CHAPTER 7

FINANCIALS AND FORECASTS

‘In the business world, the rearview mirror is always clearer than the windshield.’

Warren Buffett

In this chapter:

• ■Historic financials
• ■Market-driven sales forecasts
• ■Competition-driven margin forecasts
• ■Funding the plan
• ■Full financial forecasts
  • –Profit and loss account
  • –Cash flow
  • –Balance sheet
• ■Forecasts in a start-up
• ■Financial risks and opportunities

In Chapter 6 of your plan, you set out how you would deploy your firm’s scarce resources to achieve the goals of Chapter 2, following the strategy of Chapter 5. In this chapter, you will show how that strategy will translate into results – in terms of both key measurable parameters and money.

And you are going to do it in a way that will convince your backer. A way that you won’t find in other guides to business planning.

You will forecast your sales growth in a way that is consistent both with the trends in market demand you identified in Chapter 3 and with your growth plans outlined in Chapter 5.

You will forecast your profit margin development in a way that is consistent with the competitive dynamics assessed in Chapter 4 and your profit improvement plans of Chapter 5.

Then you’ll translate these forecasts into full financial statements – the detail that your backer will expect to see in the business plan (though, in reality, they may well have their own financial model to slot your numbers into).

But, first, we will start with the actual numbers, the historic financials.