage or you want to go public in the next few years, this financial projection template for startups can show you the best new opportunities for your business’s development.
In this article:
- What is a startup financial projection?
- How to write a financial projection
- Startup expenses
- Sales forecasts
- Operating expenses
- Income statements
- Balance sheet
- Break-even analysiFinancial ratios Startup financial
- rojections template
What is a financial projection for startups?
A financial projection uses existing revenue and expense data to estimate future cash flow in and out of the business with a month-to-month breakdown.
These financial forecasts allow businesses to establish internal goals and processes considering seasonality, industry trends, and financial history. These projections cover three to five years of cash flow and are valuable for making and supporting financial decisions.
Financial projections can also be used to validate the business’s expected growth and returns to entice investors. Though a financial statement is a better fit for most lenders, many actuals used to validate your forecast are applied to both documents.
Projections are great for determining how financially stable your business will be in the coming years, but they’re not 100% accurate. There are several variables that can impact your revenue performance, while financial projections identify these specific considerations:
- Internal sales trends
- Identifiable risks
- Opportunities for growth
- Core operation questions
To help manage unforeseeable risks and variables that could impact financial projections, you should review and update your report regularly — not just once a year.
How do you write a financial projection for a startup?
Financial projections consider a range of internal revenue and expense data to estimate sales volumes, profit, costs, and a variety of financial ratios. All of this information is typically broken into two sections:
- Sales forecasts : includes units sold, number of customers, and profit
- Expense budget : includes fixed and variable operating costs
Financial projections also use existing financial statements to support your estimated forecasts, including:
- Income stateme
- Cash flow document
Gathering your business’s financial data and statements is one of the first steps to preparing your complete financial projection. Next, you’ll import that information into your financial projection document or template.
This foundation will help you build the rest of your forecast, which includes:
- Cash flow statements
- Break-even analysis
- Financial ratios
Once all of your data is gathered, you can organize your insights via a top-down or bottom-up forecasting methods.
The top-down approach begins with an overview of your market, then works into the details of your specific revenue. This can be especially valuable if you have a lot of industry data, or you’re a startup that doesn’t have existing sales to build from. However, this relies on a lot of averages and trends will be generalized.
Bottom-up forecasting begins with the details of your business and assumptions like your estimated sales and unit prices. You then use that foundation to determine your projected revenue. This process focuses on your business’s details across departments for more accurate reporting. However, mistakes early in forecasting can compound as you “build up.”
1. Startup expenses
If your startup is still in the seed stage or expected to grow significantly in the next few quarters, you’ll need to account for these additional expenses that companies beyond the expansion phase may not have to consider.
Depending on your startup stage, typical costs may include:
- Advertising and marketing
- Lawyer fees
- Licenses and permits
- Market research
- Office space
- Website development
Many of these costs also fall under operating expenses, though as a startup, items like your office space lease may have additional costs to consider, like a down payment or renovation labor and materials.
2. Sales forecasts
Sales forecasts can be created using a number of different forecasting methods designed to determine how much an individual, team, or company will sell in a given amount of time.
This data is similar to your financial projections in that it helps your organization set targets, make informed business decisions, and identify new opportunities. A sales forecast report is just much more niche, using industry knowledge and historical sales data to determine your future sales. Gather data to include:
- Customer acquisition cost (CAC)
- Cost of goods sold (COGS)
- Sales quotas and attainment
- Pipeline coverage
- Customer relationship management (CRM) score
- Average Revenue Per User (ARPU), typically used for SaaS companies
Sales forecasts should consider interdepartmental trends and data, too. In addition to your sales process and historical details, connect with other teams to apply insights from:
- Marketing strategies for the forecast period
- New product launches
- Financial considerations and targets
- Employee needs and resources from HR
Your sales strategy and forecasts are directly tied to your financial success, so an accurate sales forecast is essential to creating an effective financial projection.
3. Operating expenses
Whereas the costs of goods solds (aka Cost of Sales or COGS) account for variable costs associated with producing the products or services you produce, operating expenses are the additional costs of running your startup, including everything from payroll and office rent to sales and marketing expenses.
In addition to these fixed costs, you’ll need to anticipate one-time costs, like replacing broken machinery or holiday bonuses. If you’ve been in business for a few years, you can take a look at previous years’ expenses to see what one-time costs you ran into, or estimate a percentage of your total expenses that contributed to variable costs.
4. Cash flow statements
Cash flow statements (CFS) compare a business’s incoming cash totals, including investments and operating profit, to their expected expenses, including operational costs and debt payments.
Cash flow shows a company’s overall money management and is one of three major financial statements, next to balance sheets and income statements. It can be calculated using one of two methods:
- Direct Method : calculates actual cash flow in and out of the company
- Indirect Method : adjusts net income considering non-cash revenue and expenses
Businesses can use either method to determine cash flow, though presentation differs slightly. Typically, indirect cash flow methods are preferred by accountants who largely use accrual accounting methods .
5. Income statements
Your income statement projection utilizes your sales forecasts, estimated expenses, and existing income statements to calculate an expected net income for the future.
In addition to the hard numbers available, you should apply your industry expertise to consider new opportunities for your business to grow. If you’re entering Series C, you should anticipate the extra investments and big returns that you’re aiming to experience this round.
Once you’ve collected your insights, use your existing income statement to track your estimated revenue and expenses. Total each and subtract the expenses from the revenue projections to determine your projected income for the period.
6. Balance sheet
Your balance sheet is the final of the big three financial documents needed to establish your company’s financial standing. The balance sheet makes a case for your company’s financial health and future net worth using these details:
- Company’s assets
- Business’s liabilities
- Shareholders’ equity
This document breaks down the company’s owned assets vs. debt items. It most directly tracks earnings and spendings, and it also doubles as an actual to establish profitability for prospective investors.
7. Break-even analysis
Launching a startup or new product line requires a significant amount of capital upfront. But at some point, your new endeavor will generate a profit. A break-even analysis identifies the moment that your profit equals the exact amount of your initial investment, meaning you’ve broken even on the launch and you haven’t lost or gained money.
A break-even point (BEP) should be identified before launching your business to determine its viability. The higher your BEP, the more seed money you’ll need or the longer it will be until operations are self-sufficient.
Of course, you can also increase prices or reduce your production costs to lower the BEP.
As your business matures, you can use the BEP to weigh risks with your product decisions, like implementing a new product or removing an existing item from the mix.
8. Financial ratios
Financial ratios are common metrics that lenders use to check financial health using data from your financial statements. There are five core groups of financial ratios used to evaluate businesses, as well as an example of each:
Efficiency ratios : Analyze a company’s assets and liabilities to determine how efficiently it manages resources and its current performance.
Formula : Asset turnover ratio = net sales / average total assets
Leverage ratios : Measure a company’s debt levels compared to other financial metrics, like total assets or equity.
Formula : Debt ratio = total liabilities / total assets
Liquidity ratios : Compare a company’s liquid assets and its liabilities to lenders to determine its ability to repay debt.
Formula : Current ratio = current assets / current liabilities
Market value ratios : Determine a public company’s current stock share price.
Formula : Book value per share (BVPS) = (shareholder’s equity - preferred equity) / total outstanding shares
Profitability ratios : Utilize revenue, operating costs, equity, and other other balance sheet metrics to asses a company’s ability to generate profits.
Formula : Gross profit margin = revenue / COGS
Graphs and charts can provide visual representations of financial ratios, as well as other insights like revenue growth and cash flow. These assets provide an overview of the financial projections in one place for easy comparison and analysis.
Startup Financial Projections Template
As a startup, you have some extra considerations to apply to your financial projections. Download and customize our financial projections template for startups to begin importing your financial data and build a road map for your investments and growth.
Plan for future success with HubSpot for Startups
A sound financial forecast paves the way for your next moves and reassures investors (and yourself) that your business has a bright future ahead. Use our startup financial projections template to estimate your revenue, expenses, and net income for the next three to five years.
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