Financial Forecasting

“A forecast is like the weather: it changes over time.” Geoff Letby (1949–2015), founder of Training for Employment

A realistic financial plan can help you understand whether your business idea is affordable, sustainable and capable of providing the income you need.

Most people would not organise a wedding, make a major purchase or take out a loan without considering the cost. Starting a business also requires careful planning.

A financial forecast is not a promise about what will happen. It is a working estimate based on the information available. Your figures and assumptions should be reviewed and updated as prices, sales and circumstances change.

Understand your figures

Financial planning can include:

• Start-up costs
• Expected sales
• Fixed and variable costs
• Household income requirements
• Profit-and-loss forecasts
• Cash-flow forecasts
• Break-even calculations

A business can appear profitable on paper but still run short of money if customers pay late or important bills become due first. A cash-flow forecast helps you estimate when money should enter and leave the business, allowing you to identify possible shortfalls in advance.

Plan for different outcomes

Testing optimistic, realistic and cautious scenarios can help you understand how changes in sales or costs might affect your plans.

TfE can help you explore the figures behind your idea and develop a more realistic view of its financial viability. Contact TfE to find out more about our self-employment support.

TfE provides general business information and guidance. It does not provide financial or investment advice.