Estimating the financial forecasts of your business plan is a difficult art that does not suffer from any approximation... For a successful business plan, you must anticipate all the expenses, investments, and charges necessary to launch your activity. In short, estimate your financing needs. Then, to produce the financial tables included in the business plan: the financing plan, the cash flow plan, the provisional income statement, etc.
Your business plan is not limited to financial forecasts, of course. See also the 1st step of our series: creator, how to create a good business plan?
Financial forecasts of the business plan, start by estimating your expenses and your investments!
Before even thinking about your sources of financing, you must make an effort to identify all your expenses to precisely determine your financing needs.
The charges
These are all expenses that are consumed quickly. They consider the purchase of raw materials, goods, financial costs, general costs, personnel costs, and taxes and duties.
They can be distinguished into two categories:
- Fixed charges do not vary depending on the activity (rent, electricity bills, remuneration, etc.).
- Variable expenses are those which, overall, fluctuate in the same proportions as turnover. Therefore, knowing your costs will let you know if your activity will be profitable and calculate your breakeven point (the breakeven point) between your expenses and your income.
Investments
Fixed assets are long-lasting investments to be included in expenses but which, unlike costs, will be used over a longer period and which provide future economic benefits. By breaking down your activity and analyzing the purchase, manufacture, and sale operations, you will be able to list the investments necessary for your training (machines, tools, vehicles, real estate and furniture, software, etc.). These investments do not all have the same useful life. Therefore, it is necessary to assess the actual useful life of your fixed assets to make your long-term financial forecasts.
Plan your financing needs as soon as you have estimated your expenses and investments. Be ambitious but realistic to convince your investors!
How to establish the financial forecasts of your business plan?
Financial forecasts make it possible to gauge the project's viability by calculating the need for financing and allocating the budget. For economic forecasts, several plans make it possible to see things more clearly. The financing plan, the cash flow plan, and the provisional income statement are presented in tables.
The forecast income statement
The forecast income statement is an accounting table that summarizes the company's expenses and income. This table results in a positive accounting result ( a profit ) or a negative accounting result ( a loss ). It is often presented over three years and makes it possible to roughly estimate the annual net effect of the activity over a period. In the construction of your provisional income statement, be objective! You must be able to justify your figures.
The financing plan
The financing plan included in the business plan must be defined over the medium term, for example, for the first three years of activity. It dissociates needs and resources and indicates the difference between these two variables.
To integrate your financing plan into your business plan, how to prepare it well to convince investors: how to make your financing plan?
The cash flow plan
The cash plan is necessary to measure the sustainability of the company. Over a year, all cash inflows and outflows are included in the cash flow plan. Built monthly, the cash flow plan shows you disbursements and receipts monthly.
The advice of our accountants to finalize the financial forecasts of your business plan
Financial forecasts are essential steps to verify the feasibility and economic coherence of the project. The goal is to determine whether the company's activity will generate sufficient revenue to cover the expenses and define the need for financing. Know that other notions are to be considered to check the financial health of your future project. The breakeven point allows you to know when your activity will become profitable. So much key data will be analyzed with a magnifying glass by the funders you will solicit!
At Amaris Direct, your advisor guides you to help you establish your precise financial forecasts. The outside view of a specialist is often beneficial to help you validate your business plan.
To learn more about other useful concepts and calculations related to the evaluation of your company's performance:
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