HOW TO MAKE A SUCCESSFUL FINANCIAL BUSINESS PLAN FOR A STARTUP?
The financial forecast is the ideal tool to know if a startup project can become profitable. Therefore, this is the first study that should be done, at the start, before launching.
Also, a financial
business plan allows having a complete analysis of your project.
Building a financial
forecast also allows you to estimate the projected turnover of your startup by
trying several hypotheses (such as the selling price of your product or
service, the number of customers you expect to acquire each quarter, etc.).
The forecast is an
essential element of your startup's business plan through all the information
it provides.
However, constructing
a financial forecast seems out of reach for many project leaders. Predicting
the future is always a complicated task, and it is even more difficult to
estimate a business project's future income and expenses.
What if we told you
that nothing obliges you to build an entire financial forecast, from A to Z,
from a blank sheet? Here is the method for a successful financial forecast for
your startup.
THE ELEMENTS THAT
MUST BE FOUND IN A GOOD STARTUP FINANCIAL FORECAST
REALISTIC ESTIMATES
OF THE TURNOVER YOU WILL GENERATE
First, you must be
clear about the business model and how you will generate money. For example,
how much will you earn from a transaction on average? This is the first
question to be answered. You will then need to multiply it by the number of
potential customers you expect to convert.
Adopt a conservative
approach for the first few months. However, this number will increase in the
following months (thanks, in particular, to your efforts in marketing and
communication).
For a startup's second
and third years, you can expect a pretty aggressive growth rate: that's usually
what startups are about.
Find the right balance
between stable and overambitious growth and justify it with your marketing
plan.
NO ERRORS IN THE
ESTABLISHMENT OF ACCOUNTING RULES AND FORMULAS
Your banker will look
for "red flags" in your financial projections for startup forecast. For example, your cash flow should
not stay negative "too long."
Also, correctly
transcribe your cash shifts between the forecast income statement and the cash
budget. Do not set up a forecast turnover that triples yearly without investing
the slightest euro in marketing and communication for your startup.
Finally, you don't
have complete freedom regarding the presentation of your financial tables: you
must respect a certain formalism.
THE 3-YEAR
FINANCIAL FORECAST FOR YOUR STARTUP MUST BE COMPLETE
Do not think
presenting the list of expenses that justify the fundraising will be enough.
The business plan writers will want to be able to consult the following tables: a
financing plan, a forecast income statement, a forecast balance sheet, the
analysis of interim management balances, a cash budget, details of the
break-even point, or the details of the calculation of the working capital
requirement.
It's even better if you add financial charts and ratios. Finally, unless otherwise instructed, favor three years rather than 5 years (financial forecasts over 5 years are not very credible).
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