How to Prepare Your Business Forecast

Nearly every SME’s I meet doesn’t have a business forecast. Some have a cash flow forecast but that’s about it. At least those with a cash flow forecast will be able to track cash and that’s important.

But how do you manage a growing business without a forecast? How do you secure debt or equity funding without a forecast? How do you know if you are going to make money or even stay in business? How do you make sure that projects are delivered on time? In my experience; with great difficultly.

Successful businesses are fantastic at anticipating future trends & problems and then solving them. The business forecast is the very best tool to help you do that.  A good business forecast covers everything from sales to cash, through to production & stock, capacity, resources and timescales that will really help you maximise performance, sales and profit. Make money, save time and reduce stress.

Working with SMEs it is clear that many businesses aren't sure how to prepare a business forecast for the coming period. Neither are they comfortable with managing the business against the forecast. Even a re-forecast can prove really difficult for them and unfortunately there isn’t much help at hand.

But it isn’t hard to construct a robust living forecast that used regularly can really help you make good decisions and achieve successful growth at a time when the business may be burning lots of cash as it grows.

You’ll need to consider:

1. Sales / revenue by product stream – either monetary or unit whichever is easiest
2. Capacity and resources – these will vary each month – even a holiday chart can help
3. Cash – money in and money out (regular and ad hoc)
4. Stock holdings, minimum and maximum levels
5. Margins
6. Capital expenditure as well as growth cash
7. New products, launches, major events and timelines
8. Marketing activity

A cash flow forecast is just one of the 3 Pieces of Paper that you need to run a successful business. Find out what the other 2 are at 3 Pieces of Paper.

For most small businesses using an excel spread sheet should be a good starting point. So some basic skills will be needed. Once you have prepared the forecast you should review your actual performance against the forecast weekly or monthly, and adjust your tactics as necessary. Each time you complete a month add on the next future month so if you have finished July then add July next year to your forecast.