How to Make Financial Projections

This is a series of posts setting out how to make financial projections for a business plan. This post will act as a general index and be a place to reference all of the posts in the series.

It is designed as an overview to walk you through the process of creating your business plan financial projections using the free template.

Financial Projections Template

When using the financial projections template, simply amend the highlighted input elements to suit your purposes, and the template does the rest.

Ready to get started?

Outline Task List – How to Make Financial Projections

The outline process for producing projections using the financial projections template is shown below, follow the links for further details and information. If you’re not yet sure whether your business idea is viable, it might be worth carrying out a break even analysis before preparing a full financial business plan.

Income statements

  1. Estimate revenue
  2. Calculate or estimate your gross margin.
  3. Estimate operating expenses
  4. Decide on the depreciation rate
  5. Find the interest rate
  6. Find the tax rate

In summary the Income Statement shows:

Revenue – Expenses = Net income

Balance sheets

Start up

  1. Estimate start up expenses
  2. Estimate start up assets
  3. Estimate startup capital (equity)
  4. Calculate start up debt finance required

Opening balance sheet

  1. Enter fixed assets opening balance
  2. Enter cash opening balance
  3. Enter opening accounts receivable
  4. Enter opening inventory
  5. Enter opening accounts payable
  6. Enter opening other liabilities balance
  7. Enter opening debt
  8. Enter the opening debt payment term
  9. Enter opening capital

Projected balance sheets

  1. Determine days sales outstanding
  2. Determine inventory days
  3. Determine days payable outstanding
  4. Determine other liabilities days outstanding

To summarize the balance sheet shows:

Assets = Liabilities + Equity

Cash flow Statements

  1. Estimate capital expenditure
  2. Estimate new debt
  3. Enter the new debt payment term
  4. Estimate new equity capital

In summary the cash statement shows:

Cash in – Cash out = Cash flow

Financial Model Reality Check

It is unlikely that the first draft from the financial projections template will be perfect, review the financial model output and then make changes to see how they affect the projections, repeat the process until the income statements, balance sheets, and cash flow statements represent your proposed business plan activity, and the financial model behaves and responds in the way you expected it to.

The post is one of a series covering the process of how to do financial projections for a business plan to start your business. This post will act as a general index and be a place to reference all of the posts in the series.

How to Make Financial Projections July 19th, 2017Team

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