Is there a method for creating achievable financial forecasts?
Is there a method or set of methods for writing the financial forecasts and profit loss statements for the next two years of business when you have never actually traded?
These documents are often required parts of a business plan if your going for funding of some kind be it VC, Bank or Angel investor. Having never traded a single day how do you not just write a total set of lies?
When doing something new you might not be able to judge how successful you will be based on how other businesses have done, what approach can be taken here?
Marketing Finance Business Plan Financial Forecasting
1 Answer
These figures are always going to be rough and there will be a multitude of books written on the subject, but in a nutshell.
If you really have no idea as to what your projections should look like, I suspect you may not have conducted sufficient market research.
Market research isn't limited to 'the industry in area X that I'm targeting is worth $5B and I should be able to take 1% of that over 3 years'.
Get a landing page up, do some marketing, ask if people would be interest in your product or service, take letters of intent, etc.
Figure out what costs are required to build your product or offer your service - will you need offices, more staff etc.
That gives you your profit/loss figures. Obviously a lot more attention and detail is required than in the examples I gave to do it properly.
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The problem I am running into is that my numbers always look too good. I have a great deal of knowledge of the target market having worked for a startup in this industry before but when I look at the numbers I'm coming up with based on the sales growth of the startups i've worked with before it all just seems a little too good to be true and I don't want a potential investor to look at it and pull it to shreds because I've not worked out my numbers in the right way. – Matthew 12 years ago
