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Need Help with Financial Projections In a Business Plan?

I help you provide investors with believable financial projections for business plan startup costs and other key indicators of future financial performance.

  • I lay out the most realistic Startup Capital Costs for the period leading to a start-of-business date.

  • From then on  I produce a detailed Income Statement (P&L) that runs 2, 3, or more years with a resulting Net Profit (depicted as Earnings Before Interest, Taxes, Depreciation, and Amortization) over the period. 

  • Cash Flow is also tracked to help appreciate the amount of cash transferred into and out of the business as a measure of your ability to create value for you and the other stakeholders through positive cash flows.

  • Other financial projections for a business plan such as a Balance Sheet or Return On Investment are also prepared as needed.

 Your Financial Awareness 

  Comfort With Data, Dates, And Dollars In Business Plan Financial Projections  

What’s your comfort level with data, dates, and dollars for a business plan with financial projections? If you lack awareness you are in luck. Your involvement in data input and assessment of financial results is a fundamental requirement and a great learning opportunity. The process will give you full confidence to present and defend your business plan projections to investors or lenders.


The process of assembling formulas and numbers in the spreadsheets will be allocated to me. You will benefit greatly through your oversight of the forecasting process. Your participation will generate welcome knowledge and awareness for you now and in the long run. And as your business unfolds, you’ll have the awareness to monitor the real-time financial dynamics of your business first hand. You’ll use financial reports and statements to make good ongoing business decisions.

The Spreadsheets 


My preference is to use Google Sheets for preparing and sharing spreadsheets during the financial modeling and projection process. Google allows shared real-time access for you with the added abilities to view, comment and even edit the document 24/7.


I usually produce the final version using MS Excel. It has better formatting features and is still more familiar to most people.


PDF versions of the spreadsheets are also available as needed.

  3 and 5 Year Forecasts  


I recommend preparing 3-year projection scenarios because further out can get unwieldy. However, you may get an investor request for a longer period, likely 5 years. We will prepare this in advance for that possibility, but don't provide it unless requested.

  2 or 3 Financial Projections For A Business Plan?  

Offering a single financial scenario is very finite and suggests too much precision and overconfidence in predicting future results. A better approach is to ‘bracket’ the financial scenarios. Use two scenarios, one at the high end of your reasonable expectations and the other at the lowest end. 


This provides a nice range of potential outcomes and is much more honest and believable. It’s also important to describe the likely business conditions that could drive your results to the high and low ends.


Some investors or lenders will ask for 3 scenarios classified as a high revenue plan, low revenue plan, and a ‘worst-case scenario. It’s tempting to say these should be a ‘best case’ plan and a ‘worst-case’ plan.


  •   High Revenue  

This view illustrates over-the-top performance that will happen if things go beyond your considered expectations. Some care needs to be taken here since it is not as simple as a percentage increase in sales and a direct increase in profits. There are thresholds of growth that require a significant step up in additional expense or capital which will reduce profits. 


  •   Low Revenue  

A low (below-average) plan shows your business’s durability of a lower than average year and if you have costs that were unanticipated. It is probable your startup year will have some surprises. Having already calculated a low-income potential you know you will manage these issues.


  •   Worst-Case  

This is a circumstance to avoid.  Illustrating this scenario and realizing the answers to the difficulties it provides are critical to you and anyone else who enquires. You actually don’t need to include this scenario in the business plan, but we will consider it– just in case you have some hard questions about this situation. 


How Do I Prepare a Business Plan With Financial Projections?

Financial Forecasting - A Science and an Art

Wondering how to do financial projections for a business plan? I help you demonstrate believable figures to your prospective investor. But, honestly, projecting three or more years into the future can be a real challenge, especially when you are seeking seed money. There is no escape though. We must present short-term to mid-term financial projections in a business plan written by me.


I follow the Canadian guidelines for Accounting Standard for Private Enterprises (ASPE) when producing statements for the Financial Section of your business plan. They minimally include three years of sales forecast, expenses budget, income statement  (P&L), cash flow statement and balance sheet. 


If you have an accountant it is common to include them at any phase of developing these financial statements. They are welcome to our financial projections against ASPE guidelines and any personal insights they have.

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  Sales Forecast  

If you're starting a new enterprise you naturally don’t have any historical sales data.  We need to include sales by month for the first year, then quarterly for the subsequent years. That presents a challenge, but we can reasonably develop it. I will need to evaluate your market niche knowledge and related secondary research information. Accessing this data will be relatively easy for established markets and a little tougher for leading edge markets. Either way, presenting the sales data findings well will guide investors through the thought process leading to your financial assumptions.


The art and science of the sales forecast requires estimating sales per month. How many units and which type of product or service are sold to customers, and at what prices in the first year after business is initiated? For subsequent years it is not realistic to express sales (or any other financial data)  monthly, so quarterly is fully acceptable.


If you sell dozens or hundreds of various products or services, divide them into just a few income categories. 

Here are three ideas for aggregating your products or services:

  1. By seasonal trends

  2. By pricing groups

  3. Different geographies, or company sections


What volume of customers will you get and how many units will be sold? What do you expect the cost of your products and services to be (Cost of Goods Sold - COGS)? What pricing strategies will you begin with and migrate to? Sales projections will predict revenue. When the COGS is also considered, projected gross profit can be calculated for each year.


When all the operating costs are collected, subtract them from the gross profit to calculate your actual profit (net income...or profit). Operating expenses are based on the expense budget.

  Expense Forecast  

Your sales have individual costs per item sold (COGS). Operating expenses are  incurred through normal business operations. They are separated into fixed (predictably the same each month, like commercial space rental) and variable costs (categories that are naturally ‘lumpy’ from month to month, like marketing costs) and not easily predictable).


It isn’t possible to do a finely detailed listing, like the cost of every item of office furniture. We’ll just need approximate numbers.

Income Statement

Your income statement uses the data from your sales, expenses, and cash flow forecasts to estimate your future profits or losses over your 3 or more year business plan period.


You will need sales totals, expense totals, and resulting profit totals for each year of the period.

Cash Flow Statement

The last step in the financial projections is the cash flow statement. It is connected to your income statement and the balance sheet and shows cash actions that impact your business. 


Your sales forecast and expense budget will produce your cash flow statement. It’s essentially a cash total at the end of a given period. The result is a calculation of all the cash that flowed into the business against how much cash flowed out. 


We begin by forecasting a cash-flow statement over the first 12 months. We’ll need to agree on a realistic ratio for the number of invoices to be paid in cash, 30 days, 60 days, 90 days, etc. This avoids being surprised by a smaller percentage of invoices being paid in the first 30 days if you expected all to be paid in the period. 


Negative cash flows can be tolerated in the very early stages of a startup, and for predictable seasonal or other known trends. The objective though is to become cash positive as early and consistently as possible. This will be realistically projected in your cash flow predictions.


Here are the 3 activities included in the cash flow analysis.

  • Operating 

Cash flows from operating identifies the cash inflows and outflows from day-to-day business operations. Included are changes made in cash, accounts receivable, accounts payable, depreciation, and inventory.

  • Investing 

Investing cash flows are used for the company’s investments into its future. They include inbound cash from selling assets, and cash outbound to buying fixed assets, like commercial property and equipment.

  • Financing 

Financing activities are cash brought in from either investors or banks, and cash paid to shareholders. At the end of each period, it is all totaled to reveal a profit or loss.


Your income statement and cash flow statement are connected through net income. The cash flow statement reconciles net income and cash flow from operations. Net income (profitability), is totaled in the income statement, which then begins the cash flow from the operations category in a cash flow statement.

Balance Sheet

Your balance sheet includes a listing of all your assets and liabilities. Many of these items are assets and liabilities outside of monthly sales and expenses. Assets are anything of capital value, like production equipment, vehicles, leasehold improvements, stock inventory, unpaid invoices, etc. Liabilities are debts and invoices you have not yet paid.

The balance is the result of all you own versus all your outstanding financial obligations.


Essentially, this all tells you how much an enterprise owes compared to what it owns. It answers the following:


  • Value of business assets?

  • The total business debt?

  • What provides capital into the business, investment, or debt?

  • Is the business risky from an investor’s perspective?


Primary balance sheet information:

  • Assets

These are resources with financial value owned by the business that you believe will provide a benefit in the future. Examples include cash flow generation, expense reduction, and sales enhancement. They include cash, inventory, and property.


  • Liabilities

These are your obligations to someone else. Usually debts during business operations. They include accounts payable and loans. They are either short-term (within a year) or long-term (more than a year).


  • Owners’ Equity

Once all liabilities are paid, the amount remaining is placed here as retained earnings...the total of all net income minus all dividends paid since the company started up.


Balance sheets are divided with assets on one side, and liabilities and owner’s equity on the other side. The total assets must equal the total amount of liabilities, plus equity. The formula for a balance sheet is assets equals liabilities plus owners’ equity (Assets = Liabilities + Owners’ Equity). 


Forecasting three or more years into the future enables you to determine your breakeven point, which is the point at which your business stops operating at a loss and begins to turn a profit. If your startup business is characteristic it will break even in roughly 18 months, depending on your business model and market niche.

Breakeven Point

You and your capital funding sources will be eager to know when your business is predicted to become profitable. This is simply the balance point when more money begins to flow in than is flowing out.


Nobody expects you to make this happen immediately. It takes time to gather enough momentum in the business to turn a profit and do it consistently over several periods. Forecasting this needs to be balanced and realistic. A break-even point too early or a break-even date too distant will raise some eyebrows. You need to determine what break-even range is acceptable to you and your investors.

How To Present Your Business Plan Financial Forecast?

Do you know how to present financial projections in a business plan? To start with, we’ll look at five common types of key information that you should include in the Financial Plan section of your business plan. There are many, many more but these five are common to most new businesses regardless of their industry. 

  • General Assumptions

  • Startup Costs

  • Sales Forecast

  • Salaries

  • Funding Requirements


Next, you will present the financial reports:


  • Cash Flow forecast

  • Profit and Loss forecast

  • Balance Sheet forecast

  • Break-Even Analysis

Taking a look at how to present your financials in a business plan.

There are several ways to publish your financial projections as a section of your business plan. Start by revealing all the assumptions you used to construct the forecasts, followed by the 3 or 4 financial statements in the highest level form possible. Readers of the plan will immediately see the financial dynamics of the business opportunity without having to sift through the additional full financial details.


You are expected to be conversant with all of the main elements of the financial statement and be able to comment and defend them as required. Hence, we will review these details so you are well prepared.

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