The Financial Forecasting Part of Business Planning

There are a few essential things that a newbie entrepreneur needs to take on board before their fledgling business can even see the light of day.   Apart from the obvious points of what can I sell or what service am I good at supplying . . . The question of where shall I trade from and how many folk will it take to run this business. A big point is how are you going to finance the operation.   Do you have funds set aside from an earlier job or inheritance for example or is some form of loan from a bank or other institution going to be needed.

For the latter options, then a business plan is going to be absolutely essential.  This is one of the very first questions any lender will ask – do you have one and can we see it.  Another very important task is to formulate a cashflow forecast.  This sounds pretty serious and it needs to be.  So many folk start up their business in a head rush of generally amateur enthusiasm without actually planning the financial side.  A cash forecast is the plan to show how much money you expect your business to be bringing in,  and importantly, paying out over a set period of time.  It must reflect all your possible and likely revenue streams – those being payments in from customers, family investments or gifts and commission on affiliated sales.   Your outgoings must include rent for the premises or rooms you are using to produce and distribute the goods; storage facility costs for equipment; tax and inland revenue outgoings and national insurance.  Then there are insurances for vehicles needed and liability insurances plus communications – one mobile phone as an amateur is not going to cut the mustard when things start to move.