Forecasting your business is essential to the business plan, as it will show whether the business is financially viable and provide good return on investment (ROI).

If external finance is require for your business start up you should look at:

-    The level of external investment sought.

-    Sources of revenue / income.

-    How you aim to repay lenders and security offered.

When trying to raise capital potential investors are more favourable when you contribute your own personal finance to the pot, as it shows that you are serious about the business and reduces their risk.

You will need to provide forecasts for at least the first 3 years of business. This can vary in detail depending on your business, however you should include the ‘building blocks’ to show how you have derived at your forecasts. This will include assumptions in terms of costs and revenues to show the rationale behind the thinking.

The forecasts should include:

Cashflow statements - show your cash balance and monthly cashflow patterns for at least the first 12 months. The purpose is to demonstrate that your business will have enough working capital to operate and survive, remembering to considered the key factors such as the timing of sales and salaries.

Profit and loss forecast – this is a statement of the trading position of the business: the level of profit you expect to make, given your projected sales and the costs of providing goods and services and your overheads.

Sales forecast - the amount of money you expect to raise from sales.