Creating Financial Projections

Financial projections are forecasts of your business's financial future. They typically include: Key Components: • Income Statement (P&L) • Balance Sheet • Cash Flow Statement • Break-even Analysis • Use of Funds Timeframes: • Monthly projections for first year • Quarterly for years 2-3 • Annual for years 4-5

How to project your Profit & Loss statement: 1. Revenue Projections • Estimate sales volume • Set pricing strategy • Consider seasonality • Account for growth rates 2. Cost of Goods Sold (COGS) • Direct materials • Direct labor • Manufacturing overhead • Shipping and handling 3. Operating Expenses • Salaries and wages • Rent and utilities • Marketing and advertising • Insurance and licenses • Office supplies • Professional services

Projecting your cash flow is crucial for business survival: Key Considerations: • Payment timing from customers • Supplier payment terms • Inventory requirements • Capital expenditures • Debt payments • Tax obligations Tips for Accuracy: • Be conservative in estimates • Account for seasonal variations • Include buffer for unexpected expenses • Consider payment cycles • Plan for growth investments

Avoid these common financial projection mistakes: 1. Revenue Assumptions • Overly optimistic growth • Ignoring seasonality • Unrealistic market share • Disregarding competition 2. Cost Estimates • Underestimating expenses • Missing hidden costs • Ignoring inflation • Forgetting about taxes 3. Timing Issues • Poor cash flow planning • Unrealistic collection periods • Ignoring payment terms • Misaligned growth timing