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There\u2019s a bright side to today\u2019s unprecedented market conditions: Agile people may discover opportunities to start new business ventures. Start-ups need a comprehensive business plan, including detailed financial forecasts, to drum up capital from investors and lenders. Entrepreneurs may also use forecasts as yardsticks for evaluating and improving performance over time.<\/p>\n
However, forecasting can be challenging for a business with no track record, especially during today\u2019s unprecedented conditions. Here\u2019s an objective approach to developing forecasts based on realistic, market-based assumptions.<\/p>\n
Starting point<\/strong><\/p>\n Revenue is a critical line item in the forecast, because it drives many other accounts, such as direct costs, accounts receivable and inventory. To create a credible estimate of your start-up\u2019s revenue-generating potential, consider the following questions:<\/p>\n It\u2019s generally a good idea to develop multiple revenue scenarios \u2014 best, worst and most likely case. Then weight each scenario based on how likely it is to happen.<\/p>\n Costs and investments<\/strong><\/p>\n Next, the costs directly<\/em> attributable to producing revenue, such as materials, utilities and labor, need to be identified and quantified. These variable costs are typically stated as a percentage of forecasted revenue.<\/p>\n Some expenses \u2014 such as rent, insurance and administrative salaries \u2014 are fixed. That is, they remain constant over the short run, though they often have limited capacity. For example, you might need to add office space and headcount once a start-up grows beyond a certain level.<\/p>\n Besides expenses that are recorded on the income statement, start-ups may need working capital to ramp up operations. They may also need to invest in fixed assets, such as equipment, furniture and software. These expenditures are typically capitalized (reported) on the balance sheet and gradually depreciated their useful lives.<\/p>\n Finally, it\u2019s time to focus on the missing puzzle piece: financing. You may need an initial round of capital to acquire (or produce) inventory, purchase essential assets and generate buzz about your new offering. Plus, start-ups often need ongoing access to capital \u2014 such as a revolving line of credit \u2014 to help fund the cash conversion cycle as the business grows.<\/p>\n Don\u2019t let a competitor beat you to the punch!<\/strong><\/p>\n Time is of the essence if you want to capitalize on emerging opportunities. So that you can focus on starting the business, we can help create an objective, defensible financial forecast for your start-up and benchmark your forecasted results against other successful businesses. This diligence will help impress prospective investors and lenders \u2014 and build value over the long run.<\/p>\n \u00a9 2020<\/em><\/p>\n <\/body> There\u2019s a bright side to today\u2019s unprecedented market conditions: Agile people may discover opportunities to start new business ventures. Start-ups need a comprehensive business plan, including detailed financial forecasts, to drum up capital from investors and lenders. Entrepreneurs may also use forecasts as yardsticks for evaluating and improving performance over time. However, forecasting can be […]<\/p>\n","protected":false},"author":3,"featured_media":14941,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[27],"class_list":["post-14942","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-aa","tag-aa"],"_links":{"self":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/14942","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/comments?post=14942"}],"version-history":[{"count":0,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/14942\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/media?parent=14942"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/categories?post=14942"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/tags?post=14942"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
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