business plan revenue projections

• Business Planning

Business Plan Financial Projections

Written by Dave Lavinsky

Financial projections are forecasted analyses of your business’ future that include income statements, balance sheets and cash flow statements. We have found them to be an crucial part of your business plan for the following reasons:

• They can help prove or disprove the viability of your business idea. For example, if your initial projections show your company will never make a sizable profit, your venture might not be feasible. Or, in such a case, you might figure out ways to raise prices, enter new markets, or streamline operations to make it profitable. 
• Financial projections give investors and lenders an idea of how well your business is likely to do in the future. They can give lenders the confidence that you’ll be able to comfortably repay their loan with interest. And for equity investors, your projections can give them faith that you’ll earn them a solid return on investment. In both cases, your projections can help you secure the funding you need to launch or grow your business.
• Financial projections help you track your progress over time and ensure your business is on track to meet its goals. For example, if your financial projections show you should generate $500,000 in sales during the year, but you are not on track to accomplish that, you’ll know you need to take corrective action to achieve your goal.

Below you’ll learn more about the key components of financial projections and how to complete and include them in your business plan.

What Are Business Plan Financial Projections?

Financial projections are an estimate of your company’s future financial performance through financial forecasting. They are typically used by businesses to secure funding, but can also be useful for internal decision-making and planning purposes. There are three main financial statements that you will need to include in your business plan financial projections:

1. Income Statement Projection

The income statement projection is a forecast of your company’s future revenues and expenses. It should include line items for each type of income and expense, as well as a total at the end.

There are a few key items you will need to include in your projection:

• Revenue: Your revenue projection should break down your expected sales by product or service, as well as by month. It is important to be realistic in your projections, so make sure to account for any seasonal variations in your business.
• Expenses: Your expense projection should include a breakdown of your expected costs by category, such as marketing, salaries, and rent. Again, it is important to be realistic in your estimates.
• Net Income: The net income projection is the difference between your revenue and expenses. This number tells you how much profit your company is expected to make.

Sample Income Statement

2. cash flow statement & projection.

The cash flow statement and projection are a forecast of your company’s future cash inflows and outflows. It is important to include a cash flow projection in your business plan, as it will give investors and lenders an idea of your company’s ability to generate cash.

There are a few key items you will need to include in your cash flow projection:

• The cash flow statement shows a breakdown of your expected cash inflows and outflows by month. It is important to be realistic in your projections, so make sure to account for any seasonal variations in your business.
• Cash inflows should include items such as sales revenue, interest income, and capital gains. Cash outflows should include items such as salaries, rent, and marketing expenses.
• It is important to track your company’s cash flow over time to ensure that it is healthy. A healthy cash flow is necessary for a successful business.

Sample Cash Flow Statements

3. balance sheet projection.

The balance sheet projection is a forecast of your company’s future financial position. It should include line items for each type of asset and liability, as well as a total at the end.

A projection should include a breakdown of your company’s assets and liabilities by category. It is important to be realistic in your projections, so make sure to account for any seasonal variations in your business.

It is important to track your company’s financial position over time to ensure that it is healthy. A healthy balance is necessary for a successful business.

Sample Balance Sheet

How to create financial projections.

Creating financial projections for your business plan can be a daunting task, but it’s important to put together accurate and realistic financial projections in order to give your business the best chance for success.  

Cost Assumptions

When you create financial projections, it is important to be realistic about the costs your business will incur, using historical financial data can help with this. You will need to make assumptions about the cost of goods sold, operational costs, and capital expenditures.

It is important to track your company’s expenses over time to ensure that it is staying within its budget. A healthy bottom line is necessary for a successful business.

Capital Expenditures, Funding, Tax, and Balance Sheet Items

You will also need to make assumptions about capital expenditures, funding, tax, and balance sheet items. These assumptions will help you to create a realistic financial picture of your business.

Capital Expenditures

When projecting your company’s capital expenditures, you will need to make a number of assumptions about the type of equipment or property your business will purchase. You will also need to estimate the cost of the purchase.

When projecting your company’s funding needs, you will need to make a number of assumptions about where the money will come from. This might include assumptions about bank loans, venture capital, or angel investors.

When projecting your company’s tax liability, you will need to make a number of assumptions about the tax rates that will apply to your business. You will also need to estimate the amount of taxes your company will owe.

Balance Sheet Items

When projecting your company’s balance, you will need to make a number of assumptions about the type and amount of debt your business will have. You will also need to estimate the value of your company’s assets and liabilities.

Financial Projection Scenarios

Write two financial scenarios when creating your financial projections, a best-case scenario, and a worst-case scenario. Use your list of assumptions to come up with realistic numbers for each scenario.

Presuming that you have already generated a list of assumptions, the creation of best and worst-case scenarios should be relatively simple. For each assumption, generate a high and low estimate. For example, if you are assuming that your company will have $100,000 in revenue, your high estimate might be $120,000 and your low estimate might be $80,000.

Once you have generated high and low estimates for all of your assumptions, you can create two scenarios: a best case scenario and a worst-case scenario. Simply plug the high estimates into your financial projections for the best-case scenario and the low estimates into your financial projections for the worst-case scenario.

Conduct a Ratio Analysis

A ratio analysis is a useful tool that can be used to evaluate a company’s financial health. Ratios can be used to compare a company’s performance to its industry average or to its own historical performance.

There are a number of different ratios that can be used in ratio analysis. Some of the more popular ones include the following:

• Gross margin ratio
• Operating margin ratio
• Return on assets (ROA)
• Return on equity (ROE)

To conduct a ratio analysis, you will need financial statements for your company and for its competitors. You will also need industry average ratios. These can be found in industry reports or on financial websites.

Once you have the necessary information, you can calculate the ratios for your company and compare them to the industry averages or to your own historical performance. If your company’s ratios are significantly different from the industry averages, it might be indicative of a problem.

Be Realistic

When creating your financial projections, it is important to be realistic. Your projections should be based on your list of assumptions and should reflect your best estimate of what your company’s future financial performance will be. This includes projected operating income, a projected income statement, and a profit and loss statement.

Your goal should be to create a realistic set of financial projections that can be used to guide your company’s future decision-making.

Sales Forecast

One of the most important aspects of your financial projections is your sales forecast. Your sales forecast should be based on your list of assumptions and should reflect your best estimate of what your company’s future sales will be.

Your sales forecast should be realistic and achievable. Do not try to “game” the system by creating an overly optimistic or pessimistic forecast. Your goal should be to create a realistic sales forecast that can be used to guide your company’s future decision-making.

Creating a sales forecast is not an exact science, but there are a number of methods that can be used to generate realistic estimates. Some common methods include market analysis, competitor analysis, and customer surveys.

Create Multi-Year Financial Projections

When creating financial projections, it is important to generate projections for multiple years. This will give you a better sense of how your company’s financial performance is likely to change over time.

It is also important to remember that your financial projections are just that: projections. They are based on a number of assumptions and are not guaranteed to be accurate. As such, you should review and update your projections on a regular basis to ensure that they remain relevant.

Creating financial projections is an important part of any business plan. However, it’s important to remember that these projections are just estimates. They are not guarantees of future success.

Business Plan Financial Projections FAQs

What is a business plan financial projection.

A business plan financial projection is a forecast of your company's future financial performance. It should include line items for each type of asset and liability, as well as a total at the end.

What are annual income statements? 

The Annual income statement is a financial document and a financial model that summarize a company's revenues and expenses over the course of a fiscal year. They provide a snapshot of a company's financial health and performance and can be used to track trends and make comparisons with other businesses.

What are the necessary financial statements?

The necessary financial statements for a business plan are an income statement, cash flow statement, and balance sheet.

How do I create financial projections?

You can create financial projections by making a list of assumptions, creating two scenarios (best case and worst case), conducting a ratio analysis, and being realistic.

• Search Search Please fill out this field.
• Building Your Business
• Becoming an Owner
• Business Plans

Writing a Business Plan—Financial Projections

Spell out your financial forecast in dollars and sense

Creating financial projections for your startup is both an art and a science. Although investors want to see cold, hard numbers, it can be difficult to predict your financial performance three years down the road, especially if you are still raising seed money. Regardless, short- and medium-term financial projections are a required part of your business plan if you want serious attention from investors.

The financial section of your business plan should include a sales forecast , expenses budget , cash flow statement , balance sheet , and a profit and loss statement . Be sure to follow the generally accepted accounting principles (GAAP) set forth by the Financial Accounting Standards Board , a private-sector organization responsible for setting financial accounting and reporting standards in the U.S. If financial reporting is new territory for you, have an accountant review your projections.

Sales Forecast

As a startup business, you do not have past results to review, which can make forecasting sales difficult. It can be done, though, if you have a good understanding of the market you are entering and industry trends as a whole. In fact, sales forecasts based on a solid understanding of industry and market trends will show potential investors that you've done your homework and your forecast is more than just guesswork.

In practical terms, your forecast should be broken down by monthly sales with entries showing which units are being sold, their price points, and how many you expect to sell. When getting into the second year of your business plan and beyond, it's acceptable to reduce the forecast to quarterly sales. In fact, that's the case for most items in your business plan.

Expenses Budget

What you're selling has to cost something, and this budget is where you need to show your expenses. These include the cost to your business of the units being sold in addition to overhead. It's a good idea to break down your expenses by fixed costs and variable costs. For example, certain expenses will be the same or close to the same every month, including rent, insurance, and others. Some costs likely will vary month by month such as advertising or seasonal sales help.

Cash Flow Statement

As with your sales forecast, cash flow statements for a startup require doing some homework since you do not have historical data to use as a reference. This statement, in short, breaks down how much cash is coming into your business on a monthly basis vs. how much is going out. By using your sales forecasts and your expenses budget, you can estimate your cash flow intelligently.

Keep in mind that revenue often will trail sales, depending on the type of business you are operating. For example, if you have contracts with clients, they may not be paying for items they purchase until the month following delivery. Some clients may carry balances 60 or 90 days beyond delivery. You need to account for this lag when calculating exactly when you expect to see your revenue.

Profit and Loss Statement

Your P&L statement should take the information from your sales projections, expenses budget, and cash flow statement to project how much you expect in profits or losses through the three years included in your business plan. You should have a figure for each individual year as well as a figure for the full three-year period.

Balance Sheet

You provide a breakdown of all of your assets and liabilities in the balances sheet. Many of these assets and liabilities are items that go beyond monthly sales and expenses. For example, any property, equipment, or unsold inventory you own is an asset with a value that can be assigned to it. The same goes for outstanding invoices owed to you that have not been paid. Even though you don't have the cash in hand, you can count those invoices as assets. The amount you owe on a business loan or the amount you owe others on invoices you've not paid would count as liabilities. The balance is the difference between the value of everything you own vs. the value of everything you owe.

Break-Even Projection

If you've done a good job projecting your sales and expenses and inputting the numbers into a spreadsheet, you should be able to identify a date when your business breaks even—in other words, the date when you become profitable, with more money coming in than going out. As a startup business, this is not expected to happen overnight, but potential investors want to see that you have a date in mind and that you can support that projection with the numbers you've supplied in the financial section of your business plan.

Additional Tips

When putting together your financial projections, keep some general tips in mind:

• Get comfortable with spreadsheet software if you aren't already. It is the starting point for all financial projections and offers flexibility, allowing you to quickly change assumptions or weigh alternative scenarios. Microsoft Excel is the most common, and chances are you already have it on your computer. You can also buy special software packages to help with financial projections.
• Prepare a five-year projection . Don’t include this one in the business plan, since the further into the future you project, the harder it is to predict. However, have the projection available in case an investor asks for it.
• Offer two scenarios only . Investors will want to see a best-case and worst-case scenario, but don’t inundate your business plan with myriad medium-case scenarios. They likely will just cause confusion.
• Be reasonable and clear . As mentioned before, financial forecasting is as much art as science. You’ll have to assume certain things, such as your revenue growth, how your raw material and administrative costs will grow, and how effective you’ll be at collecting on accounts receivable. It’s best to be realistic in your projections as you try to recruit investors. If your industry is going through a contraction period and you’re projecting revenue growth of 20 percent a month, expect investors to see red flags.

Everything that you need to know to start your own business. From business ideas to researching the competition.

Practical and real-world advice on how to run your business — from managing employees to keeping the books.

Our best expert advice on how to grow your business — from attracting new customers to keeping existing customers happy and having the capital to do it.

Entrepreneurs and industry leaders share their best advice on how to take your company to the next level.

• Business Ideas
• Human Resources
• Business Financing
• Growth Studio
• Ask the Board

Looking for your local chamber?

Interested in partnering with us?

Run » finance, how to create a financial forecast for a startup business plan.

Financial forecasting allows you to measure the progress of your new business by benchmarking performance against anticipated sales and costs.

When starting a new business, a financial forecast is an important tool for recruiting investors as well as for budgeting for your first months of operating. A financial forecast is used to predict the cash flow necessary to operate the company day-to-day and cover financial liabilities.

Many lenders and investors ask for a financial forecast as part of a business plan; however, with no sales under your belt, it can be tricky to estimate how much money you will need to cover your expenses. Here’s how to begin creating a financial forecast for a new business.

[Read more: Startup 2021: Business Plan Financials ]

Start with a sales forecast

A sales forecast attempts to predict what your monthly sales will be for up to 18 months after launching your business. Creating a sales forecast without any past results is a little difficult. In this case, many entrepreneurs make their predictions using industry trends, market analysis demonstrating the population of potential customers and consumer trends. A sales forecast shows investors and lenders that you have a solid understanding of your target market and a clear vision of who will buy your product or service.

A sales forecast typically breaks down monthly sales by unit and price point. Beyond year two of being in business, the sales forecast can be shown quarterly, instead of monthly. Most financial lenders and investors like to see a three-year sales forecast as part of your startup business plan.

Lower fixed costs mean less risk, which might be theoretical in business schools but are very concrete when you have rent and payroll checks to sign.

Tim Berry, president and founder of Palo Alto Software

Create an expenses budget

An expenses budget forecasts how much you anticipate spending during the first years of operating. This includes both your overhead costs and operating expenses — any financial spending that you anticipate during the course of running your business.

Most experts recommend breaking down your expenses forecast by fixed and variable costs. Fixed costs are things such as rent and payroll, while variable costs change depending on demand and sales — advertising and promotional expenses, for instance. Breaking down costs into these two categories can help you better budget and improve your profitability.

"Lower fixed costs mean less risk, which might be theoretical in business schools but are very concrete when you have rent and payroll checks to sign," Tim Berry, president and founder of Palo Alto Software, told Inc . "Most of your variable costs are in those direct costs that belong in your sales forecast, but there are also some variable expenses, like ads and rebates and such."

Project your break-even point

Together, your expenses budget and sales forecast paints a picture of your profitability. Your break-even projection is the date at which you believe your business will become profitable — when more money is earned than spent. Very few businesses are profitable overnight or even in their first year. Most businesses take two to three years to be profitable, but others take far longer: Tesla , for instance, took 18 years to see its first full-year profit.

Lenders and investors will be interested in your break-even point as a projection of when they can begin to recoup their investment. Likewise, your CFO or operations manager can make better decisions after measuring the company’s results against its forecasts.

[Read more: ​​ Startup 2021: Writing a Business Plan? Here’s How to Do It, Step by Step ]

Develop a cash flow projection

A cash flow statement (or projection, for a new business) shows the flow of dollars moving in and out of the business. This is based on the sales forecast, your balance sheet and other assumptions you’ve used to create your expenses projection.

“If you are starting a new business and do not have these historical financial statements, you start by projecting a cash-flow statement broken down into 12 months,” wrote Inc . The cash flow statement will include projected cash flows from operating, investing and financing your business activities.

Keep in mind that most business plans involve developing specific financial documents: income statements, pro formas and a balance sheet, for instance. These documents may be required by investors or lenders; financial projections can help inform the development of those statements and guide your business as it grows.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

Follow us on Instagram for more expert tips & business owners’ stories.

CO—is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. Chamber of Commerce, here .

Subscribe to our newsletter, Midnight Oil

Expert business advice, news, and trends, delivered weekly

By signing up you agree to the CO— Privacy Policy. You can opt out anytime.

For more finance tips

What is enterprise resource planning, choosing an enterprise resource planning tool for your small business, 10 benefits of erp systems for small businesses.

By continuing on our website, you agree to our use of cookies for statistical and personalisation purposes. Know More

Welcome to CO—

Designed for business owners, CO— is a site that connects like minds and delivers actionable insights for next-level growth.

U.S. Chamber of Commerce 1615 H Street, NW Washington, DC 20062

Social links

Looking for local chamber, stay in touch.

How to Create Financial Projections for Your Business Plan

Written by Dave Lavinsky

Financial projections, also known as financial models, are forecasts of your company’s expected financial performance, typically over the next 5 years.

Over the past 25+ years, we’ve created financial projections for thousands of startups and existing businesses. In doing so, we’ve found 3 key reasons why financial projections are important:

• They help you determine the viability of your new business ideas and/or your need to make modifications to them. For instance, if your initial financial projections show your business idea isn’t profitable, you’ll know that changes are needed (e.g., raising prices, serving new markets, figuring out how to reduce costs, etc.) to make it viable.
• They are crucial for raising funding. Lenders will always review your financial projections to ensure you can comfortably repay any loans they issue you. Equity investors will nearly always review your projections in determining whether they can achieve their desired return on their investment in your business.
• They help keep your business financially on track by giving you goals. For instance, if your financial projections state your company should generate 100 new clients this year, and the year is halfway done and you’re only at 30 clients, you’ll know you need to readjust your strategy to achieve your goals.

In the remainder of this article, you’ll learn more about financial projections, how to complete them, and how to incorporate them in your business plan.

Download our Ultimate Business Plan Template Here to Quickly & Easily Complete Your Business Plan & Financial Projections

What are Financial Projections?

Financial projections are forecasts or estimations of your company’s future revenues and expenses, serving as a crucial part of business planning. To complete them you must develop multiple assumptions with regards to items like future sales volumes, employee headcount and the cost of supplies and other expenses. Financial projections help you create better strategies to grow your business.

Your financial projections will be the most analyzed part of your business plan by investors and/or banks. While never a precise prediction of future performance, an excellent financial model outlines the core assumptions of your business and helps you and others evaluate capital requirements, risks involved, and rewards that successful execution will deliver.

Having a solid framework in place also will help you compare your performance to the financial projections and evaluate how your business is progressing. If your performance is behind your projections, you will have a framework in place to assess the effects of lowering costs, increasing prices, or even reimagining your model. In the happy case that you exceed your business projections, you can use your framework to plan for accelerated growth, new hires, or additional expansion investments.

Hence, the use of financial projections is multi-fold and crucial for the success of any business. Your financial projections should include three core financial statements – the income statement, the cash flow statement, and the balance sheet. The following section explains each statement in detail.

Necessary Financial Statements

The three financial statements are the income statement, the cash flow statement, and the balance sheet. You will learn how to create each one in detail below.  

Income Statement Projection

The projected income statement is also referred to as a profit and loss statement and showcases your business’s revenues and expenses for a specific period.

To create an income statement, you first will need to chart out a sales forecast by taking realistic estimates of units sold and multiplying them by price per unit to arrive at a total sales number. Then, estimate the cost of these units and multiply them by the number of units to get the cost of sales. Finally, calculate your gross margin by subtracting the cost of sales from your sales.

Once you have calculated your gross margin, deduct items like wages, rent, marketing costs, and other expenses that you plan to pay to facilitate your business’s operations. The resulting total represents your projected operating income, which is a critical business metric.

Plan to create an income statement monthly until your projected break-even, or the point at which future revenues outpace total expenses, and you reflect operating profit. From there, annual income statements will suffice.

Sample Income Statement

Consider a sample income statement for a retail store below:

Cash Flow Projection

As the name indicates, a cash flow statement shows the cash flowing in and out of your business. The cash flow statement incorporates cash from business operations and includes cash inflows and outflows from investment and financing activities to deliver a holistic cash picture of your company.

Investment activities include purchasing land or equipment or research & development activities that aren’t necessarily part of daily operations. Cash movements due to financing activities include cash flowing in a business through investors and/or banks and cash flowing out due to debt repayment or distributions made to shareholders.

You should total all these three components of a cash flow projection for any specified period to arrive at a total ending cash balance. Constructing solid cash flow projections will ensure you anticipate capital needs to carry the business to a place of sustainable operations.

Sample Cash Flow Statement

Below is a simple cash flow statement for the same retail store:

Balance Sheet Projection

A balance sheet shows your company’s assets, liabilities, and owner’s equity for a certain period and provides a snapshot in time of your business performance. Assets include things of value that the business owns, such as inventory, capital, and land. Liabilities, on the other hand, are legally bound commitments like payables for goods or services rendered and debt. Finally, owner’s equity refers to the amount that is remaining once liabilities are paid off. Assets must total – or balance – liabilities and equity.

Your startup financial documents should include annual balance sheets that show the changing balance of assets, liabilities, and equity as the business progresses. Ideally, that progression shows a reduction in liabilities and an increase in equity over time.

While constructing these varied business projections, remember to be flexible. You likely will need to go back and forth between the different financial statements since working on one will necessitate changes to the others.

Sample Balance Sheet

Below is a simple balance sheet for the retail store:

How to Finish Your Business Plan and Financial Projections in 1 Day!

Don’t you wish there was a faster, easier way to finish your plan and financial projections?

With Growthink’s Ultimate Business Plan Template you can finish your plan in just 8 hours or less!

How to Create Financial Projections

When it comes to financial forecasting, simplicity is key. Your financial projections do not have to be overly sophisticated and complicated to impress, and convoluted projections likely will have the opposite effect on potential investors. Keep your tables and graphs simple and fill them with credible data that inspires confidence in your plan and vision. The below tips will help bolster your financial projections.  

Create a List of Assumptions

Your financial projections should be tied to a list of assumptions. For example, one assumption will be the initial monthly cash sales you achieve. Another assumption will be your monthly growth rate. As you can imagine, changing either of these assumptions will significantly impact your financial projections.

As a result, tie your income statement, balance sheet, and cash flow statements to your assumptions. That way, if you change your assumptions, all of your financial projections automatically update.

Below are the key assumptions to include in your financial model:

For EACH essential product or service you offer:

• What is the number of units you expect to sell each month?
• What is your expected monthly sales growth rate?
• What is the average price that you will charge per product or service unit sold?
• How much do you expect to raise your prices each year?
• How much does it cost you to produce or deliver each unit sold?
• How much (if at all) do you expect your direct product costs to grow each year?

For EACH subscription/membership, you offer:

• What is the monthly/quarterly/annual price of your membership?
• How many members do you have now, or how many members do you expect to gain in the first month/quarter/year?
• What is your projected monthly/quarterly/annual growth rate in the number of members?
• What is your projected monthly/quarterly/annual member churn (the percentage of members that will cancel each month/quarter/year)?
• What is the average monthly/quarterly/annual direct cost to serve each member (if applicable)?

Cost Assumptions

• What is your monthly salary? What is the annual growth rate in your salary?
• What is your monthly salary for the rest of your team? What is the expected annual growth rate in your team’s salaries?
• What is your initial monthly marketing expense? What is the expected annual growth rate in your marketing expense?
• What is your initial monthly rent + utility expense? What is the expected annual growth rate in your rent + utility expense?
• What is your initial monthly insurance expense? What is the expected annual growth rate in your insurance expense?
• What is your initial monthly office supplies expense? What is the expected annual growth rate in your office supplies expense?
• What is your initial monthly cost for “other” expenses? What is the expected annual growth rate in your “other” expenses?

Capital Expenditures, Funding, Tax, and Balance Sheet Items

• How much money do you need for Capital Expenditures in your first year  (to buy computers, desks, equipment, space build-out, etc.)?
• How much other funding do you need right now?
• What percent of the funding will be financed by Debt (versus equity)?
• What Corporate Tax Rate would you like to apply to company profits?
• What is your Current Liabilities Turnover (in the number of days)?
• What are your Current Assets, excluding cash (in the number of days)?
• What is your Depreciation rate?
• What is your Amortization number of Years?
• What is the number of years in which your debt (loan) must be paid back?
• What is your Debt Payback interest rate?

Create Two Financial Projection Scenarios

It would be best if you used your assumptions to create two sets of financial projections that exhibit two very different scenarios. One is your best-case scenario, and the other is your worst-case. Investors are usually very interested in how a business plan will play out in both these scenarios, allowing them to better analyze the robustness and potential profitability of a business.  

Conduct a Ratio Analysis

Gain an understanding of average industry financial ratios, including operating ratios, profitability ratios, return on investment ratios, and the like. You can then compare your own estimates with these existing ratios to evaluate costs you may have overlooked or find historical financial data to support your projected performance. This ratio analysis helps ensure your financial projections are neither excessively optimistic nor excessively pessimistic.  

Be Realistic

It is easy to get carried away when dealing with estimates and you end up with very optimistic financial projections that will feel untenable to an objective audience. Investors are quick to notice and question inflated figures. Rather than excite investors, such scenarios will compromise your legitimacy.  

Create Multi-Year Financial Projections

The first year of your financial projections should be presented on a granular, monthly basis. For subsequent years, annual projections will suffice. It is advised to have three- or five-year projections ready when you start courting investors. Since your plan needs to be succinct, you can add yearly projections as appendices to your main plan.

You should now know how to create financial projections for your business plan. In addition to creating your full projections as their own document, you will need to insert your financial projections into your plan. In your executive summary, Insert your topline projections, that is, just your sales, gross margins, recurring expenses, EBITDA (earnings before interest, taxes, depreciation, and amortization), and net income). In the financial plan section of your plan, insert your key assumptions and a little more detail than your topline projections. Include your full financial model in the appendix of your plan.

Other Helpful Business Plan Articles & Templates

Revenue Projection: How to Plan and Track Growth

A revenue projection is an indispensable task that is the backbone of financial planning for small business owners and entrepreneurs eager to secure their business trajectory. 

In this comprehensive blog post, we'll navigate through the art of projecting your revenue, paving the pathway for decision-making and growth tracking.

The Role of Revenue Projections in Financial Planning

Beyond the financial jargon, revenue projection is a visionary exercise businesses undertake to map out their finances over a specified period. But it's not merely a set of numbers; it's a dynamic map that helps you navigate challenging economic terrains.

A revenue projection typically requires estimating units sold, selling prices, growth rates across multiple customer segments, and customer churn. These factors combine to estimate your level of sales and inform what you can spend in all areas of your business.

Let's delve deeper into why understanding these projections is not a luxury but a necessity.

The Ins and Outs of Successful Revenue Projection

Although every business differs, successful revenue projections typically include a few core elements.

Setting Realistic Revenue Goals

Striking a balance between ambitious and achievable is the cornerstone of establishing realistic revenue goals. 

Of course, you'd love to grow your company to extraordinary heights. However, benchmarks that align with your company's size, market potential, and growth stage can inform your expectations while maintaining the vigor necessary for expansion.

Before defining short and long-term revenue targets, gauge the current market pulse. Understand the demand-supply dynamics, consumer behavior shifts, and emerging industry trends that could be the wind behind your sales or the ominous herald demanding strategic shifts.

For future-proof assumptions, it's vital to incorporate growth factors while remaining vigilant about potential roadblocks. There are massive benefits to a proactive and pragmatic approach to challenges, ensuring your projections aren't just romantic dreams but adaptable structures.

Develop a Revenue Projection Strategy

Your past financial data isn't just history; it's a compass that indicates future performance when appropriately interpreted. Historical data analysis highlights your current trajectory and its crucial role in your projection strategies.

In a world of choices and opportunities, navigating the strategic waters of diversified revenue streams can feel intimidating. Know which products or services are your golden geese and which offer growth potential yet require nurturing. Revenue forecasting also allows for exploring new products, markets, and customer segments.

Ignoring your competitors may lead you to unrest. Instead, map them. Understand their plays, strategize, and let this informed approach impact your revenue projection strategy. Monitoring their behavior and performance can ensure your competitive advantage is well-maintained.

Implement Tools and Systems for Revenue Tracking

There are a million software tools available on the market. Choosing the software or system that best aligns with your business needs and size can simplify your startup's financial life. Find one that works well with your business model to generate actionable insights.

Forecasting tools that integrate seamlessly with your financial and CRM systems allow easy data collection and analysis.  

Tools that decode the patterns, trends, and anomalies in your revenue data can help you readily transform your raw data into actionable intelligence that propels strategic business decisions.

Integrating your revenue tracking system with other financial management tools is necessary to understand your business's overall economic health. A seamless integration ensures you're not just looking but seeing the bigger fiscal picture.

Review and Adjust Revenue Projections

Reviewing your business's financial performance against your projected revenue is similar to tuning a musical instrument. It's a never-ending, iterative process that keeps your business in harmony with its financial notes.

Variances are common and occur for many reasons. Expect to find gaps when reviewing your projected versus actual revenue. Pay attention to them, understand their root causes, and transform them into learning opportunities for future projections. 

Numbers speak truth; it's your analysis that adds color and context. Learn to differentiate between variances that warrant adjustments to your projections and those that indicate something in your business that needs adjustment. 

When making data-driven decisions, you can confidently react to real-world influences on your business's finances.

Best Practices for Effective Revenue Projection

Revenue projections are more than just a one-person show. Multiple perspectives from a cross-functional team ensure that your forecast reflects what's happening in the market and your business.

Because your revenue projection will rarely be spot on, documenting the assumptions and methodologies you used adds credibility to your projections. 

Documentation also makes it easy to improve your accuracy consistently. You'll see where your assumptions were correct and where you need to adjust your projections. Practice makes perfect, and regular forecasts allow you to continuously refine and enhance your revenue projection models based on feedback and results. 

It's not just about what you project but the story you tell behind those numbers.

Leveraging Revenue Projections is Tied to Business Growth

There's an unbreakable link between revenue projections and your business's growth. Data-driven assumptions allow a glimpse into the future and enable you to adjust to pricing, target markets, and customer acquisition strategies. Remember that projection is not a constraint; it's liberation, providing the security and foresight required to achieve your long-term business goals.

Although getting started can feel challenging, you don't need to go it alone. The experts at Founder's CPA can help you implement tools and processes to make consistent, accurate revenue projections that guide your business AND improve over time.

Contact us today to see how a robust revenue projection can help you plan and track business growth.

What You Need to Know About Startup Cap Tables

What Should Be in Your Financial Tech Stack?

KPIs You Need to Scale Your Saas Company

Cash vs Accrual: What Should Your Startup Use?

Just in Time for Spring 🌻 50% Off for 3 Months. BUY NOW & SAVE

50% Off for 3 Months Buy Now & Save

Wow clients with professional invoices that take seconds to create

Quick and easy online, recurring, and invoice-free payment options

Automated, to accurately track time and easily log billable hours

Reports and tools to track money in and out, so you know where you stand

Easily log expenses and receipts to ensure your books are always tax-time ready

Tax time and business health reports keep you informed and tax-time ready

Automatically track your mileage and never miss a mileage deduction again

Time-saving all-in-one bookkeeping that your business can count on

Track project status and collaborate with clients and team members

Organized and professional, helping you stand out and win new clients

Set clear expectations with clients and organize your plans for each project

Client management made easy, with client info all in one place

Pay your employees and keep accurate books with Payroll software integrations

• Team Management

FreshBooks integrates with over 100 partners to help you simplify your workflows

Send invoices, track time, manage payments, and more…from anywhere.

• Freelancers
• Self-Employed Professionals
• Businesses With Employees
• Businesses With Contractors
• Marketing & Agencies
• Construction & Trades
• IT & Technology
• Business & Prof. Services
• Accounting Partner Program
• Collaborative Accounting™
• Accountant Hub
• Reports Library
• FreshBooks vs QuickBooks
• FreshBooks vs HoneyBook
• FreshBooks vs Harvest
• FreshBooks vs Wave
• FreshBooks vs Xero
• Free Invoice Generator
• Invoice Templates
• Accounting Templates
• Business Name Generator
• Estimate Templates
• Help Center
• Business Loan Calculator
• Mark Up Calculator

Call Toll Free: 1.866.303.6061

1-888-674-3175

• All Articles
• Productivity
• Project Management
• Bookkeeping

Resources for Your Growing Business

How to make financial projections for business.

Writing a solid business plan should be the first step for any business owner looking to create a successful business. 

As a small business owner, you will want to get the attention of investors, partners, or potential highly skilled employees. It is, therefore, important to have a realistic financial forecast incorporated into your business plan. 

We’ll break down a financial projection and how to utilize it to give your business the best start possible.

Key Takeaways

Accurate financial projections are essential for businesses to succeed. In this article, we’ll explain everything you need to know about creating financial projections for your business. Here’s what you need to know about financial projections:

• A financial projection is a group of financial statements that are used to forecast future performance
• Creating financial projections can break down into 5 simple steps: sales projections, expense projections, balance sheet projections, income statement projections, and cash flow projections
• Financial projections can offer huge benefits to your business, including helping with forecasting future performance, ensuring steady cash flow, and planning key moves around the growth of the business

Here’s What We’ll Cover:

What Is a Financial Projection?

How to Create a Financial Projection

What goes into a financial projection, what are financial projections used for.

Financial Projections Advantages

Frequently Asked Questions

What Is Financial Projection?

A financial projection is essentially a set of financial statements . These statements will forecast future revenues and expenses. 

Any projection includes your cash inflows and outlays, your general income, and your balance sheet. 

They are perfect for showing bankers and investors how you plan to repay business loans. They also show what you intend to do with your money and how you expect your business to grow. 

Most projections are for the first 3-5 years of business, but some include a 10-year forecast too.

Either way, you will need to develop a short and mid-term projection broken down month by month. 

As you are just starting out with your business, you won’t be expected to provide exact details. Most financial projections are rough guesses. But they should also be educated guesses based on market trends, research, and looking at similar businesses. 

It’s incredibly important for financial statements to be realistic. Most investors will be able to spot a fanciful projection from a mile away. 

In general, most people would prefer to be given realistic projections, even if they’re not as impressive.

Financial projections are created to help business owners gain insight into the future of their company’s financials. 

The question is, how to create financial projections? For business plan purposes, it’s important that you follow the best practices of financial projection closely. This will ensure you get accurate insight, which is vital for existing businesses and new business startups alike.

Here are the steps for creating accurate financial projections for your business.

1. Start With A Sales Projection

For starters, you’ll need to project how much your business will make in sales. If you’re creating a sales forecast for an existing business, you’ll have past performance records to project your next period. Past data can provide useful information for your financial projection, such as if your sales do better in one season than another.

Be sure also to consider external factors, such as the economy at large, the potential for added tariffs and taxes in the future, supply chain issues, or industry downturns. 

The process is almost the same for new businesses, only without past data to refer to. Business startups will need to do more research on their industry to gain insight into potential future sales.

2. Create Your Expense Projection

Next, create an expense projection for your business. In a sense, this is an easier task than a sales projection since it seems simpler to predict your own behaviors than your customers. However, it’s vital that you expect the unexpected.

Optimism is great, but the worst-case scenario must be considered and accounted for in your expense projection. From accidents in the workplace to natural disasters, rising trade prices, to unexpected supply disruptions, you need to consider these large expenses in your projection. 

Something always comes up, so we suggest you add a 10-15% margin on your expense projection.

3. Create Your Balance Sheet Projection

A balance sheet projection is used to get a clear look at your business’s financial position related to assets, liabilities , and equity, giving you a more holistic view of the company’s overall financial health. 

For startup businesses, this can prove to be a lot of work since you won’t have existing records of past performance to pull from. This will need to be factored into your industry research to create an accurate financial projection.

For existing businesses, it will be more straightforward. Use your past and current balance sheets to predict your business’s position in the next 1-3 years. If you use a cloud-based, online accounting software with the feature to generate balance sheets, such as the one offered by FreshBooks, you’ll be able to quickly create balance sheets for your financial projection within the app.

Click here to learn more about the features of FreshBooks accounting software.

4. Make Your Income Statement Projection

Next up, create an income statement projection. An income statement is used to declare the net income of a business after all expenses have been made. In other words, it states the profits of a business.

For currently operating businesses, you can use your past income statements and the changes between them to create accurate predictions for the next 1-3 years. You can also use accounting software to generate your income statements automatically. 

You’ll need to work on rough estimates for new businesses or those still in the planning phase. It’s vital that you stay realistic and do your utmost to create an accurate, good-faith projection of future income. 

5. Finally, Create Your Cash Flow Projection

Last but not least is to generate your projected cash flow statement. A cash flow projection forecasts the movement of all money to and from your business. It’s intertwined with a business’s balance sheet and income statement, which is no different when creating projections. 

If your business has been operating for six months or more, you can create a fairly accurate cash flow projection with your past cash flow financial statements. For new businesses, you’ll need to factor in this step of creating a financial forecast when doing your industry research. 

It needs to include five elements to ensure an accurate, useful financial forecast for your business. These financial statements come together to provide greater insight into the projected future of a business’s financial health. These include:

Income Statement

A standard income statement summarizes your company’s revenues and expenses over a period. This is normally done either quarterly or annually.

The income statement is where you will do the bulk of your forecasting. 

On any income statement, you’re likely to find the following:

• Revenue: Your revenue earned through sales. 
• Expenses: The amount you’ve spent, including your product costs and your overheads.
• Pre-Tax Earnings: This is your income before you’ve paid tax.
• Net Income: The total revenues minus your total expenses. 

Net income is the most important number. If the number is positive, then you’re earning a profit, if it’s negative, it means your expenses outweigh your revenue and you’re making a loss. 

Cash Flow Statement

Your cash flow statement will show any potential investor whether you are a good credit risk. It also shows them if you can successfully repay any loans you are granted.

You can break a cash flow statement into three parts:

• Cash Revenues: An overview of your calculated cash sales for a given time period. 
• Cash Disbursements: You list all the cash expenditures you expect to pay.
• Net Cash Revenue: Take the cash revenues minus your cash disbursements.

Balance Sheet

Your balance sheet will show your business’s net worth at a given time.

A balance sheet is split up into three different sections:

• Assets: An asset is a tangible object of value that your company owns. It could be things like stock or property such as warehouses or offices. 
• Liabilities: These are any debts your business owes.
• Equity: Your equity is the summary of your assets minus your liabilities.

Looking for an easy-to-use yet capable online accounting software? FreshBooks accounting software is a cloud-based solution that makes financial projections simple. With countless financial reporting features and detailed guides on creating accurate financial forecasts, FreshBooks can help you gain the insight you need to let your business thrive. Click here to give FreshBooks a try for free.

Financial projections have many uses for current business owners and startup entrepreneurs. Provided your financial forecasting follows the best practices for an accurate projection, your data will be used for:

• Internal planning and budgeting – Your finances will be the main factor in whether or not you’ll be able to execute your business plan to completion. Financial projections allow you to make it happen.
• Attracting investors and securing funding – Whether you’re receiving financing from bank loans, investors, or both, an accurate projection will be essential in receiving the funds you need.
• Evaluating business performance and identifying areas for improvement – Financial projections help you keep track of your business’s financial health, allowing you to plan ahead and avoid unwelcome surprises.
• Making strategic business decisions – Timing is important in business, especially when it comes to major expenditures (new product rollouts, large-scale marketing, expansion, etc.). Financial projections allow you to make an informed strategy for these big decisions.

Financial Projections Advantages 

Creating clear financial projections for your business startup or existing company has countless benefits. Focusing on creating (and maintaining) good financial forecasting for your business will:

• Help you make vital financial decisions for the business in the future
• Help you plan and strategize for growth and expansion
• Demonstrate to bankers how you will repay your loans 
• Demonstrate to investors how you will repay financing
• Identify your most essential financing needs in the future
• Assist in fine-tuning your pricing
• Be helpful when strategizing your production plan
• Be a useful tool for planning your major expenditures strategically
• Help you keep an eye on your cash flow for the future

Your financial forecast is an essential part of your business plan, whether you’re still in the early startup phases or already running an established business. However, it’s vital that you follow the best practices laid out above to ensure you receive the full benefits of comprehensive financial forecasting.  

If you’re looking for a useful tool to save time on the administrative tasks of financial forecasting, FreshBooks can help. With the ability to instantly generate the reports you need and get a birds-eye-view of your business’s past performance and overall financial help, it will be easier to create useful financial projections that provide insight into your financial future. 

FAQs on Financial Projections

More questions about financial forecasting, projections, and how these processes fit into your business plan? Here are some frequently asked questions by business owners.

Why are financial projections important?

Financial projections allow you to gain insight into your business’s economic trajectory. This helps business owners make financial decisions, secure funding, and more. Additionally, financial projections provide early warning of roadblocks and challenges that may lay ahead for the company, making it easier to plan for a clear course of action.

What is an example of a financial projection?

A projection is an overall look at a business’s forecasted performance. It’s made up of several different statements and reports, such as a cash flow statement, income statement, profit and loss statement, and sales statement. You can find free templates and examples of many of these reports via FreshBooks. Click here to view our selection of accounting templates.

Are financial forecasts and financial projections the same?

Technically, there is a difference between forecasting and projections, though many use the terms interchangeably. Financial forecasting often refers to shorter-term (<1 year) predictions of financial performance, while financial projections usually focus on a larger time scale (2-3 years).

What is the most widely used method for financial forecasting?

The most common method of accurate forecasting is the straight-line forecasting method. It’s most often used for projecting the growth of a business’s revenue growth over a set period. If you notice that your records indicate a 4% growth of revenue per year for five years running, it would be reasonable to assume that this will continue year-over-year. 

What is the purpose of a financial projection?

Projection aims to get deeper, more nuanced insight into a business’s financial health and viability. It allows business owners to anticipate expenses and profit growth, giving them the tools to secure funding and loans and strategize major business decisions. It’s an essential accounting process that all business owners should prioritize in their business plans.

Michelle Alexander, CPA

About the author

Michelle Alexander is a CPA and implementation consultant for Artificial Intelligence-powered financial risk discovery technology. She has a Master's of Professional Accounting from the University of Saskatchewan, and has worked in external audit compliance and various finance roles for Government and Big 4. In her spare time you’ll find her traveling the world, shopping for antique jewelry, and painting watercolour floral arrangements.

RELATED ARTICLES

Save Time Billing and Get Paid 2x Faster With FreshBooks

Want More Helpful Articles About Running a Business?

Get more great content in your Inbox.

By subscribing, you agree to receive communications from FreshBooks and acknowledge and agree to FreshBook’s Privacy Policy . You can unsubscribe at any time by contacting us at [email protected].

👋 Welcome to FreshBooks

To see our product designed specifically for your country, please visit the United States site.

What's Planergy?

Modern Spend Management and Accounts Payable software.

Helping organizations spend smarter and more efficiently by automating purchasing and invoice processing.

We saved more than $1 million on our spend in the first year and just recently identified an opportunity to save about $10,000 every month on recurring expenses with Planergy.

Cristian Maradiaga

Download a free copy of "preparing your ap department for the future", to learn:.

• How to transition from paper and excel to eInvoicing.
• How AP can improve relationships with your key suppliers.
• How to capture early payment discounts and avoid late payment penalties.
• How better management in AP can give you better flexibility for cash flow management.

Business Plan Financial Projections: How To Create Accurate Targets

• Written by Keith Murphy
• 16 min read

Small businesses and startups have a lot riding on their ability to create effective and accurate financial projections as part of their business plan. Solid financials are a strong enticement for investors, after all, and can help new businesses chart a course that will take them beyond the legendendarily difficult first year and into a productive and profitable future.

But the need for business owners to look ahead in order to secure funding, increase profits, and make intelligent financial decisions doesn’t end when startups become full-fledged businesses—and business plan financial projections aren’t just for startups. Existing businesses can also put them to good use by harvesting insights from their existing financial statements and creating sales projections and other financial forecasts that guide and improve their ongoing business planning.

What Are Business Plan Financial Projections?

Successful companies plan ahead, looking as best they can into the near and distant future to chart a course to growth, innovation, and competitive strength. Financial projections, both as part of an initial business plan and as part of ongoing business planning, use a company’s financial statements to help business owners forecast their upcoming expenses and revenue in a strategically useful way.

Most businesses use two types of financial projections:

• Short-term projections are broken down by month and generally cover the coming 12 months. They provide a guide companies can use to monitor and adjust their financial activity to set and hit targets for the financial year. In the first year, short-term projections will be entirely estimated, but in subsequent years, historical data can be used to help fine-tune them for greater accuracy and strategic utility.
• Long-term projections are focused on the coming three to five years and are generally used to secure investment (both initial and ongoing), provide a strategic roadmap for the company’s growth, or both.

For startups, creating financial projections is part of their initial business plan. Providing financial forecasts banks and potential investors can use to determine the financial viability of a business is key to obtaining financing and investments needed to get the business off the ground.

For existing businesses—for whom an initial business plan has evolved into business planning—financial projections are useful in attracting investors who want to see clear estimates for upcoming revenue, expenses, and potential growth. They’re also helpful in securing loans and lines of credit from financial institutions for the same reason. And even if you’re not trying to get funding or investments, financial projections provide a useful framework for building budgets focused on growth and competitive advantage.

So whether you’re a small business owner, an aspiring tycoon starting a new business, or part of the financial team at a well-established corporation, what matters most is viewing financial projections as a living, breathing reference tool that can help you plan and budget for growth in a realistic way while still setting aspirational goals for your business.

Financial projections, both as part of an initial business plan and as part of ongoing business planning, use a company’s financial statements to help business owners forecast their upcoming expenses and revenue in a strategically useful way.

Financial Projections: Core Components

Whether you’re preparing them as part of your business plan or to enhance your business planning, you’ll need the same financial statements to prepare financial projections: an income statement, a cash-flow statement, and a balance sheet.

• Income statements , sometimes called profit and loss statements , provide detailed information on your company’s revenue and expenses for a given period (e.g., a quarter, year, or multi-year period).
• Cash flow statements provide a comprehensive view of cash flowing into and out of a business. They record all cash flow from operations, investment, and financing activities.
• Balance sheets are used to showcase a company’s assets, liabilities, and owner’s equity for a specific period.

How to Create Financial Projections

The process of creating financial projections is the same whether you’re drafting a business plan or creating forecasts for an existing business. The primary difference is whether you’ll draw on your own research and expertise (a new business or startup business) or use historical data (existing businesses).

Keep in mind that while you’ll create the necessary documents separately, you’ll most likely finish them by consulting each of them as needed. For example, your sales forecast might change once you prepare your cash-flow statement. The best approach is to view each document as both its own piece of the financial projection puzzle and a reference for the others; this will help ensure you can assemble comprehensive and clear financial projections.

1. Start with a Sales Projection

A sales forecast is the first step in creating your income statement. You can start with a one, three, or five-year projection, but keep in mind that, without historical financial data, accuracy may decrease over time. It’s best to start with monthly income statements until you reach your projected break-even , which is the point at which revenue exceeds total operating expenses and you show a profit. Once you hit the break-even, you can transition to annual income statements.

Also, keep in mind factors outside of sales; market conditions, global environmental, political, and health concerns, sourcing challenges (including pricing changes and increased variable costs) and other business disruptors can put the kibosh on your carefully constructed forecasts if you leave them out of your considerations.

Start with a reasonable estimate of the units sold for the forecast period, and multiply them by the price per unit. This value is your total sales for the period.

Next, estimate the total cost of producing these units (i.e., the cost of goods sold , or COGS; sometimes called cost of sales ) by multiplying the per-unit cost by the number of units produced.

Deducting your COGS from your estimated sales yields your gross profit margin.

From the gross margin, subtract expenses such as wages, marketing costs, rent, and other operating expenses. The result is your projected operating income , or net income .

Using these figures, you can create an income statement:

2. Cash Flow Statement

Tracking your estimated cash inflows and outflows from investment and financing, combined with the cash generated by business operations, is the purpose of a cash flow projection .

Investment activities might include, for example, purchasing real estate or investing in research and development outside of daily operations.

Financing activities include cash inflows from investor funding or business loans, as well as cash outflows to repay debts or pay dividends to shareholders.

A reliable and accurate cash flow projection is essential to managing your working capital effectively and ensuring you have all the cash you need to cover your ongoing obligations while still having enough left to invest in growth and innovation or cover emergencies.

Drawing from our income statement, we can create a basic cash flow statement:

3. The Balance Sheet

Providing a “snapshot” of your businesses’ financial performance for a given period of time, the balance sheet contains your company’s assets, liabilities, and owner’s equity.

Assets include inventory, real estate, and capital, while liabilities represent financial obligations and include accounts payable, bank loans, and other debt.

Owner’s equity represents the amount remaining once liabilities have been paid.

Ideally, over time your company’s balance sheet will reflect your growth through a reduction of liabilities and an increase in owner’s equity.

We can complete our triumvirate of financial statements with a basic balance sheet:

Best Practices for Effective Financial Projections

Like a lot of other business processes, financial planning can be complex, time-consuming, and even frustrating if you’re still using manual workflows and paper documents or basic spreadsheet-style applications such as Microsoft Excel. You can get free templates for basic financial projections from the Service Corps of Retired Executives (SCORE), but even templates can only take you so far.

Without a doubt, the best advantage you can give yourself in creating effective and accurate financial projections—whether they’re for the financial section of your business plan or simply part of your ongoing business planning—is to invest in comprehensive procure-to-pay (P2P) software such as Planergy.

In addition to helpful templates, best-in-class P2P software also provides a rich array of real-time data analysis, reporting, and forecasting tools that make it easy to transform historical data (or market research) into accurate forecasts. In addition, artificial intelligence and process automation make it easy to collect, organize, manage and share your data with all internal stakeholders, so everyone has the information they need to create the most useful and complete forecasts and projections possible.

Beyond investing in P2P software, you can also improve the quality and accuracy of your financial projections by:

• Doing your homework. Invest in financial statement analysis and ratio analysis, with a focus not just on your own company, but your industry and the market in general. Learn the current ratios used for liquidity analysis, profitability, and debt and compare them to your own to get a more nuanced and useful understanding of how your company performs internally and within the context of the marketplace.
• Keeping it real. It can be all too easy to get carried away with pie-in-the-sky optimism when forecasting the future of your business. Rose-colored glasses aren’t exclusive to startups and small businesses; over-inflated estimates can hobble even veteran organizations if they don’t practice good data discipline and temper their hopes with practical considerations. Focus on creating realistic, but positive, projections, and you won’t have to worry about investors or lenders glancing askance at your hard work.
• Hoping for the best, but planning for the worst. Run two scenarios when performing your financial projections: the best-case scenario where everything goes perfectly to plan, and a worse-case scenario where Murphy’s Law holds sway. While actual performance will undoubtedly fall somewhere in between the two, having an upper and lower boundary appeals to investors and lenders who are assessing your company’s financial viability.

Financial Projections Help You Reach Your Goals for Growth

From startups to global corporations, every business needs reliable tools for financial forecasting. Take the time to create well-researched, data-driven financial projections, and you’ll be well-equipped to attract investors, secure funding, and chart a course for greater profits, growth, and performance in today’s competitive marketplace.

What’s your goal today?

1. use planergy to manage purchasing and accounts payable.

• Read our case studies, client success stories, and testimonials.
• Visit our “Solutions” page to see the areas of your business we can help improve to see if we’re a good fit for each other.
• Learn about us, and our long history of helping companies just like yours.

2. Download our guide “Preparing Your AP Department For The Future”

3. learn best practices for purchasing, finance, and more.

Browse hundreds of articles , containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

Related Posts

The Future of FP&A: How The Role Is Evolving With The Use Of Real-Time Data

• 17 min read

Days Sales Outstanding: What Is It and How To Calculate It

• 19 min read

Budgeting In UK Schools: MAT, Academy Budgeting Challenges and Best Practices

Procurement.

• Purchasing Software
• Purchase Order Software
• Procurement Solutions
• Procure-to-Pay Software
• E-Procurement Software
• PO System For Small Business
• Spend Analysis Software
• Vendor Management Software
• Inventory Management Software

AP & FINANCE

• Accounts Payable Software
• AP Automation Software
• Compliance Management Software
• Business Budgeting Software
• Workflow Automation Software
• Integrations
• Reseller Partner Program

Business is Our Business

Stay up-to-date with news sent straight to your inbox

Sign up with your email to receive updates from our blog

This website uses cookies

We use cookies to personalise content and ads, to provide social media features and to analyse our traffic. We also share information about your use of our site with our social media, advertising and analytics partners who may combine it with other information that you’ve provided to them or that they’ve collected from your use of their services.

Read our privacy statement here .

Business Plan

• Our Services
• Our Process

WhatsApp: +92 345 5384026

E-mail: [email protected]

A Comprehensive Guide: How to Forecast Revenues for Your Business Plan

Introduction:.

Forecasting revenues is a crucial aspect of developing a business plan. Accurate revenue projections not only attract investors but also provide a roadmap for sustainable growth and financial success. This article will provide you with a step-by-step guide to help you forecast revenues effectively. By following these strategies and best practices, you can make informed decisions, set realistic goals, and build a solid foundation for your business.

I. Understand Your Market and Customers:

Before you can forecast revenues, it's essential to gain a deep understanding of your target market and customers. Conduct market research to analyze trends, demand, and competition. Identify your target audience's needs, preferences, and purchasing behavior. This information will help you estimate the potential market size and assess the revenue potential for your products or services.

II. Break Down Revenue Streams:

Next, break down your revenue streams into specific categories. For example, if you have multiple products or services, create separate revenue streams for each. Consider the pricing structure, sales volume, and average transaction value for each category. This breakdown enables you to analyze and forecast revenues with greater accuracy.

III. Utilize Historical Data:

If you have been in business for some time, historical data can serve as a valuable resource for revenue forecasting. Analyze past financial records, sales data, and customer trends. Identify patterns, seasonal variations, and growth rates. Use this information as a baseline to project future revenues, accounting for any market changes or new product launches.

IV. Determine Key Assumptions:

Forecasting revenues involves making certain assumptions about your business and the market. Identify the key factors that will impact your revenue projections, such as market growth rates, pricing changes, or shifts in consumer behavior. Document these assumptions clearly, ensuring they are realistic and supported by data and market trends.

V. Use Multiple Forecasting Methods:

To enhance the accuracy of your revenue projections, employ various forecasting methods. Here are a few commonly used techniques:

a) Top-Down Approach:

Start with the overall market size, estimate your market share, and calculate revenues based on this share.

b) Bottom-Up Approach:

Begin with individual product or service sales projections and aggregate them to obtain total revenue estimates.

c) Time-Series Analysis:

Analyze historical sales data to identify patterns, trends, and seasonality. Apply statistical methods like moving averages or exponential smoothing to project future revenues.

d) Market Research and Surveys:

Conduct market surveys or customer interviews to gather insights on demand, price sensitivity, and purchasing behavior. Use this data to estimate market size and forecast revenues.

VI. Account for External Factors:

Consider external factors that could impact your revenue forecast, such as economic conditions, industry trends, regulatory changes, or technological advancements. Conduct a thorough analysis of these factors and assess their potential influence on your business. Adjust your revenue projections accordingly to reflect any anticipated challenges or opportunities.

VII. Monitor and Review:

Once you have developed your revenue forecast, it is crucial to continuously monitor and review its accuracy. Regularly compare your projections with actual revenue performance and adjust your forecast as needed. Use key performance indicators (KPIs) to track your progress and make informed decisions to drive revenue growth.

By following the steps outlined in this guide, you can enhance the accuracy and reliability of your revenue forecast for your business plan.

Here are a few additional tips to keep in mind:

Sensitivity Analysis:

Perform a sensitivity analysis by testing your revenue projections against various scenarios. This will help you understand the potential impact of changes in key variables such as pricing, market share, or economic conditions. It provides a more comprehensive view of the range of possible outcomes.

Seek Expert Advice:

If you're unsure about certain aspects of revenue forecasting or lack expertise in financial analysis, consider consulting with us. At businessplanprovider.com , we have professionals such as accountants, financial advisors, and industry experts. Their insights and guidance can add credibility to your revenue forecast.

Regularly Update Your Forecast:

Revenue forecasting is not a one-time exercise. As your business grows and market conditions evolve, it's crucial to update your forecast regularly. Review and revise your projections quarterly or annually, taking into account any new information or changes in your business environment.

Validate with Market Feedback:

Don't rely solely on internal data or assumptions. Seek feedback from potential customers, industry experts, or mentors to validate your revenue projections. Incorporate their insights into your forecast, as they can provide valuable perspectives and highlight blind spots.

Be Realistic and Conservative:

While it's important to set ambitious goals, it's equally crucial to be realistic and conservative in your revenue forecast. Investors and stakeholders appreciate a forecast that demonstrates a clear understanding of potential challenges and uncertainties. Avoid overestimating revenues, as it may lead to unrealistic expectations and undermine your credibility.

Remember that revenue forecasting is both an art and a science. It requires a blend of data analysis, market understanding, and informed decision-making. Be prepared to adjust your forecast as new information becomes available or market dynamics change.

Conclusion:

Forecasting revenues for your business plan requires a systematic and data-driven approach. By understanding your market and customers, utilizing historical data, making key assumptions, employing multiple forecasting methods, accounting for external factors, and continuously monitoring and reviewing your forecast, you can develop realistic revenue projections. Remember, revenue forecasting is an ongoing process that should be regularly updated to align with market changes and business growth. By accurately forecasting revenues, you can make informed strategies, allocate resources effectively, and attract investors and stakeholders who are confident in the potential of your business.

A well-structured and thoughtfully prepared revenue forecast will not only guide your business planning and decision-making but also demonstrate your professionalism and strategic thinking to potential investors. By following the steps and best practices outlined in this guide, you can develop a robust revenue forecast that will support the growth and success of your business. 

Transforming Your Vision into a Winning Business Plan

Get in touch, got some ideas have questions we're ready for them..

©2023 businessplanprovider.com. All rights reserved. Privacy Policy

Free Financial Templates for a Business Plan

By Andy Marker | July 29, 2020

• Share on Facebook
• Share on LinkedIn

Link copied

In this article, we’ve rounded up expert-tested financial templates for your business plan, all of which are free to download in Excel, Google Sheets, and PDF formats.

Included on this page, you’ll find the essential financial statement templates, including income statement templates , cash flow statement templates , and balance sheet templates . Plus, we cover the key elements of the financial section of a business plan .

Financial Plan Templates

Download and prepare these financial plan templates to include in your business plan. Use historical data and future projections to produce an overview of the financial health of your organization to support your business plan and gain buy-in from stakeholders

Business Financial Plan Template

Use this financial plan template to organize and prepare the financial section of your business plan. This customizable template has room to provide a financial overview, any important assumptions, key financial indicators and ratios, a break-even analysis, and pro forma financial statements to share key financial data with potential investors.

Download Financial Plan Template

Word | PDF | Smartsheet

Financial Plan Projections Template for Startups

This financial plan projections template comes as a set of pro forma templates designed to help startups. The template set includes a 12-month profit and loss statement, a balance sheet, and a cash flow statement for you to detail the current and projected financial position of a business.

‌ Download Startup Financial Projections Template

Excel | Smartsheet

Income Statement Templates for Business Plan

Also called profit and loss statements , these income statement templates will empower you to make critical business decisions by providing insight into your company, as well as illustrating the projected profitability associated with business activities. The numbers prepared in your income statement directly influence the cash flow and balance sheet forecasts.

Pro Forma Income Statement/Profit and Loss Sample

Use this pro forma income statement template to project income and expenses over a three-year time period. Pro forma income statements consider historical or market analysis data to calculate the estimated sales, cost of sales, profits, and more.

‌ Download Pro Forma Income Statement Sample - Excel

Small Business Profit and Loss Statement

Small businesses can use this simple profit and loss statement template to project income and expenses for a specific time period. Enter expected income, cost of goods sold, and business expenses, and the built-in formulas will automatically calculate the net income.

‌ Download Small Business Profit and Loss Template - Excel

3-Year Income Statement Template

Use this income statement template to calculate and assess the profit and loss generated by your business over three years. This template provides room to enter revenue and expenses associated with operating your business and allows you to track performance over time.

Download 3-Year Income Statement Template

For additional resources, including how to use profit and loss statements, visit “ Download Free Profit and Loss Templates .”

Cash Flow Statement Templates for Business Plan

Use these free cash flow statement templates to convey how efficiently your company manages the inflow and outflow of money. Use a cash flow statement to analyze the availability of liquid assets and your company’s ability to grow and sustain itself long term.

Simple Cash Flow Template

Use this basic cash flow template to compare your business cash flows against different time periods. Enter the beginning balance of cash on hand, and then detail itemized cash receipts, payments, costs of goods sold, and expenses. Once you enter those values, the built-in formulas will calculate total cash payments, net cash change, and the month ending cash position.

Download Simple Cash Flow Template

12-Month Cash Flow Forecast Template

Use this cash flow forecast template, also called a pro forma cash flow template, to track and compare expected and actual cash flow outcomes on a monthly and yearly basis. Enter the cash on hand at the beginning of each month, and then add the cash receipts (from customers, issuance of stock, and other operations). Finally, add the cash paid out (purchases made, wage expenses, and other cash outflow). Once you enter those values, the built-in formulas will calculate your cash position for each month with.

‌ Download 12-Month Cash Flow Forecast

3-Year Cash Flow Statement Template Set

Use this cash flow statement template set to analyze the amount of cash your company has compared to its expenses and liabilities. This template set contains a tab to create a monthly cash flow statement, a yearly cash flow statement, and a three-year cash flow statement to track cash flow for the operating, investing, and financing activities of your business.

Download 3-Year Cash Flow Statement Template

For additional information on managing your cash flow, including how to create a cash flow forecast, visit “ Free Cash Flow Statement Templates .”

Balance Sheet Templates for a Business Plan

Use these free balance sheet templates to convey the financial position of your business during a specific time period to potential investors and stakeholders.

Small Business Pro Forma Balance Sheet

Small businesses can use this pro forma balance sheet template to project account balances for assets, liabilities, and equity for a designated period. Established businesses can use this template (and its built-in formulas) to calculate key financial ratios, including working capital.

Download Pro Forma Balance Sheet Template

Monthly and Quarterly Balance Sheet Template

Use this balance sheet template to evaluate your company’s financial health on a monthly, quarterly, and annual basis. You can also use this template to project your financial position for a specified time in the future. Once you complete the balance sheet, you can compare and analyze your assets, liabilities, and equity on a quarter-over-quarter or year-over-year basis.

Download Monthly/Quarterly Balance Sheet Template - Excel

Yearly Balance Sheet Template

Use this balance sheet template to compare your company’s short and long-term assets, liabilities, and equity year-over-year. This template also provides calculations for common financial ratios with built-in formulas, so you can use it to evaluate account balances annually.

Download Yearly Balance Sheet Template - Excel

For more downloadable resources for a wide range of organizations, visit “ Free Balance Sheet Templates .”

Sales Forecast Templates for Business Plan

Sales projections are a fundamental part of a business plan, and should support all other components of your plan, including your market analysis, product offerings, and marketing plan . Use these sales forecast templates to estimate future sales, and ensure the numbers align with the sales numbers provided in your income statement.

Basic Sales Forecast Sample Template

Use this basic forecast template to project the sales of a specific product. Gather historical and industry sales data to generate monthly and yearly estimates of the number of units sold and the price per unit. Then, the pre-built formulas will calculate percentages automatically. You’ll also find details about which months provide the highest sales percentage, and the percentage change in sales month-over-month. 

Download Basic Sales Forecast Sample Template

12-Month Sales Forecast Template for Multiple Products

Use this sales forecast template to project the future sales of a business across multiple products or services over the course of a year. Enter your estimated monthly sales, and the built-in formulas will calculate annual totals. There is also space to record and track year-over-year sales, so you can pinpoint sales trends.

Download 12-Month Sales Forecasting Template for Multiple Products

3-Year Sales Forecast Template for Multiple Products

Use this sales forecast template to estimate the monthly and yearly sales for multiple products over a three-year period. Enter the monthly units sold, unit costs, and unit price. Once you enter those values, built-in formulas will automatically calculate revenue, margin per unit, and gross profit. This template also provides bar charts and line graphs to visually display sales and gross profit year over year.

Download 3-Year Sales Forecast Template - Excel

For a wider selection of resources to project your sales, visit “ Free Sales Forecasting Templates .”

Break-Even Analysis Template for Business Plan

A break-even analysis will help you ascertain the point at which a business, product, or service will become profitable. This analysis uses a calculation to pinpoint the number of service or unit sales you need to make to cover costs and make a profit.

Break-Even Analysis Template

Use this break-even analysis template to calculate the number of sales needed to become profitable. Enter the product's selling price at the top of the template, and then add the fixed and variable costs. Once you enter those values, the built-in formulas will calculate the total variable cost, the contribution margin, and break-even units and sales values.

Download Break-Even Analysis Template

For additional resources, visit, “ Free Financial Planning Templates .”

Business Budget Templates for Business Plan

These business budget templates will help you track costs (e.g., fixed and variable) and expenses (e.g., one-time and recurring) associated with starting and running a business. Having a detailed budget enables you to make sound strategic decisions, and should align with the expense values listed on your income statement.

Startup Budget Template

Use this startup budget template to track estimated and actual costs and expenses for various business categories, including administrative, marketing, labor, and other office costs. There is also room to provide funding estimates from investors, banks, and other sources to get a detailed view of the resources you need to start and operate your business.

Download Startup Budget Template

Small Business Budget Template

This business budget template is ideal for small businesses that want to record estimated revenue and expenditures on a monthly and yearly basis. This customizable template comes with a tab to list income, expenses, and a cash flow recording to track cash transactions and balances.

Download Small Business Budget Template

Professional Business Budget Template

Established organizations will appreciate this customizable business budget template, which  contains a separate tab to track projected business expenses, actual business expenses, variances, and an expense analysis. Once you enter projected and actual expenses, the built-in formulas will automatically calculate expense variances and populate the included visual charts. 

‌ Download Professional Business Budget Template

For additional resources to plan and track your business costs and expenses, visit “ Free Business Budget Templates for Any Company .”

Other Financial Templates for Business Plan

In this section, you’ll find additional financial templates that you may want to include as part of your larger business plan.

Startup Funding Requirements Template

This simple startup funding requirements template is useful for startups and small businesses that require funding to get business off the ground. The numbers generated in this template should align with those in your financial projections, and should detail the allocation of acquired capital to various startup expenses.

Download Startup Funding Requirements Template - Excel

Personnel Plan Template

Use this customizable personnel plan template to map out the current and future staff needed to get — and keep — the business running. This information belongs in the personnel section of a business plan, and details the job title, amount of pay, and hiring timeline for each position. This template calculates the monthly and yearly expenses associated with each role using built-in formulas. Additionally, you can add an organizational chart to provide a visual overview of the company’s structure. 

Download Personnel Plan Template - Excel

Elements of the Financial Section of a Business Plan

Whether your organization is a startup, a small business, or an enterprise, the financial plan is the cornerstone of any business plan. The financial section should demonstrate the feasibility and profitability of your idea and should support all other aspects of the business plan. 

Below, you’ll find a quick overview of the components of a solid financial plan.

• Financial Overview: This section provides a brief summary of the financial section, and includes key takeaways of the financial statements. If you prefer, you can also add a brief description of each statement in the respective statement’s section.
• Key Assumptions: This component details the basis for your financial projections, including tax and interest rates, economic climate, and other critical, underlying factors.
• Break-Even Analysis: This calculation helps establish the selling price of a product or service, and determines when a product or service should become profitable.
• Pro Forma Income Statement: Also known as a profit and loss statement, this section details the sales, cost of sales, profitability, and other vital financial information to stakeholders.
• Pro Forma Cash Flow Statement: This area outlines the projected cash inflows and outflows the business expects to generate from operating, financing, and investing activities during a specific timeframe.
• Pro Forma Balance Sheet: This document conveys how your business plans to manage assets, including receivables and inventory.
• Key Financial Indicators and Ratios: In this section, highlight key financial indicators and ratios extracted from financial statements that bankers, analysts, and investors can use to evaluate the financial health and position of your business.

Need help putting together the rest of your business plan? Check out our free simple business plan templates to get started. You can learn how to write a successful simple business plan  here . 

Visit this  free non-profit business plan template roundup  or download a  fill-in-the-blank business plan template  to make things easy. If you are looking for a business plan template by file type, visit our pages dedicated specifically to  Microsoft Excel ,  Microsoft Word , and  Adobe PDF  business plan templates. Read our articles offering  startup business plan templates  or  free 30-60-90-day business plan templates  to find more tailored options.

Discover a Better Way to Manage Business Plan Financials and Finance Operations

Empower your people to go above and beyond with a flexible platform designed to match the needs of your team — and adapt as those needs change. 

The Smartsheet platform makes it easy to plan, capture, manage, and report on work from anywhere, helping your team be more effective and get more done. Report on key metrics and get real-time visibility into work as it happens with roll-up reports, dashboards, and automated workflows built to keep your team connected and informed. 

When teams have clarity into the work getting done, there’s no telling how much more they can accomplish in the same amount of time.  Try Smartsheet for free, today.

Discover why over 90% of Fortune 100 companies trust Smartsheet to get work done.

Financial projection templates and custom CPA support for raising capital and business planning.

Financial Projections for raising investment, securing an SBA loan, or internal planning

Join more than 50,000 founders who have made projections with ProjectionHub

Our Financial Projection Templates are CPA Prepared, Industry Specific, and Easy to use.

Choose from 100+ unique, CPA developed, financial forecast worksheet templates to have lender and investor ready projections in no time at all.

How do the Projection Templates work?

Select your industry.

Browse the list of 100+ CPA developed financial projection templates to find your industry. Don't worry , if you don't see your industry listed or the one you purchase isn't the best fit, we'll help you find the right template and swap it for no extra charge!

Fill out your projection template

Every template organizes the information into a few tabs, and all of the cells where your numbers are needed are highlighted to guide you along. Our team is standing by to offer   help as you go .

Expert CPA Review

After you enter your information into the template, you can upload your file to our team and get a custom video of our experts walking through your projections with feedback so you can be sure they are ready.

Looking for something a little more custom or Expert Help?   We've got you covered.

Custom Financial Projections

Work directly with our experts including our CPA, Grace, to build custom financial models exactly to your specifications and needs so you can feel confident raising investment, applying for a loan, or planning your next expansion.

Other Popular Services:

Template Fill Out

Save time & effort by having one of our experts fill out your financial projections for you!

Business Plan

You tell us about your new business venture, and we'll write a business plan draft for you!

QofE "Sniff Test"

We'll help you validate if an acquisition deal is a good fit BEFORE you make an offer.

Join Thousands of Other Happy Businesses

50,000+ founders, owners, and advisors have worked with ProjectionHub to prepare financial projections for their SBA loans, pitch decks, and business plans.

Your Financial Projection Hub

Enter what you know about your revenue, expenses, assets, and liabilities and we’ll take care of the projections

How Do You Create Financial Projections?

To make accurate and reliable business financial projections, you should start by building a revenue model specific to your business model. The revenue model will contain several assumptions – such as how you will attract leads, what percentage of leads you will convert into customers, and what your average customer will spend on your products and services. Modeling your expenses should take a similar approach.

Once you have a good understanding of your revenue and expenses, you can integrate your custom revenue projections into an existing business financial statement template with ProjectionHub. This will help you automatically create your projected balance sheet, cash flow and income projections.

Financial Projections FAQ

What do financial projections include.

A financial projection utilizes two key elements: a set of assumptions that will drive the model and the financial projection statements. Your assumptions should help the reader understand how you arrived at your revenue projections and expense numbers. These assumptions should then be tied together in a financial model to create a projected profit and loss statement, cash flow statement and balance sheet.

Which product is right for me?

Excel Templates

Custom Projection Services

Who does the work?

You do! Our templates are designed for a variety of specific scenarios, all you do is set assumptions like asset purchases, price, expenses. Every template has a video guide to give you a nice intro and overview of the template.

We do! Our experts will ask questions about your scenario and collect necessary info and then get to work. We provide a completed Excel file specific to your business model along with detailed explanation on how the projections were set up.

Do I need to be good at Excel to use this?

If you can enter data into a cell, you can use our projection templates.

Your model will be delivered in Excel, but we do all the work. We'll explain what we built and how your projectios were produced. We’re here if you need help.

What if I need help?

We’re available via email and live chat (9-5pm EST) to provide free support. We also offer consulting services and can fill out or modify templates to fit your needs exactly. 

We’re creating the model for you and will answer any questions you have directly.

One-time payment

Custom models are two payments – a deposit and a final payment upon completion of the model. Our template fill out service is one payment collected in full before we begin the work.

Our templates are designed in and for Excel, but can be converted to other spreadsheet programs. The most popular alternative program is Google Sheets which our templates work well in.

Our custom models are designed in and for Excel, but can be converted to other spreadsheet programs.

If you can enter data into a cell, you can use our Excel templates.

Your model will be delivered in Excel, but we do all the work. We'll explain what we built and how your projections were produced. We’re here if you need help.

We’re available via email and live chat (9-5pm EST) to provide free support. We also offer consulting services and can fill out or modify templates to fit your needs exactly.

We’re creating the model for you and will answer any questions you have in our coaching phone calls.

One-time payment.

What is the Most Important Part of a Financial Projection?

An essential part of all business financial projections is your cash flow forecast. A profitable business can still go bankrupt because of challenges with cash flow. You must understand your cash flow projections so that you can plan for any working capital needs your business may require.

What Are Financial Projections in a Business Plan

A vital component of any business plan is your financial forecasting. The rest of your business plan will provide a narrative of how the business intends to operate, while the financial projections section will aim to show the financial implications of following the rest of your business plan. Sometimes a business projection template will include various financial charts, graphs and tables that display key information, such as sales projections, gross profit and net profit margins. Creating business financial projections for a new startup can be difficult. At ProjectionHub, we are often asked how to create financial projections when there's no actual data to build from. Even without financial data available, using a business projection template for your startup is still a worthwhile investment. A financial forecast consultant can help most businesses and industries utilize average data to help make educated guesses about financial projections. We believe an educated guess is still a better option than having no financial projections at all.

How Do You Prepare a Projected Balance Sheet For Five Years?

To create a projected balance sheet for a business, you will first need to project your revenue and expenses and other cash-flow-related items like loans, accounts receivable, accounts payable, equity investments, etc. The best way to prepare a projected balance sheet is to create a full set of business financial projections with a projected income statement, cash flow statement and integrated balance sheet. The business plan revenue projections and forecast templates at ProjectionHub help you ensure that your three financial statements are appropriately integrated and that your balance sheet will balance!

What Does Financial Forecasting Begin With?

All financial forecasting begins with developing assumptions for the key drivers of your business. For example, suppose you attract new customers through online advertising. In that case, you may start your financial model with an estimated ad spend per month and an estimated cost to acquire a new customer, which will allow you to calculate estimated new customers per month. Financial forecast software and financial projection templates will help you model additional assumptions that drive both your revenue and expenses.

Need help with anything?

We're here to help with any questions you have about plans, pricing, and supported features.

Plan Projections

ideas to numbers .. simple financial projections

Home > Calculators > Revenue Projections Calculator

Revenue Projections Calculator

The business plan financial section always starts with the forecasting of revenue. Revenue refers to the monetary amount from the sale of goods or services in which the business normally trades and which are available for sale. This revenue projections excel calculator will help you to calculate total revenue for use in the Financial Projections Template .

The revenue projections calculator, which is available for download below, helps estimate revenue for five years. The calculator can deal with up to four unit based products and a further four non unit based products. Unit prices can be uplifted for each of the five years by a fixed percentage to allow for inflation and price increases.

Revenue Projections Spreadsheet Download

The revenue projections calculator is available for download in Excel format by following the link below.

Examples Using the Revenue Projection Calculator

The revenue projections calculator can be used for any business, industry specific revenue forecast template examples are shown below:

• Retail Store Revenue Projection
• Lead Generation Revenue Projection
• Sandwich Shop Revenue Projection
• Bed and Breakfast Business Plan Revenue Projection
• Vacation Rental Business Plan Revenue Projection
• Microbrewery Business Plan Revenue Projection
• Salon Business Plan Revenue Projection
• Drop Shipping Business Revenue Projection
• Car Wash Business Plan Revenue Projection
• Coffee Shop Revenue Projection
• Restaurant Business Revenue Projection
• Subscription Based Business Revenue Projection
• Search Engine Business Revenue Projection
• Golf Course Business Revenue Projection

About the Author

Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.

You May Also Like

From Idea to Foundation

Master the Essentials: Laying the Groundwork for Lasting Business Success. 

Funding and Approval Toolkit

Shape the future of your business, business moves fast. stay informed..

Discover the Best Tools for Business Plans

Learn from the business planning experts, resources to help you get ahead, financial projections, table of contents.

Financial Projections refer to forward-looking statements about a company’s expected financial performance.

Key Takeaways

• Navigating Business Strategy: Financial projections are essential for guiding a company’s strategic direction. By providing a forecast of financial performance, these projections allow businesses to plan effectively, set achievable goals, and make informed decisions.
• Risk Assessment Tool: They serve as a crucial tool in risk assessment. By analyzing various financial scenarios through projections, businesses can prepare for potential challenges and mitigate risks.
• Foundation for Financial Models: They form the basis of a comprehensive financial model, a vital tool in business strategy. This model uses historical financial data and projections to provide a detailed analysis of a company’s potential financial trajectory.
• Data-Driven Decisions: The ability to analyze and interpret financial data through projections empowers businesses to make data-driven decisions. This approach leads to more accurate planning, budgeting, and resource allocation.
• Proactive Approach to Market Changes: Regularly updated financial projections enable businesses to adapt to market changes proactively. By keeping a pulse on financial performance and forecasts, companies can adjust their strategies in real-time to optimize results.

Financial projections are an integral part of financial planning, encompassing various components such as sales forecasts, estimated operating expenses, and projected profitability.

• Forecasting Future Financial Performance: Financial projections are primarily used to forecast a business’s future financial state by estimating revenues, costs, and expenses over a specific period. They provide a roadmap of a company’s financial health and are essential for strategic planning and decision-making.
• Sales Forecast as a Core Component: A critical element of financial projections is the sales forecast, which predicts future sales volumes over a given period. This forecast is based on market analysis, historical sales data, and an understanding of future market conditions.
• Operating Expenses and Profitability Analysis: Alongside revenue estimates, financial projections also include detailed forecasts of operating expenses. These projections are crucial for assessing the company’s future profitability and cash flow, helping business owners and managers make informed decisions about resource allocation, cost management, and growth strategies.
• Tool for External and Internal Purposes: Externally, financial projections are often used to attract investors, secure loans, or convince stakeholders of the viability of a business. Internally, they are used to set financial goals, prepare budgets, and guide financial planning.

Financial projections are not just about predicting the future; they are a vital component of sound financial management, providing both a vision and a practical guide for businesses to navigate their financial journey.

What Financial Projections Are Used For?

Overview of applications.

• Securing Funding: One of the primary uses of financial projections is to secure funding from investors or lenders. These projections demonstrate the potential for growth and profitability, showcasing a business’s ability to generate revenue and manage expenses effectively. Clear evidence of a solid gross margin and control over fixed costs can make a compelling case for investment.
• Budgeting and Financial Control: They are critical for internal budgeting. They enable businesses to allocate resources efficiently, manage cash flow, and plan for both short-term and long-term financial obligations. Accurate budgeting relies on detailed projections of revenues and expenses, ensuring that a business can sustain operations and grow.

Aid in Business Planning and Investment Decisions

• Strategic Planning: Long-term strategic planning hinges on robust financial projections. These projections, informed by market research and industry trends, help businesses set realistic goals and strategize for future growth. Understanding projected revenues and expenses allows businesses to make informed decisions about expansions, new product launches, or entering new markets.
• Investment Decisions: For investors, they are a crucial factor in decision-making. They provide insight into a business’s potential return on investment, helping investors to assess the viability and profitability of their investment. Projections that demonstrate a well-thought-out plan for revenue growth and cost management are particularly persuasive.
• Risk Management: They help businesses identify potential risks and develop strategies to mitigate them. By analyzing various financial scenarios, companies can prepare for fluctuations in the market, changes in consumer behavior, or other external factors that could impact their financial performance.

Financial projections serve as a multifaceted tool, vital for securing funding, effective budgeting, strategic planning, and making informed investment decisions. The ability to accurately forecast financial performance based on comprehensive market research and analysis of past financial data is essential for the long-term success of any business.

How to Create Financial Projections

Creating accurate and realistic projections is a cornerstone of financial modeling, essential for presenting a credible business case to potential investors and for guiding strategic decision-making. Here’s a detailed guide on developing each component:

Sales Projections

• Basis of Projections: Sales projections are typically based on a combination of market analysis and historical sales data. They involve predicting future sales volumes, considering market trends, consumer behavior, and past performance.
• Methodology: To create a sales forecast, businesses should analyze market demand, competition, pricing strategies, and potential market share. This analysis should be grounded in thorough market research to ensure accuracy.

Expense Projections

• Understanding Costs: Expense projections involve forecasting both fixed costs, like rent and salaries, and variable costs, such as raw materials and sales commissions. These projections help in determining the overall operational expenses of a business.
• Projection Techniques: Businesses should use historical financial data to estimate future expenses, adjusting for expected changes in business operations or market conditions. It’s crucial to account for potential increases in costs and inflation.

Balance Sheet Projections

• Projecting Financial Health: Balance sheet projections provide a snapshot of a company’s projected financial health at a future date. This includes estimating future assets, liabilities, and equity.
• Components: Assets projection might include cash on hand, accounts receivable, and inventory, while liabilities may encompass loans and accounts payable. Equity projections involve retained earnings and any additional owner’s equity.

Projected Profit & Loss Statement

• Estimating Profitability: The projected Profit & Loss (P&L) statement is a crucial financial statement that estimates a company’s future profitability. It’s compiled by subtracting estimated expenses from projected revenues.
• Importance for Investors: This statement is particularly important for potential investors, as it provides a clear picture of a company’s ability to generate profit and manage expenses effectively.

Each of these components plays a vital role in financial modeling, helping businesses and potential investors understand the financial trajectory and health of the company. Accurate financial projections are essential for effective financial planning and for making informed business decisions.

Accounting Software vs. Microsoft Excel or Google Sheets

Comparing tools for financial projections.

Financial projections are vital for assessing a company’s future financial status, and the choice of tools used to create these projections can significantly impact their accuracy and usability. The two primary categories of tools are specialized accounting software and traditional spreadsheet programs like Microsoft Excel or Google Sheets.

Specialized Accounting Software

• Integrated Features: Most accounting software comes with integrated tools specifically designed for financial modeling, making it easier to create accurate financial projections.
• Automated Data Inputs: These programs often allow for automatic data input from other financial systems, reducing manual entry errors.
• Real-Time Analysis: Some software offers real-time analysis of financial data, which can be crucial for adjusting revenue projections and other financial metrics.
• Cost: Specialized software can be expensive, especially for small businesses or startups.
• Learning Curve: These tools can be complex and may require specific training to use effectively.

Microsoft Excel or Google Sheets

• Flexibility and Customization: Excel and Sheets offer a high degree of flexibility, allowing users to create custom financial models tailored to specific business needs.
• Wide Accessibility: These tools are widely used and accessible, making it easier to share and collaborate on models.
• Lower Cost: Both Excel and Google Sheets are more affordable than most specialized accounting software, with Sheets being free to use.
• Potential for Errors: Manual data entry and formula setup in Excel or Sheets can lead to errors, impacting the accuracy of financial projections.
• Time-Consuming: Building a comprehensive financial model in Excel or Sheets can be more time-consuming compared to using specialized software.

Choosing between specialized accounting software and tools like Excel or Google Sheets depends on various factors, including the size of the business, the complexity of financial needs, budget constraints, and the user’s familiarity with these tools. For simple revenue projections and basic financial status assessments, Excel or Sheets might suffice. However, for more complex and dynamic financial modeling that requires accurate financial projections, investing in specialized accounting software might be more beneficial.

Relevance to Various Audiences 

Business education.

• Crucial Coursework: Understanding financial projections is an essential aspect of business education, particularly in undergraduate and graduate courses like financial management, business planning, and entrepreneurship. These courses often cover various forecasting methods, assumption validation, and analysis of financial data, providing students with a comprehensive understanding of how to create and interpret them.
• Developing Expertise in Projections: Students should focus on courses that offer practical skills in creating them. This includes learning how to forecast future revenue, managing variable costs, analyzing market conditions, and understanding industry trends. Courses that offer case studies and real-world project work can be particularly beneficial.
• Practical Exercises: Engaging in practical exercises involving financial projections is crucial. This may involve developing projections for hypothetical businesses, analyzing historical financial data, and using different forecasting methods to predict future performance.

Relevance to Pre-Revenue Startups

• Attracting Investors: For startups, particularly those in the pre-revenue stage, accurate financial projections are vital for attracting investors. Investors look for realistic and well-founded projections that show potential for future revenue, sustainable growth, and a clear understanding of market conditions.
• Consulting with Experts: Startups may not always have the expertise in-house to create detailed financial projections. Hiring an accountant or a competent business plan developer can provide valuable insights and expertise. These professionals can help in developing realistic assumptions, forecasting cash inflows, and planning for capital expenditures.
• Tools for Informed Decisions: They help startups make informed decisions about product development, marketing strategies, and resource allocation. They provide a roadmap for managing finances, aligning with business goals, and adjusting to changing market conditions.

Small and Medium-sized Business (SMB) Owners

• Budgeting and Planning: For SMB owners, financial projections are a tool for effective budgeting and financial planning. They enable business owners to anticipate cash inflows and outflows, manage variable costs, and plan for capital expenditures.
• Adapting to Market Changes: They help SMBs adapt to market conditions and industry trends. By regularly updating projections, business owners can stay ahead of market shifts and make strategic decisions that align with their business objectives.
• Professional Assistance: SMB owners, especially those who may not have in-depth financial expertise, can benefit from consulting with financial experts. These professionals can assist in creating more accurate and reliable models, ensuring that the business is on a sustainable financial path.

Frequently Asked Questions

• How do you calculate gross profit in financial projections?

Gross profit is calculated by subtracting the cost of goods sold (COGS) from the total revenue. This calculation should be part of your revenue projection. It’s important to accurately estimate both sales revenue and COGS to ensure the gross profit figure is realistic.

• What is the importance of revenue projection in financial planning?

Revenue projection is the cornerstone of financial planning. It provides an estimate of the expected income over a certain period, helping businesses to plan for growth, manage expenses, and assess potential risks. Accurate revenue projections are crucial for making informed strategic decisions.

• How should accounts receivable be handled in financial projections?

Accounts receivable should be projected based on historical collection patterns and current market conditions. They should be included in cash flow projections to provide a realistic picture of when cash will actually be received, as opposed to when sales are made.

• What are potential risks to consider when creating financial projections?

They should be updated regularly, ideally on a quarterly basis or whenever there is a significant change in business operations or market conditions. Regular updates ensure that projections reflect the most current data, helping businesses stay agile and responsive to changes.

• Can financial projections help in managing debt and financing decisions?

Yes, they play a critical role in managing debt and making financing decisions. By projecting future cash flows and understanding revenue potential, businesses can make informed decisions about taking on new debt, refinancing existing debts, or planning for equity financing. Accurate projections help in ensuring that the level of debt is sustainable and aligned with the company’s financial capacity.

Related Terms

Cash Flow Forecasting: This term refers to the process of estimating the future financial liquidity of a business by predicting both cash inflows and outflows. It is a critical aspect of financial management that complements the revenue projections in financial forecasts. Cash flow forecasting is essential for assessing a company’s ability to generate enough cash to maintain or expand operations, crucial for meeting existing financial obligations and planning for future growth.

Budgeting: Budgeting involves creating a detailed plan that outlines expected income and expenses over a specific future period. While financial projections are often long-term and encompass a broader scope of a company’s future financial performance, budgeting is more immediate and operational. Both processes use financial forecasting methods to predict future financial states and are fundamental in helping businesses make informed financial decisions.

Financial Modeling: This practice involves creating a comprehensive representation of a company’s financial performance using historical data to predict future outcomes. Financial modeling typically includes various components of financial projections like balance sheet projections, income statements, and cash flow statements. It is used extensively by investors and corporate managers to estimate the financial viability and future financial performance of a company or investment.

Break-Even Analysis: Break-even analysis is a crucial financial concept that determines when a business will be able to cover its expenses and start to make a profit. This analysis helps businesses understand the level of activity needed to avoid losses, providing a clear benchmark for profitability in business plans and investment evaluations.

Balance Sheet Projection: A balance sheet projection is an essential part of financial projections, providing an estimated snapshot of a company’s financial position at a future date. This projection includes future assets, liabilities, and equity. It’s a key tool used by businesses and investors to gauge a company’s potential financial health and stability, informing decisions about capital expenditures, investment strategies, and overall financial planning.

Variable Costs: These are expenses that change in proportion to the business activity of a company. Estimating variable costs is crucial for creating accurate financial statements, especially in industries where costs significantly fluctuate with production levels or service demands. Accurate projection of variable costs helps in better forecasting future financial performance, particularly in understanding the dynamic nature of business expenses.

Also see: Accrual Accounting , Balance Sheet , Cash Flow , Revenue Model , Cost of Goods Sold (COGS)

Welcome to Businessplan.com

Currently in beta test mode.

Products available for purchase are placeholders and no orders will be processed at this time.

Let’s craft the ultimate business planning platform together.

Have questions, suggestions, or want a sneak peek at upcoming tools and resources? Connect with us on X or join “On the Right Foot” on Substack .

This site uses cookies from Google to deliver its services and to analyze traffic.

Ok, Got It.

Privacy Policy