financial projections for startup business plan

Free Financial Projection and Forecasting Templates

By Andy Marker | January 3, 2024

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We’ve collected the top free financial projection and forecasting templates. These templates enable business owners, CFOs, accountants, and financial analysts to plan future growth, manage cash flow, attract investors, and make informed decisions.  On this page, you'll find many helpful, free, customizable financial projection and forecasting templates, including a  1 2-month financial projection template , a  startup financial projection template , a  3-year financial projection template , and a  small business financial forecast template , among others. You’ll also find details on the  elements in a financial projection template ,  types of financial projection and forecasting templates , and  related financial templates .

Simple Financial Projection Template

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Excel | Google Sheets  

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Small business owners and new entrepreneurs are the ideal users for this simple financial projection template. Just input your expected revenues and expenses. This template stands out due to its ease of use and focus on basic, straightforward financial planning, making it perfect for small-scale or early-stage businesses. Available with or without sample text, this tool offers clear financial oversight, better budget management, and informed decision-making regarding future business growth. 

Looking for help with your business plan? Check out these  free financial templates for a business plan to streamline the process of organizing your business's financial information and presenting it effectively to stakeholders.

Financial Forecast Template

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This template is perfect for businesses that require a detailed and all-encompassing forecast. Users can input various financial data, such as projected revenues, costs, and market trends, to generate a complete financial outlook. Available with or without example text, this template gives you a deeper understanding of your business's financial trajectory, aiding in strategic decision-making and long-term financial stability. 

These  free cash-flow forecast templates help you predict your business’s future cash inflows and outflows, allowing you to manage liquidity and optimize financial planning.

12-Month Financial Projection Template

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Use this 12-month financial projection template for better cash-flow management, more accurate budgeting, and enhanced readiness for short-term financial challenges and opportunities. Input estimated monthly revenues and expenses, tracking financial performance over the course of a year. Available with or without sample text, this template is ideal for business owners who need to focus on short-term financial planning. This tool allows you to respond quickly to market shifts and plan effectively for the business's crucial first year. 

Download  free sales forecasting templates to help your business predict future sales, enabling better inventory management, resource planning, and decision-making.

Startup Financial Projection Template

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This dynamic startup financial projection template is ideal for startup founders and entrepreneurs, as it's designed specifically for the unique needs of startups. Available with or without example text, this template focuses on clearly outlining a startup's initial financial trajectory, an essential component for attracting investors. Users can input projected revenues, startup costs, and funding sources to create a comprehensive financial forecast.

3-Year Financial Projection Template

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This three-year financial projection template is particularly useful for business strategists and financial planners who are looking for a medium-term financial planning tool. Input data such as projected revenues, expenses, and growth rates for the next three years. Available with or without sample text, this template lets you anticipate financial challenges and opportunities in the medium term, aiding in strategic decision-making and ensuring sustained business growth.

5-Year Financial Forecasting Template

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CFOs and long-term business planners can use this five-year financial forecasting template to get a clear, long-range financial vision. Available with or without example text, this template allows you to plan strategically and invest wisely, preparing your business for future market developments and opportunities. This unique tool offers an extensive outlook for your business’s financial strategy. Simply input detailed financial data spanning five years, including revenue projections, investment plans, and expected market growth. Visually engaging bar charts of key metrics help turn data into engaging narratives.

Small Business Financial Forecast Template

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Excel | Google Sheets 

The small business financial forecast template is tailored specifically for the scale and specific requirements of small enterprises. Business owners and financial managers can simply input data such as projected sales or expenses. Available with or without sample text, this tool offers the ability to do the following: envision straightforward financial planning; anticipate future financial needs and challenges; make informed decisions; and steer the business toward steady growth.

Elements in a Financial Projection Template

The elements in a financial projection template include future sales, costs, profits, and cash flow. This template illustrates expected receivables, payables, and break-even dates. This tool helps you plan for your business's financial future and growth.   

Here are the standard elements in a financial projection template:   

• Revenue Projection: This estimates future income from various sources over a specific period.
• Expense Forecast: This predicts future costs, including both fixed and variable expenses.
• Profit and Loss Forecast:  This projects the profit or loss by subtracting projected expenses from projected revenues.
• Cash-Flow Projection: This assesses the inflows and outflows of cash, indicating liquidity over time.
• Balance Sheet Projection: This predicts the future financial position, showing assets, liabilities, and equity.
• Break-Even Analysis: This calculates the point at which total revenues equal total costs.
• Capital Expenditure Forecast: This estimates future spending on fixed assets such as equipment or property.
• Debt Repayment Plan: This outlines the schedule for paying back any borrowed funds.
• Sales Forecast:  This predicts future sales volume, often broken down by product or service.
• Gross Margin Analysis:  This looks at the difference between revenue and cost of goods sold.

Types of Financial Projection and Forecasting Templates

There are many types of financial projection and forecasting templates: basic templates for small businesses; detailed ones for big companies; special ones for startup businesses; and others. There are also sales forecasts, cash-flow estimates, and profit and loss projections. 

In addition, financial projection and forecasting templates include long-term planning templates, break-even analyses, budget forecasts, and templates made for specific industries such as retail or manufacturing. 

Each template serves different financial planning needs. Determine which one best suits your requirements based on the scale of your business, the complexity of its financial structure, and the specific department that you want to analyze.

Here's a list of the top types of financial projection and forecasting templates:  

• Basic Financial Projection Template: Ideal for small businesses or startups, this template provides a straightforward approach to forecasting revenue, expenses, and cash flow.
• Detailed Financial Projection Template: Best for larger businesses or those with complex financial structures, this template offers in-depth projections, including balance sheets, income statements, and cash-flow statements.
• Startup Financial Projection Template: Tailored for startups, this template focuses on funding requirements and early-stage revenue forecasts, both crucial for attracting investors and planning initial operations. 
• Sales Forecasting Template:  Used by sales and marketing teams to predict future sales, this template helps you set targets and plan marketing strategies. 
• Cash-Flow Forecast Template: Essential for financial managers who need to monitor the liquidity of the business, this template projects cash inflows and outflows over a period. 
• Profit and Loss Forecast Template (P&L):  Useful for business owners and financial officers who need to anticipate profit margins, this template enables you to forecast revenues and expenses.  
• Three-Year / Five-Year Financial Projection Template: Suitable for long-term business planning, these templates provide a broader view of your company’s financial future, improving your development strategy and investor presentations. 
• Break-Even Analysis Template:  Used by business strategists and financial analysts, this template helps you determine when your business will become profitable. 
• Budget Forecasting Template:  Designed for budget managers, this template uses historical financial data to help you plan your future spending. 
• Sector-Specific Financial Projection Template:  Designed for specific industries (such as retail or manufacturing), these templates take into account industry-specific factors and benchmarks.

Related Financial Templates

Check out this list of free financial templates related to financial projections and forecasting. You'll find templates for budgeting, tracking profits and losses, planning your finances, and more. These tools help keep your company’s money matters organized and clear.

Free Project Budget Templates

Use one of these  project budget templates to maintain control over project finances, ensuring costs stay aligned with the allocated budget and improving overall financial management.

Free Monthly Budget Templates

Use one of these  monthly budget templates to effectively track and manage your business’s income and expenses, helping you plan financially and save money.

Free Expense Report Templates

Use one of these  expense report templates to systematically track and document all business-related expenditures, ensuring accurate reimbursement and efficient financial record-keeping.

Free Balance Sheet Templates

Use one of these  balance sheet templates to summarize your company's financial position at a given time.

Free Cash-Flow Forecast Templates

Use one of these  cash-flow forecast templates to predict future cash inflows and outflows, helping you manage liquidity and make informed financial decisions.

Free Cash-Flow Statement Templates

Use one of these  cash-flow statement templates to track the movement of cash in and out of your business, so you can assess your company’s level of liquidity and financial stability.

Free Discounted Cash-Flow (DCF) Templates

Use one of these  discounted cash-flow (DCF) templates to evaluate the profitability of investments or projects by calculating their present value based on future cash flows.

Free Financial Dashboard Templates

Use one of these  financial dashboard templates to get an at-a-glance view of key financial metrics, so you can make decisions quickly and manage finances effectively.

Related Customer Stories

Free financial planning templates.

Use one of these  financial planning templates to strategically organize and forecast future finances, helping you set realistic financial goals and ensure long-term business growth.

Free Profit and Loss (P&L) Templates

Use one of these  profit and loss (P&L) templates to systematically track income and expenses, giving you a clear picture of your company's profitability over a specific period.

Free Billing and Invoice Templates

Use one of these  billing and invoice templates to streamline the invoicing process and ensure that you bill clients accurately and professionally for services or products.

Plan and Manage Your Company’s Financial Future with Financial Projection and Forecasting Templates from Smartsheet

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How to Prepare a Financial Plan for Startup Business (w/ example)

Financial Statements Template

Ajay Jagtap

• December 7, 2023
• 13 Min Read

If someone were to ask you about your business financials, could you give them a detailed answer?

Let’s say they ask—how do you allocate your operating expenses? What is your cash flow situation like? What is your exit strategy? And a series of similar other questions.

Instead of mumbling what to answer or shooting in the dark, as a founder, you must prepare yourself to answer this line of questioning—and creating a financial plan for your startup is the best way to do it.

A business plan’s financial plan section is no easy task—we get that.

But, you know what—this in-depth guide and financial plan example can make forecasting as simple as counting on your fingertips.

Ready to get started? Let’s begin by discussing startup financial planning.

What is Startup Financial Planning?

Startup financial planning, in simple terms, is a process of planning the financial aspects of a new business. It’s an integral part of a business plan and comprises its three major components: balance sheet, income statement, and cash-flow statement.

Apart from these statements, your financial section may also include revenue and sales forecasts, assets & liabilities, break-even analysis, and more. Your first financial plan may not be very detailed, but you can tweak and update it as your company grows.

Key Takeaways

• Realistic assumptions, thorough research, and a clear understanding of the market are the key to reliable financial projections.
• Cash flow projection, balance sheet, and income statement are three major components of a financial plan.
• Preparing a financial plan is easier and faster when you use a financial planning tool.
• Exploring “what-if” scenarios is an ideal method to understand the potential risks and opportunities involved in the business operations.

Why is Financial Planning Important to Your Startup?

Poor financial planning is one of the biggest reasons why most startups fail. In fact, a recent CNBC study reported that running out of cash was the reason behind 44% of startup failures in 2022.

A well-prepared financial plan provides a clear financial direction for your business, helps you set realistic financial objectives, create accurate forecasts, and shows your business is committed to its financial objectives.

It’s a key element of your business plan for winning potential investors. In fact, YC considered recent financial statements and projections to be critical elements of their Series A due diligence checklist .

Your financial plan demonstrates how your business manages expenses and generates revenue and helps them understand where your business stands today and in 5 years.

Makes sense why financial planning is important to your startup or small business, doesn’t it? Let’s cut to the chase and discuss the key components of a startup’s financial plan.

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Key Components of a Startup Financial Plan

Whether creating a financial plan from scratch for a business venture or just modifying it for an existing one, here are the key components to consider including in your startup’s financial planning process.

Income Statement

An Income statement , also known as a profit-and-loss statement(P&L), shows your company’s income and expenditures. It also demonstrates how your business experienced any profit or loss over a given time.

Consider it as a snapshot of your business that shows the feasibility of your business idea. An income statement can be generated considering three scenarios: worst, expected, and best.

Your income or P&L statement must list the following:

• Cost of goods or cost of sale
• Gross margin
• Operating expenses
• Revenue streams
• EBITDA (Earnings before interest, tax, depreciation , & amortization )

Established businesses can prepare annual income statements, whereas new businesses and startups should consider preparing monthly statements.

Cash flow Statement

A cash flow statement is one of the most critical financial statements for startups that summarize your business’s cash in-and-out flows over a given time.

This section provides details on the cash position of your business and its ability to meet monetary commitments on a timely basis.

Your cash flow projection consists of the following three components:

✅ Cash revenue projection: Here, you must enter each month’s estimated or expected sales figures.

✅ Cash disbursements: List expenditures that you expect to pay in cash for each month over one year.

✅ Cash flow reconciliation: Cash flow reconciliation is a process used to ensure the accuracy of cash flow projections. The adjusted amount is the cash flow balance carried over to the next month.

Furthermore, a company’s cash flow projections can be crucial while assessing liquidity, its ability to generate positive cash flows and pay off debts, and invest in growth initiatives.

Balance Sheet

Your balance sheet is a financial statement that reports your company’s assets, liabilities, and shareholder equity at a given time.

Consider it as a snapshot of what your business owns and owes, as well as the amount invested by the shareholders.

This statement consists of three parts: assets , liabilities, and the balance calculated by the difference between the first two. The final numbers on this sheet reflect the business owner’s equity or value.

Balance sheets follow the following accounting equation with assets on one side and liabilities plus Owner’s equity on the other:

Here is what’s the core purpose of having a balance-sheet:

• Indicates the capital need of the business
• It helps to identify the allocation of resources
• It calculates the requirement of seed money you put up, and
• How much finance is required?

Since it helps investors understand the condition of your business on a given date, it’s a financial statement you can’t miss out on.

Break-even Analysis

Break-even analysis is a startup or small business accounting practice used to determine when a company, product, or service will become profitable.

For instance, a break-even analysis could help you understand how many candles you need to sell to cover your warehousing and manufacturing costs and start making profits.

Remember, anything you sell beyond the break-even point will result in profit.

You must be aware of your fixed and variable costs to accurately determine your startup’s break-even point.

• Fixed costs: fixed expenses that stay the same no matter what.
• Variable costs: expenses that fluctuate over time depending on production or sales.

A break-even point helps you smartly price your goods or services, cover fixed costs, catch missing expenses, and set sales targets while helping investors gain confidence in your business. No brainer—why it’s a key component of your startup’s financial plan.

Having covered all the key elements of a financial plan, let’s discuss how you can create a financial plan for your startup or small business.

How to Create a Financial Section of a Startup Business Plan?

1. determine your financial needs.

You can’t start financial planning without understanding your financial requirements, can you? Get your notepad or simply open a notion doc; it’s time for some critical thinking.

Start by assessing your current situation by—calculating your income, expenses , assets, and liabilities, what the startup costs are, how much you have against them, and how much financing you need.

Assessing your current financial situation and health will help determine how much capital you need for your small business and help plan fundraising activities and outreach.

Furthermore, determining financial needs helps prioritize operational activities and expenses, effectively allocate resources, and increase the viability and sustainability of a business in the long run.

Having learned to determine financial needs, let’s head straight to setting financial goals.

2. Define Your Financial Goals

Setting realistic financial goals is fundamental in preparing an effective financial plan for your business plan. So, it would help to outline your long-term strategies and goals at the beginning of your financial planning process.

Let’s understand it this way—if you are a SaaS startup pursuing VC financing rounds, you may ask investors about what matters to them the most and prepare your financial plan accordingly.

However, a coffee shop owner seeking a business loan may need to create a plan that appeals to banks, not investors. At the same time, an internal financial plan designed to offer financial direction and resource allocation may not be the same as previous examples, seeing its different use case.

Feeling overwhelmed? Just define your financial goals—you’ll be fine.

You can start by identifying your business KPIs (key performance indicators); it would be an ideal starting point.

3. Choose the Right Financial Planning Tool

Let’s face it—preparing a financial plan using Excel is no joke. One would only use this method if they had all the time in the world.

Having the right financial planning software will simplify and speed up the process and guide you through creating accurate financial forecasts.

Many financial planning software and tools claim to be the ideal solution, but it’s you who will identify and choose a tool that is best for your financial planning needs.

Create a Financial Plan with Upmetrics in no time

Enter your Financial Assumptions, and we’ll calculate your monthly/quarterly and yearly financial projections.

Start Forecasting

4. Make Assumptions Before Projecting Financials

Once you have a financial planning tool, you can move forward to the next step— making financial assumptions for your plan based on your company’s current performance and past financial records.

You’re just making predictions about your company’s financial future, so there’s no need to overthink or complicate the process.

You can gather your business’ historical financial data, market trends, and other relevant documents to help create a base for accurate financial projections.

After you have developed rough assumptions and a good understanding of your business finances, you can move forward to the next step—projecting financials.

5. Prepare Realistic Financial Projections

It’s a no-brainer—financial forecasting is the most critical yet challenging aspect of financial planning. However, it’s effortless if you’re using a financial planning software.

Upmetrics’ forecasting feature can help you project financials for up to 7 years. However, new startups usually consider planning for the next five years. Although it can be contradictory considering your financial goals and investor specifications.

Following are the two key aspects of your financial projections:

Revenue Projections

In simple terms, revenue projections help investors determine how much revenue your business plans to generate in years to come.

It generally involves conducting market research, determining pricing strategy , and cash flow analysis—which we’ve already discussed in the previous steps.

The following are the key components of an accurate revenue projection report:

• Market analysis
• Sales forecast
• Pricing strategy
• Growth assumptions
• Seasonal variations

This is a critical section for pre-revenue startups, so ensure your projections accurately align with your startup’s financial model and revenue goals.

Expense Projections

Both revenue and expense projections are correlated to each other. As revenue forecasts projected revenue assumptions, expense projections will estimate expenses associated with operating your business.

Accurately estimating your expenses will help in effective cash flow analysis and proper resource allocation.

These are the most common costs to consider while projecting expenses:

• Fixed costs
• Variable costs
• Employee costs or payroll expenses
• Operational expenses
• Marketing and advertising expenses
• Emergency fund

Remember, realistic assumptions, thorough research, and a clear understanding of your market are the key to reliable financial projections.

6. Consider “What if” Scenarios

After you project your financials, it’s time to test your assumptions with what-if analysis, also known as sensitivity analysis.

Using what-if analysis with different scenarios while projecting your financials will increase transparency and help investors better understand your startup’s future with its best, expected, and worst-case scenarios.

Exploring “what-if” scenarios is the best way to better understand the potential risks and opportunities involved in business operations. This proactive exercise will help you make strategic decisions and necessary adjustments to your financial plan.

7. Build a Visual Report

If you’ve closely followed the steps leading to this, you know how to research for financial projections, create a financial plan, and test assumptions using “what-if” scenarios.

Now, we’ll prepare visual reports to present your numbers in a visually appealing and easily digestible format.

Don’t worry—it’s no extra effort. You’ve already made a visual report while creating your financial plan and forecasting financials.

Check the dashboard to see the visual presentation of your projections and reports, and use the necessary financial data, diagrams, and graphs in the final draft of your financial plan.

Here’s what Upmetrics’ dashboard looks like:

8. Monitor and Adjust Your Financial Plan

Even though it’s not a primary step in creating a good financial plan for your small business, it’s quite essential to regularly monitor and adjust your financial plan to ensure the assumptions you made are still relevant, and you are heading in the right direction.

There are multiple ways to monitor your financial plan.

For instance, you can compare your assumptions with actual results to ensure accurate projections based on metrics like new customers acquired and acquisition costs, net profit, and gross margin.

Consider making necessary adjustments if your assumptions are not resonating with actual numbers.

Also, keep an eye on whether the changes you’ve identified are having the desired effect by monitoring their implementation.

And that was the last step in our financial planning guide. However, it’s not the end. Have a look at this financial plan example.

Startup Financial Plan Example

Having learned about financial planning, let’s quickly discuss a coffee shop startup financial plan example prepared using Upmetrics.

Important Assumptions

• The sales forecast is conservative and assumes a 5% increase in Year 2 and a 10% in Year 3.
• The analysis accounts for economic seasonality – wherein some months revenues peak (such as holidays ) and wanes in slower months.
• The analysis assumes the owner will not withdraw any salary till the 3rd year; at any time it is assumed that the owner’s withdrawal is available at his discretion.
• Sales are cash basis – nonaccrual accounting
• Moderate ramp- up in staff over the 5 years forecast
• Barista salary in the forecast is $36,000 in 2023.
• In general, most cafes have an 85% gross profit margin
• In general, most cafes have a 3% net profit margin

Projected Balance Sheet

Projected Cash-Flow Statement

Projected Profit & Loss Statement

Break Even Analysis

Start Preparing Your Financial Plan

We covered everything about financial planning in this guide, didn’t we? Although it doesn’t fulfill our objective to the fullest—we want you to finish your financial plan.

Sounds like a tough job? We have an easy way out for you—Upmetrics’ financial forecasting feature. Simply enter your financial assumptions, and let it do the rest.

So what are you waiting for? Try Upmetrics and create your financial plan in a snap.

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Frequently Asked Questions

How often should i update my financial projections.

Well, there is no particular rule about it. However, reviewing and updating your financial plan once a year is considered an ideal practice as it ensures that the financial aspirations you started and the projections you made are still relevant.

How do I estimate startup costs accurately?

You can estimate your startup costs by identifying and factoring various one-time, recurring, and hidden expenses. However, using a financial forecasting tool like Upmetrics will ensure accurate costs while speeding up the process.

What financial ratios should startups pay attention to?

Here’s a list of financial ratios every startup owner should keep an eye on:

• Net profit margin
• Current ratio
• Quick ratio
• Working capital
• Return on equity
• Debt-to-equity ratio
• Return on assets
• Debt-to-asset ratio

What are the 3 different scenarios in scenario analysis?

As discussed earlier, Scenario analysis is the process of ascertaining and analyzing possible events that can occur in the future. Startups or small businesses often consider analyzing these three scenarios:

• base-case (expected) scenario
• Worst-case scenario
• best case scenario.

About the Author

Ajay is the Head of Content at Upmetrics. Before joining our team, he was a personal finance blogger and SaaS writer, covering topics such as startups, budgeting, and credit cards. If not writing, he’s probably having a power nap. Read more

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Financial projections use existing or estimated financial data to forecast your business’s future income and expenses. They often include different scenarios to see how changes to one aspect of your finances (such as higher sales or lower operating expenses) might affect your profitability.

If you need to create financial projections for a startup or existing business, this free, downloadable template includes all the necessary tools.

What Are Financial Projections Used for?

Financial projections are an essential business planning tool for several reasons.

• If you’re starting a business, financial projections help you plan your startup budget, assess when you expect the business to become profitable, and set benchmarks for achieving financial goals.
• If you’re already in business, creating financial projections each year can help you set goals and stay on track.
• When seeking outside financing, startups and existing businesses need financial projections to convince lenders and investors of the business’s growth potential.

What’s Included in Financial Projections?

This financial projections template pulls together several different financial documents, including:

• Startup expenses
• Payroll costs
• Sales forecast
• Operating expenses for the first 3 years of business
• Cash flow statements for the first 3 years of business
• Income statements for the first 3 years of business
• Balance sheet
• Break-even analysis
• Financial ratios
• Cost of goods sold (COGS), and
• Amortization and depreciation for your business.

You can use this template to create the documents from scratch or pull in information from those you’ve already made. The template also includes diagnostic tools to test the numbers in your financial projections and ensure they are within reasonable ranges.

These areas are closely related, so as you work on your financial projections, you’ll find that changes to one element affect the others. You may want to include a best-case and worst-case scenario for all possibilities. Make sure you know the assumptions behind your financial projections and can explain them to others.

Startup business owners often wonder how to create financial projections for a business that doesn’t exist yet. Financial forecasts are continually educated guesses. To make yours as accurate as possible, do your homework and get help. Use the information you unearthed in researching your business plans, such as statistics from industry associations, data from government sources, and financials from similar businesses. An accountant with experience in your industry can help fine-tune your financial projections. So can business advisors such as SCORE mentors.

Once you complete your financial projections, don’t put them away and forget about them. Compare your projections to your financial statements regularly to see how well your business meets your expectations. If your projections turn out to be too optimistic or too pessimistic, make the necessary adjustments to make them more accurate.

*NOTE: The cells with formulas in this workbook are locked. If changes are needed, the unlock code is "1234." Please use caution when unlocking the spreadsheets. If you want to change a formula, we strongly recommend saving a copy of this spreadsheet under a different name before doing so. 

We recommend downloading the Financial Projections template in English or Spanish.

Do you need help creating your financial projections? Take SCORE’s online course on-demand on financial projections or connect with a SCORE mentor  online or in your community today.

Simple Steps for Starting Your Business: Financial Projections In this online module, you'll learn the importance of financial planning, how to build your financial model, how to understand financial statements and more.

Business Planning & Financial Statements Template Gallery Download SCORE’s templates to help you plan for a new business startup or grow your existing business.

Why Projected Financial Statements Are Essential to the Future Success of Startups Financial statements are vital to the success of any company but particularly start-ups. SCORE mentor Sarah Hadjhamou shares why they are a big part of growing your start-up.

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Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.

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Financial forecasting allows you to measure the progress of your new business by benchmarking performance against anticipated sales and costs.

When starting a new business, a financial forecast is an important tool for recruiting investors as well as for budgeting for your first months of operating. A financial forecast is used to predict the cash flow necessary to operate the company day-to-day and cover financial liabilities.

Many lenders and investors ask for a financial forecast as part of a business plan; however, with no sales under your belt, it can be tricky to estimate how much money you will need to cover your expenses. Here’s how to begin creating a financial forecast for a new business.

[Read more: Startup 2021: Business Plan Financials ]

Start with a sales forecast

A sales forecast attempts to predict what your monthly sales will be for up to 18 months after launching your business. Creating a sales forecast without any past results is a little difficult. In this case, many entrepreneurs make their predictions using industry trends, market analysis demonstrating the population of potential customers and consumer trends. A sales forecast shows investors and lenders that you have a solid understanding of your target market and a clear vision of who will buy your product or service.

A sales forecast typically breaks down monthly sales by unit and price point. Beyond year two of being in business, the sales forecast can be shown quarterly, instead of monthly. Most financial lenders and investors like to see a three-year sales forecast as part of your startup business plan.

Lower fixed costs mean less risk, which might be theoretical in business schools but are very concrete when you have rent and payroll checks to sign.

Tim Berry, president and founder of Palo Alto Software

Create an expenses budget

An expenses budget forecasts how much you anticipate spending during the first years of operating. This includes both your overhead costs and operating expenses — any financial spending that you anticipate during the course of running your business.

Most experts recommend breaking down your expenses forecast by fixed and variable costs. Fixed costs are things such as rent and payroll, while variable costs change depending on demand and sales — advertising and promotional expenses, for instance. Breaking down costs into these two categories can help you better budget and improve your profitability.

"Lower fixed costs mean less risk, which might be theoretical in business schools but are very concrete when you have rent and payroll checks to sign," Tim Berry, president and founder of Palo Alto Software, told Inc . "Most of your variable costs are in those direct costs that belong in your sales forecast, but there are also some variable expenses, like ads and rebates and such."

Project your break-even point

Together, your expenses budget and sales forecast paints a picture of your profitability. Your break-even projection is the date at which you believe your business will become profitable — when more money is earned than spent. Very few businesses are profitable overnight or even in their first year. Most businesses take two to three years to be profitable, but others take far longer: Tesla , for instance, took 18 years to see its first full-year profit.

Lenders and investors will be interested in your break-even point as a projection of when they can begin to recoup their investment. Likewise, your CFO or operations manager can make better decisions after measuring the company’s results against its forecasts.

[Read more: ​​ Startup 2021: Writing a Business Plan? Here’s How to Do It, Step by Step ]

Develop a cash flow projection

A cash flow statement (or projection, for a new business) shows the flow of dollars moving in and out of the business. This is based on the sales forecast, your balance sheet and other assumptions you’ve used to create your expenses projection.

“If you are starting a new business and do not have these historical financial statements, you start by projecting a cash-flow statement broken down into 12 months,” wrote Inc . The cash flow statement will include projected cash flows from operating, investing and financing your business activities.

Keep in mind that most business plans involve developing specific financial documents: income statements, pro formas and a balance sheet, for instance. These documents may be required by investors or lenders; financial projections can help inform the development of those statements and guide your business as it grows.

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Financial Projections for Startups [Template + Course Included]

January 11, 2022

Adam Hoeksema

Financial projections are an important part of any business plan or startup pitch deck. They allow a company to estimate future revenues, expenses, and profits, and to identify potential risks and opportunities.  We have been helping founders create financial projections through our templates, tools, and custom financial modeling services since 2012.  I thought it was finally time to write a comprehensive article that should answer the key questions that we get from founders again and again.  So here is what I plan to cover:

What are financial projections? 

Why should a startup create financial projections, how to create a financial forecast , creating sales projections based on data, forecasting operating expenses, salary projections.

• Startup cost forecasting

Pro forma financial statements

Existing business vs. startup vs acquisition forecasting, how to know whether my projections are realistic, what will investors and lenders be looking for in my projections, tools used for financial forecasting.

But first, who am I, and do I know anything about financial projections? 

My name is Adam Hoeksema and I am the Co-Founder of ProjectionHub.  Since 2012 we have helped over 50,000 entrepreneurs create financial projections between our software tool and our business projection spreadsheet templates . 

I didn’t spend a decade on Wall Street or make a killing in private equity, and I haven’t even raised VC funding myself.  

But I did spend over a decade launching a growing an SBA (Small Business Administration) lender in the Indianapolis, IN area.  During that time we made over 1,800 small business loans and we often asked our clients for financial projections along with their loan applications.  That is why I started ProjectionHub.  

So 10 years ago my experience was with helping small, main street businesses create projections and secure loan funding to start their dream.  Along the way, I learned a ton about startup projections for tech-based businesses as well.  Today about 50% of our work is with small businesses looking for an SBA loan and 50% is with tech-based businesses looking to raise capital from investors.  

With that background in mind, I want to share with you what I have learned along the way to try to make your financial forecasting process just a little bit easier.  Let’s dive in!

Financial projections are estimates of the future financial performance of a company. These projections are typically based on a set of assumptions and are used to help businesses plan for the future and make informed decisions about investments, financing, and other strategic matters. Most ProjectionHub customers use pro forma financials to help external stakeholders, such as investors and lenders understand a company's financial position and future prospects. Financial projections typically include projections of income, expenses, cash flow, and balance sheet items.  

There are many opinions on whether a startup needs to create a forecasted balance sheet and how many years a set of projections should be.  At ProjectionHub, all of our financial projection templates have an integrated pro forma income statement, cash flow and balance sheet in annual and monthly format for 5 years.  This seems to meet the needs of 99% of our customers, so I think it is pretty safe to say that your investor or lender might not require all of that level of information, but they probably won’t require more than a 5-year forecast of your 3 statement financials. 

So it sounds like a lot of work to create a financial forecast, so why do we create projections?  No one can know the future.  Isn’t it just a pointless exercise?  

Well, I think it is smart for an entrepreneur to create a set of projections before they start a business to understand what they are getting themselves into and what it will take to break even and generate a profit.  

I could beat that drum all day, and you know what it doesn’t really matter.  Even if we know it is a good idea to create projections before throwing our life savings into a new venture, most entrepreneurs will not create projections before starting their business.  I have just come to accept this!  

So the real reason to create projections is because the people with the money, the investors and lenders ask for them.  

• Investors will ask for a financial model because they want to see how you plan to use their money, how long you think it will last, and what the potential return could be. 
• Lenders will ask to see financial projections for startups or new projects or divisions in a business because they want to be able to see whether you think you can pay them back or not.  How does your debt service coverage ratio look? How many cups of coffee are you going to have to sell to make your monthly loan payment? 

Now that we know why we are creating projections and who the audience is, let’s get into the “how.”

So the plan now is to walk through how to create a set of financial projections, how to do good research to take a data-driven approach when modeling, what tools you can use to help you with research, and then how to know whether your forecast is realistic once you are done.   We are going to look at:

• Creating revenue projections
• Operating Expenses
• Salaries Forecasting
• How to get investor and lender-ready projections

Revenue Projections

This is where we will camp out for a while.  I want to show you a few examples of different types of revenue models to show you how I approach creating revenue projections.  

If you have a stable, existing business, then it is possible that the best approach to creating sales projections is simply to take last year’s numbers and apply a growth rate based on your expectations of growth.  Since that approach is quite straightforward I am not going to spend any time on that today. Our Existing Business Forecast Template will be perfect for you in this scenario.  

We are going to focus on more of a first principles approach.  I am going to outline two different approaches that I often take when building a financial model.  First a capacity approach and then a customer funnel approach.  

Capacity-Based Revenue Projections

I use a capacity-based approach to revenue projections when a company is pretty certain to have demand for their products or services and their revenue is more of a function of your price x capacity.  

Here are some examples of businesses where I would take a capacity-based approach. 

Farming Projections

For a farm, your revenue forecast is going to be based on how many acres you are farming x the yield per acre x the price per unit for your crop.  You don’t really need to worry about whether you have a customer or not.  Since most crops are commodities you won’t need to find a customer, you simply sell into the ready made market at the market price. 

Trucking Projections

Trucking is similar in the sense that as long as you have a valid license and a working truck, you will be able to find loads to deliver.  The question is more about how many trucks do you have, how many miles per day can each truck drive and what price will you be able to earn per mile.  Again this is about capacity and price, not whether or not you can find a customer.  This is the approach we take to show how a trucking business with one truck can generate $400k in annual revenue . 

Daycare Facility

A daycare facility will also be able to calculate a capacity based on the size of the facility and the teacher-to-student ratio requirements.  Once you have your capacity it is mostly a function of pricing to determine your revenue forecast.  You can see a screenshot from our daycare financial forecast tool to see how we think about modeling this type of business. 

I would say most tech businesses do not fall into a capacity-based projection approach. 

For tech companies, I typically use a customer funnel-based approach to forecasting revenue. 

Customer Funnel-Based Revenue Projection Approach

These are companies where your customer might not even know your product or service exists and might not know that they want it or need it so you are going to have to really go out and market and sell.  You will likely have a customer funnel that will have leads that convert into customers over time.  

Here are some examples of business models where I would use a customer funnel approach to financial modeling. 

B2B SaaS Projections

For a B2B SaaS product you will probably have an advertising budget and a sales team that will drive leads that your team will work to qualify.  Then some percentage of those sales qualified leads will turn into customers.  You will need assumptions for things like:

• A monthly ad budget 
• Cost per click to attract a website visitor
• Percentage of website visitors that become sales qualified leads
• Percentage of sales qualified leads that the sales team converts into customers
• Average monthly spend per customer

DTC Product Forecasting

For direct to consumer product companies you will have a similar customer funnel.  Once you get to a customer, then you might have assumptions like:

• Average order value
• % of customers that become repeat customers
• How often do repeat customers repurchase

Consumer Apps 

For a consumer mobile app you will need assumptions for things like:

• Monthly ad budget
• Cost per download
• Organic / word of mouth downloads
• % of customers that download the app that convert into active users
• % of active users that churn each year
• Average monthly spend per active user per month

So this should give you an idea of the structure of assumptions that you will need in order to approach creating projections, but I just left you with a bunch of assumptions that you have no idea how to fill in with realistic data.  

Next I want to show you what I would do in order to research and find good data for your sales projections. 

So how do you know how many people are searching on Google for terms that are relevant to your product or service?  How do you know how much it would cost to advertise and get a click for that term?  How do you know what a reasonable conversion rate is from a website visitor to a customer?  How do you know what the average order value is for an ecommerce business like yours, etc? 

I recorded an entire course on this , but I have listed some tools and some slides below to show you my typical research process. 

As you will notice in the slides, I start out be simply doing Google research to try to find reasonable assumptions for as many of the key assumptions as I can.  

From there, I like to use the following tools:

• Ahrefs - I use this tool for competitor research to determine how much organic traffic my competitors are getting and thereby how much organic traffic my website might get over time. 
• Google Trends - I use Google Trends to see seasonality trends in a business. 
• Google Adwords Keyword Tool - I use this tool to forecast how much it will cost per click to attract a website visitor, and to see search volume for certain keywords.
• Bizminer - You can use Bizminer industry reports to get an idea of key industry ratios to get an idea of whether your projections are realistic for your industry. 

When forecasting expenses I like a couple of different resources to help me forecast my expenses and ensure that my expense projections are within industry standards. 

Expenses for Small Businesses

Bizminer - You can use Bizminer industry reports to get an idea of key industry ratios.  For example, you can determine if the average company in your industry spends 10% on rent or 12% on rent. 

Expenses for Tech Startups

SaaS Capital - You can use this report from SaaS Capital to get an idea of the spending categories as a % of revenue for tech companies.  This is specifically focused on SaaS, so if you are in ecommerce or a hardware startup you will need to find a similar source for your industry.  You can see an example of the expense ratios from SaaS Capital below:

When forecasting salaries I actually take two different approaches.  I typically start out by projecting specific salaries and positions for the first 24 months of the projection.  Then after that, I simply include salaries in larger buckets of operating expenses like General & Admin, R&D, and Sales & Marketing.  When you are raising investment the investors will likely want to know your specific use of funds for the first 18 to 24 months, but after that they will understand that it is impossible to predict exact positions, timing and salaries, so transitioning to an expense as a % of revenue makes sense.  You can see how this looks in one of our financial models for a B2B SaaS company : 

Detailed Salary Projections for the First 24 Months:

Salaries included in operating expense categories as a percentage of sales for year 3 and beyond:

Startup Cost Forecasting

When forecasting your startup costs, your specific location, concept, size and scale of business will make a dramatic difference in what it costs to launch your business.  I don’t recommend that you just take the first “average startup cost” number that you find in a Google search because your specific situation matters.  You will need to do your own research for each startup cost, but I have actually found it helpful to use ChatGPT to ask for a list of common startup expenses for business XYZ so that I don’t forget any common expenses. 

I have already mentioned this before, but I commonly take a different approach to creating projections for an existing business compared to a startup compared to modeling a business acquisition.  

Existing Business Projections

When modeling a projection for an existing business I like to use our existing business budgeting template that allows me to enter in historical revenue and expenses and use that as a baseline to build a forecast by increasing or decreasing expenses and revenue based on my plans. 

Startup Projections

For a startup, I would use one of our 70+ industry specific financial projection templates and start from the ground up.  You would use the research process outlined in this article to create your projections. 

Forecasting a Business Acquisition

For creating projections for a business that you are looking to acquire I would use our acquisition financial model which will allow you to enter in historical financials from the target business, but it will also allow you to make adjustments to the balance sheet and revenue and expenses for a post acquisition pro forma. You can’t simply use the existing balance sheet and income statement because both will likely change quite a bit after the sale of the business.

Finally, I wanted to show you some example pro forma statements so that you can see what the end product should look like.  

Pro forma P&L Example

Here is an example of our 5 year pro forma income statement. 

Pro forma Balance Sheet Example

Here is an example of our 5 year pro forma balance sheet. 

Once you have a complete set of projections (if you are using a ProjectionHub template) I would suggest taking a look at the profit and loss at a glance table as seen below: 

In this example, I am looking at projections for a technology company that is looking to raise investment.  So a couple of things that I would look at for a tech company pro forma.  

• The first year should probably be a loss because that is why you are looking to raise investment right?  I would just make sure you are assuming that you will raise enough investment to cover that first year loss.  
• Next I would look at how fast revenue is growing.  For an investable company there is a rule of thumb “triple, triple, double, double” which means after investment an investor will be hoping that you triple sales the first 2 years and then double sales the following two years.  This is really hard to do, so if you are forecasting that you will do 10x every year you are probably off base! 
• For tech startups you can look at this study with our partner Story Pitch Decks where we looked at what is a reasonable projection for a tech startup .  This study will show you what other similar companies are projecting, so that you can ensure that whatever you project will fall within the norms that investors see. 

Investors and lenders will likely be looking at the following numbers and ratios to make sure your projections seem to be reasonable:

• Gross Profit Margin
• Profit Margin
• Debt Service Coverage Ratio
• Comparing to industry averages
• Do revenue projections, units sold make sense?
• Does your balance sheet balance?
• When do you reach breakeven?
• Do you have room for error?

I suggest that you simply Google these things and make sure your numbers seem “normal.”  For example, if you are opening a coffee shop you could Google “average profit margin for a coffee shop” and you would probably find our article on coffee shop profit margins .  Confirm that your forecasted profit margins are in line and reasonable. Do this same exercise with each of these key ratios and numbers.  

As a thank you for reading this behemoth of an article, you can download our free financial projection template .  Other tools that I utilized or mentioned in the article include:

• Ahrefs - For competitor research
• Google Trends - For seasonality trends
• Google Adwords Keyword Tool - For search volume and cost per click
• Bizminer - For industry expense ratios
• ProjectionHub Pro Forma Templates - You can use our library of templates built specifically for over 70 unique industries and business models. 

If you would like to learn more about my process for creating financial projections, you can watch this course that I put on for tech startups looking to create investor-ready financial projections. 

Insert Webinar video below

Well I hope this has been helpful to you.  If you have specific questions please feel free to reach out directly to us at [email protected]  

About the Author

Adam is the Co-founder of ProjectionHub which helps entrepreneurs create financial projections for potential investors, lenders and internal business planning. Since 2012, over 50,000 entrepreneurs from around the world have used ProjectionHub to help create financial projections.

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How To Create Startup Financial Projections [+Template]

Businesses run on revenue, and accurate startup financial projections are a vital tool that allows you to make major business decisions with confidence. Financial projections break down your estimated sales, expenses, profit, and cash flow to create a vision of your potential future.

In addition to decision-making, projections are huge for validating your business to investors or partners who can aid your growth. If you haven’t already created a financial statement, the metrics in this template can help you craft one to secure lenders.

Whether your startup is in the seed stage or you want to go public in the next few years, this financial projection template for startups can show you the best new opportunities for your business’s development.

In this article:

• What is a startup financial projection?
• How to write a financial projection
• Startup expenses
• Sales forecasts
• Operating expenses
• Income statements
• Balance sheet
• Break-even analysiFinancial ratios Startup financial
• rojections template

What is a financial projection for startups?

A financial projection uses existing revenue and expense data to estimate future cash flow in and out of the business with a month-to-month breakdown.

These financial forecasts allow businesses to establish internal goals and processes considering seasonality, industry trends, and financial history. These projections cover three to five years of cash flow and are valuable for making and supporting financial decisions.

Financial projections can also be used to validate the business’s expected growth and returns to entice investors. Though a financial statement is a better fit for most lenders, many actuals used to validate your forecast are applied to both documents.

Projections are great for determining how financially stable your business will be in the coming years, but they’re not 100% accurate. There are several variables that can impact your revenue performance, while financial projections identify these specific considerations:

• Internal sales trends
• Identifiable risks
• Opportunities for growth
• Core operation questions

To help manage unforeseeable risks and variables that could impact financial projections, you should review and update your report regularly — not just once a year. 

How do you write a financial projection for a startup?

Financial projections consider a range of internal revenue and expense data to estimate sales volumes, profit, costs, and a variety of financial ratios. All of this information is typically broken into two sections:

• Sales forecasts : includes units sold, number of customers, and profit
• Expense budget : includes fixed and variable operating costs

Financial projections also use existing financial statements to support your estimated forecasts, including:

• Income stateme
• Cash flow document

Gathering your business’s financial data and statements is one of the first steps to preparing your complete financial projection. Next, you’ll import that information into your financial projection document or template.

This foundation will help you build the rest of your forecast, which includes:

• Cash flow statements
• Break-even analysis
• Financial ratios

Once all of your data is gathered, you can organize your insights via a top-down or bottom-up forecasting methods.

The top-down approach begins with an overview of your market, then works into the details of your specific revenue. This can be especially valuable if you have a lot of industry data, or you’re a startup that doesn’t have existing sales to build from. However, this relies on a lot of averages and trends will be generalized.

Bottom-up forecasting begins with the details of your business and assumptions like your estimated sales and unit prices. You then use that foundation to determine your projected revenue. This process focuses on your business’s details across departments for more accurate reporting. However, mistakes early in forecasting can compound as you “build up.”

1. Startup expenses

If your startup is still in the seed stage or expected to grow significantly in the next few quarters, you’ll need to account for these additional expenses that companies beyond the expansion phase may not have to consider.

Depending on your startup stage, typical costs may include:

• Advertising and marketing
• Lawyer fees
• Licenses and permits
• Market research
• Merchandise
• Office space
• Website development

Many of these costs also fall under operating expenses, though as a startup, items like your office space lease may have additional costs to consider, like a down payment or renovation labor and materials.

2. Sales forecasts

Sales forecasts can be created using a number of different forecasting methods designed to determine how much an individual, team, or company will sell in a given amount of time.

This data is similar to your financial projections in that it helps your organization set targets, make informed business decisions, and identify new opportunities. A sales forecast report is just much more niche, using industry knowledge and historical sales data to determine your future sales. Gather data to include:

• Customer acquisition cost (CAC)
• Cost of goods sold (COGS)
• Sales quotas and attainment
• Pipeline coverage
• Customer relationship management (CRM) score
• Average Revenue Per User (ARPU), typically used for SaaS companies

Sales forecasts should consider interdepartmental trends and data, too. In addition to your sales process and historical details, connect with other teams to apply insights from:

• Marketing strategies for the forecast period
• New product launches
• Financial considerations and targets
• Employee needs and resources from HR

Your sales strategy and forecasts are directly tied to your financial success, so an accurate sales forecast is essential to creating an effective financial projection.

3. Operating expenses

Whereas the costs of goods solds (aka Cost of Sales or COGS) account for variable costs associated with producing the products or services you produce, operating expenses are the additional costs of running your startup, including everything from payroll and office rent to sales and marketing expenses.

In addition to these fixed costs, you’ll need to anticipate one-time costs, like replacing broken machinery or holiday bonuses. If you’ve been in business for a few years, you can take a look at previous years’ expenses to see what one-time costs you ran into, or estimate a percentage of your total expenses that contributed to variable costs.

4. Cash flow statements

Cash flow statements (CFS) compare a business’s incoming cash totals, including investments and operating profit, to their expected expenses, including operational costs and debt payments.

Cash flow shows a company’s overall money management and is one of three major financial statements, next to balance sheets and income statements. It can be calculated using one of two methods:

• Direct Method : calculates actual cash flow in and out of the company
• Indirect Method : adjusts net income considering non-cash revenue and expenses

Businesses can use either method to determine cash flow, though presentation differs slightly. Typically, indirect cash flow methods are preferred by accountants who largely use accrual accounting methods .

5. Income statements

Your income statement projection utilizes your sales forecasts, estimated expenses, and existing income statements to calculate an expected net income for the future.

In addition to the hard numbers available, you should apply your industry expertise to consider new opportunities for your business to grow. If you’re entering Series C, you should anticipate the extra investments and big returns that you’re aiming to experience this round.

Once you’ve collected your insights, use your existing income statement to track your estimated revenue and expenses. Total each and subtract the expenses from the revenue projections to determine your projected income for the period.

 6. Balance sheet

Your balance sheet is the final of the big three financial documents needed to establish your company’s financial standing. The balance sheet makes a case for your company’s financial health and future net worth using these details:

• Company’s assets
• Business’s liabilities
• Shareholders’ equity

This document breaks down the company’s owned assets vs. debt items. It most directly tracks earnings and spendings, and it also doubles as an actual to establish profitability for prospective investors.

7. Break-even analysis

Launching a startup or new product line requires a significant amount of capital upfront. But at some point, your new endeavor will generate a profit. A break-even analysis identifies the moment that your profit equals the exact amount of your initial investment, meaning you’ve broken even on the launch and you haven’t lost or gained money.

A break-even point (BEP) should be identified before launching your business to determine its viability. The higher your BEP, the more seed money you’ll need or the longer it will be until operations are self-sufficient.

Of course, you can also increase prices or reduce your production costs to lower the BEP.

As your business matures, you can use the BEP to weigh risks with your product decisions, like implementing a new product or removing an existing item from the mix.

8. Financial ratios

Financial ratios are common metrics that lenders use to check financial health using data from your financial statements. There are five core groups of financial ratios used to evaluate businesses, as well as an example of each:

Efficiency ratios : Analyze a company’s assets and liabilities to determine how efficiently it manages resources and its current performance.

Formula : Asset turnover ratio = net sales / average total assets

Leverage ratios : Measure a company’s debt levels compared to other financial metrics, like total assets or equity.

Formula : Debt ratio = total liabilities / total assets

Liquidity ratios : Compare a company’s liquid assets and its liabilities to lenders to determine its ability to repay debt.

Formula : Current ratio = current assets / current liabilities

Market value ratios : Determine a public company’s current stock share price.

Formula : Book value per share (BVPS) = (shareholder’s equity - preferred equity) / total outstanding shares

Profitability ratios : Utilize revenue, operating costs, equity, and other other balance sheet metrics to asses a company’s ability to generate profits.

Formula : Gross profit margin = revenue / COGS

Graphs and charts can provide visual representations of financial ratios, as well as other insights like revenue growth and cash flow. These assets provide an overview of the financial projections in one place for easy comparison and analysis.

Startup Financial Projections Template

As a startup, you have some extra considerations to apply to your financial projections. Download and customize our financial projections template for startups to begin importing your financial data and build a road map for your investments and growth. 

Plan for future success with HubSpot for Startups

A sound financial forecast paves the way for your next moves and reassures investors (and yourself) that your business has a bright future ahead. Use our startup financial projections template to estimate your revenue, expenses, and net income for the next three to five years.

Ready to invest in a CRM to help you increase sales and connect with your customers? HubSpot for Startups offers sales, marketing, and service software solutions that scale with your startup. 

Get the template

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How to Create Financial Projections for your Business Plan

• Last Updated: September 10, 2024
• By: StartUp 101

Advertising Disclosure

Starting a business is an exciting time, but one that can come with some uncertainty. Writing out your business plan helps to increase your success significantly in addition to reducing some of the worries by getting all the ideas out of your head and organized on paper.

Financial projections are an essential component of the  business plan  to provide a realistic view as to whether or not your business is financially viable for success.

By creating financial plans, you are also able to test some of your assumptions to see the financial impact and analyze whether your business idea is feasible.

What are financial projections?

Financial projections (sometimes referred to as pro forma) are an essential part of a business plan. They are used to forecast a business’s expected sales and expenses and analyze the financial feasibility of the company. These forecasts evaluate past trends, current market conditions, and future expectations. They will also take into account regional sales potential and growth strategies and examine external and internal costs, such as the cost of customer acquisition and the amount of money you can afford to pay team members and yourself.

While it may be tempting to skip this step, not completing it could be costly.

Why are financial projections important?

Financial projections are one of the most critical steps in starting a small business. These figures help show you whether or not your business has a reasonable chance of being profitable. If your company does not reflect a profit based on your projections, you may have to make some adjustments. Financial projections can also help determine realistic price points and sales goals. They can also show you whether or not a profitable market even exists for the product or service you wish to provide.

The sales forecast is also useful in analyzing cash flows from accounts receivable and accounts payable to ensure the company has enough cash to operate.

Another reason financial projections are important is when requesting funding.  The bank will review whether you have realistic financial projections before making a business loan.

How to create financial projections?

It is important to understand that financial projections are simply the best estimates you can determine based on the information available.

These figures are next to impossible to predict accurately. While this financial forecast can’t predict how the business will perform in the future, it will provide the analysis to make informed decisions and plans for the business.

Financial projections are typically shown as a 12-month projection in the first year and by quarter in the second year and third year.

To begin with, your business plan financial projections, start by focusing on your revenue potential and likely expenses.

1. Create sales projections

Projecting sales projections (also known as revenue projections) for a new business is difficult, especially if you are new to the type of business you are starting. They are a few approaches you can consider when preparing the sales forecast.  Some companies will have multiple sources of revenue. To make these easier to follow, each revenue stream is often put on a separate line in the projections.

Average household spending  – The Consumer Expenditure Survey program from the  U.S. Bureau of Labor Statistics  (scroll down to the Annual Calendar Year Tables) provides data on the expenditures of U.S. consumers. Using the average household spending multiplied by the population in your target area, you can come up with the total potential sales. Try not to get too carried away with your target area as it will have a significant impact on potential sales.

Using the BLS data, you can look up how much people spend on food and beverages (such as food at home, food away at home, bakery products, alcoholic beverages, etc.), appliances, apparel, education, reading – and the list goes on. This information can be assessed against demographic information such as age, income, education level, occupation, race, religion, and more.

Not only can you use this data to provide useful because you can use it to gauge the feasibility of your business. For instance, if there are three competitors in your market, and you need 10% of the market to make an adequate profit, this may be a good indication your business would be successful. If you needed 80% of the market, it would likely be much more challenging.

Trade associations –  Depending on the industry you are starting your business in, it’s likely there is an industry association. Do a Google search for “[type of business] industry association” or even find a Facebook group to join and ask questions. Many industry associations have statistics and formulas you can use to estimate sales. Make sure to reference your work, so the bank or prospective investors know you didn’t come up with these numbers out of thin air. Be sure to do your own due diligence as these numbers may be overly optimistic.

Menu of services –  Another way to project sales is to create a list of services to assess how many jobs you can do in a day and the pricing of each job.

For instance, if you own a  car detailing business and it takes 4 hours per vehicle to detail, you may be able to do up to two vehicles per day, ten vehicles a week, or 40 vehicles a month (you could squeeze in a few more in a month, but let’s keep the math easy for now).

Each vehicle brings in an average of $100 for a total monthly sales revenue of $4,000. Let’s say that after subtracting rent, utilities, supplies, advertising, etc, you are left with $2,000. Now you find that best case, you have a profit of $2,000, and by working 8 hours a day, you would make $12.50 per hour. Now you have to ask yourself that in this best-case scenario where you have clients lined up each and every day and you are making $12.50 per hour, is this business worth your time?

Regardless of how you project sales, be sure to explain the key assumptions in the business plan so the reader can follow the math!

2. Project operating expenses

Next, project the monthly operating expenses of the business. Some expenses are going to be easy to estimate, such as fixed costs like rent, insurance, and utilities. Other expenses need to be carefully examined as they can make a large difference in the projected profit.

The biggest expense for most businesses is the cost of goods sold, sometimes called COGS, cost of sales, or cost of inventory. This is the cost to produce the item being sold, such as the raw materials to produce it. A typical example is a wedding band sold at a jewelry store. The sales price to the customer may have been $1,000, but the jewelry store purchased it for $700. The cost of goods sold in this instance is $700. Many times COGS is represented as a percentage, which in this example would have been 70% ($700 /$1,000).

You can often find the average cost of goods for most businesses by searching for industry publications.

Another major expense for most businesses is employees. This number can be found for many industries as a percentage of sales; however, we would recommend you create a list of the positions needed, the number of employees for each position, the number of hours worked, and wages. By comparing the industry average with your own list, you can have some confidence your numbers are in the ballpark.

Make a list of the monthly expenses and the cost for those expenses to use later in the financial statements.

3. Seasonality

After getting the sales projections completed, you will also want to look at seasonality. Seasonality refers to the fluctuations in monthly sales. Some businesses will be affected more by seasonality than others, but it is important to analyze because it may show your business will run out of cash. Lenders and potential investors will expect some seasonality, but if you have a business that has steady sales, be sure to explain why your sales are consistent.

In most areas,  landscapers  are a common business that has fluctuating sales. The spring and fall are really busy, while in the winter, there is little to no work.

4. Financial projections

With the sales projections, expenses, and seasonality now out of the way, creating the pro forma financial statements are actually pretty straightforward.

Business plan financial forecasting is typically set up to show a three-year outlook. Depending on the project, especially if it is one that has a significant amount of research and development time before revenues start to come in, some banks and lenders will occasionally want to see a five-year outlook.

There will be three financial statements to create:

• Cash flow statement –  Similar to a detailed view of a checkbook, the projected cash flow statement  looks at cash coming in and cash going out of the business. Cash flow projections usually look at the first year broken out into 12 months, and the following two years by quarter.
• Profit and loss statement  – Also referred to as an income statement, this statement is an annual estimate of the taxable profits (or losses) of the business. The numbers in the P&L statement are similar to the cash flow statement; however, depreciation and amortization are also included.
• Balance sheet –  Not every bank will request a proforma balance sheet for a start-up business. The balance sheet is similar to a personal financial statement that looks at assets and liabilities to determine the net worth.

The balance sheet is projected at the end of each year.

5. Sources and uses of funds

The sources and uses of funds section provide an overview of the financing activities, use of working capital,  loan repayments, and how the money is spent.

The sources section is a list of where the money is coming from to fund the project. This will commonly have a line for the amount of the bank loan and another line for the amount the owner is investing in the business. Keep in mind when preparing this for the bank that most banks will want to see the business owner invest 15%-25% of their own funds in a start-up business.

The uses section provides details of all the startup costs for the business. Items are usually put into categories such as:

• Real estate
• Renovations

The amount in the sources section should equal the amount in the uses section.

Financial Projection Templates

There are free financial projection templates from  Smartsheet ,  Spreadsheet 123 , and others. LivePlan has a guided approach (like Turbo Tax) to creating financial projections that are pretty thorough and easy to use.

There are free financial projection templates from  Smartsheet ,  Spreadsheet 123 , and others.  LivePlan has a guided approach (like Turbo Tax) to creating financial projections that are pretty thorough and easy to use.

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Top 10 Startup Business Financial Projections Templates with Examples and Samples

Prerna Leekha

A startup business is a risky venture, and to increase the chances of its success, you must have a solid financial foundation. Creating well-thought-out financial projections is one contributing factor to a successful business. You must be wondering what financial projections constitute? Let's understand the key building blocks of financial projections, especially for a start-up!

Key foundational elements of financial projections:

• Business Plan 
• Financial Modeling
• Fundraising
• Financial Reporting

A comprehensive business plan is the keystone of any startup. It outlines your business concept, target market, competitive analysis, and financial projections. Creating a budget helps businesses track their income and expenses, identify potential cost-cutting measures, and ensure that your startup remains financially viable. Financial modeling involves creating a spreadsheet or software model that will help you highlight the financial scenarios. 

Explore five year financial projection templates to help you map future financial performance, cash flows, and resource needs!

This can involve seeking venture capital, angel investors, or loans. A content-ready template helps craft a financial report, which provides insights into your startup's performance. These templates also help identify and mitigate potential risks, which is essential for your startup's long-term success. SlideTeam has crafted some ready-to-use templates to highlight financial projections for a startup business. You can download them for a smooth and efficient presentation of the financial projections of a business.   Access these startup financial projection templates to navigate the complex world of financial forecasting!

Template 1: New Business One-Page Outline with Financial Projections

This PPT Template outlines financial projection for a new business's first year. It is content-ready and helps you highlight revenue expenses, and total profit, along with growth opportunities, sales channels, funding, and marketing activities through charts, graphs, and creative icons. In addition to this, you can also mention your team, and what is their occupation.

Template 2: Quarterly Financial Projections of Startup Business

Financial projections help ensure the success of a startup business. This template highlights quarterly financial projections of a business startup. The slide outlines revenue, service revenue, profit from operations, and commission for the four quarters of a year through a table. Illustrate types of revenue, effectively, and in a detailed manner, using this template. 

Download it now

Template 3: Startup Business Financial Planning and Projections Graph

Highlight a business's financial projections through graphs. This pre-designed PPT Template assists in demonstrating the financial projections through graphs and tables. Highlight profitability, efficiency, leverage, Operating Return on Assets, Return on Equity, Liquidity, and breakdown revenue projected for years. Also, you can mention revenue, free cash flow, cash balance , and net income through graphs. 

Template 4: Financials Projections For Crypto Startup Business

This content-ready template is specially designed for crypto startup businesses. You can highlight the annual turnover, average bank transfer, incoming bank transfers per month, and outgoing bank transfers per month. In addition, you also get a pre-designed table to highlight the summary income statement mentioning net revenue, gross profit, gross margin, and EBITDA.

Access it now

Template 5: Financial Projections for Startup Company Table

Get this pre-designed template to highlight the financial projections of a startup company table. Underline the sources of revenue, gross profit resources, EBITDA, and profit before tax. You can mention the cost of goods sold, capitalized expenses, subsidies, operating income, financial income, financial expenses, exceptional income, or corporation tax for years.

Template 6: Startup Financial Projections Checklist 

Having a checklist for financial projections is important to highlight what needs to be done and the status of the prediction (whether it is on course to become true). This template gives the status in terms of whether the projection has not been started yet, is in progress, and has been completed. Downloading this content-ready template will help you highlight tasks like creating assumptions for preparing financial projections, allowing seasonal variations in expense and revenue, including staff on costs, and analyzing staffing levels as per projected growth and tracking their status.  

Download it

Template 7: Startup  Summary of Vending Startup

This pre-designed PPT Template makes it easy to showcase the startup vending business. You can highlight the equity capital, startup costs, licenses and permits, fixed assets, and cash buffer that remains for the business. This slide also facilitates a brief about your company. Download this customizable slide to highlight the startup summary through innovative graphs and charts.

Template 8: Steps Involved in Financial Forecasting 

Financial forecasting is a complex science; you can highlight the steps involved creatively and effectively. This ready-to-use template depicts the steps like recognizing the patterns in your business, understanding the drivers of your income, deciding on a time horizon, defining interim goals and converting everything into quarterly metrics. It also involves getting the flow of cash flow variability, and looking at long-term trends creatively.

Template 9: Key Financial Assumptions of Organization 

Before you start a business, you project how much money will go into each expense. This pre-designed PPT Template helps highlight the organization's assumptions. Download this template to highlight assumptions like administrative expenses, maintenance expenses, operating expenses percentage of net revenue, and marketing and advertising expenses. Also included are salaries, transportation and supplies, printing and stationery expenses, inflation rate, and many more through this editable slide.

Template 10: Break-Even Analysis with Fixed and Variable Cost 

Highlight the particulars of fixed and variable costs for a couple of years using this slide. Outline particulars like average revenue per year, average variable cost per year and contribution per year. Estimated annual fixed cost is also an important financial projection. There is average revenue break-even, present value factor, discounted net cash flow to the firm, positive cash flow, and payback period through a table.

INCREASE CHANCES OF LONG-TERM SUCCESS

Startup Business Financial Projections Templates are critical tools for entrepreneurs looking to launch and grow their ventures. These templates provide a structured framework for forecasting revenue, expenses, and cash flow, enabling startups to make informed decisions and secure necessary funding. With the use of these templates and consulting with financial experts, startups can enhance their financial planning and increase their chances of long-term success.

P.S. Explore the Financial Projections Templates to monitor cash flow metrics and revenue forecasts.

Related posts:

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How To Create Financial Projections For a Startup (with Template)

Joe Garafalo

Founder and COO

SaaS Financial Model Template

Startups live and die by their ability to turn their financial projections into reality. That might sound a little dramatic, but new companies, by definition, have less historical financial data that can be used to value the company or forecast its future results.

If Bank of America or Apple provide a forecast for the coming year, there’s a much narrower range of outcomes for them to work with. Even without a detailed forecast, an established business like that is going to have a relatively stable set of results year to year.

Not so much with startups. Financial projections are more difficult to get right, and at the same time, they’re also much more important to the longevity of the business. It’s those forecasts and the progress towards making them a reality that attract potential investors.

If you’re a SaaS startup, it’s vital to ensure your financial projections are realistic, achievable, and based on accurate data. In this article, we run through a comprehensive guide on how to build financial projections and why they’re so important to a startup.

Table of Contents

What Is a Financial Projection?

A financial projection is an estimate of a company’s future financials based on assumptions of performance, such as total revenue , expenses, and cash flows.

Most commonly, financial projections are created for the coming year. But they can also be projected quarterly for businesses that are scaling rapidly (like SaaS startups) or with a longer-term view of 3, 5, or even 10-year time scales. Obviously, the further out financial projections are made, the less accurate they’re likely to be.

Why Startups Need Financial Projections

There’s uncertainty in the startup world. When a company is new, there are a lot of unknowns, from the actual product roadmap itself, to the most effective marketing strategies, or the success of expanding to new geographic regions.

The more accurate these financial projections are, the more useful they can be in driving growth of the company (see our guide on planning vs forecasting for more insight on how to accomplish this). These financial projections provide much needed context for decision makers when setting corporate objectives and budgets, as well as expectations for investors, lenders, and other stakeholders.

Additionally, scenario planning , or creating multiple projections with different assumptions, can be hugely beneficial in this planning process. Scenario planning allows you to see various potential outcomes, giving you an expected range of results or an idea of how different strategies might impact the business. The more of these scenarios you model, the better your understanding will be of the best case and worst case scenarios for the company.

If you’re a SaaS startup and you don’t have a solid set of financial projections, you probably won’t have a business for long. It’s a necessary part of running a startup, and if done correctly, it can help you scale the business faster and more efficiently.

What Is Included in a Startup’s Financial Projections

Financial projections for a SaaS startup begin with people, which is the largest of a SaaS company’s expenses by far. Before we can start projecting the financials, we need to gain an understanding of the headcount roster.

Finance executives need to have a clear understanding of the headcount plan from every department leader to ensure they’re accurately projecting these costs and the expected revenue each employee will contribute.

In short, start with headcount planning .

From there, the focus can shift to the financial performance that is expected to flow from the team. The typical place to start is with the three financial statements from the prior period — the balance sheet, the income statement (or profit and loss statement), and the cash flow statement.

From here, you can pull together your current figures and start considering how to forecast them into the future. Here are some of the fundamental numbers that should be included in your startup’s financial projections:

Sales & Revenue

Of all the aspects of a company that needs to be projected, sales, or bookings , is probably the most obvious. Simply put, this will allow you to calculate the amount of revenue that you think the company is going to be able to generate over the coming period.

For a sales-led company, a sales capacity model can help plan your top-line by using sales rep performance to forecast future bookings. If a top-down approach is better suited to your company, the ARR snowball model uses historical trend data to project future growth.

Costs of Goods Sold (COGS)

While sales are important, you also need to ensure that the sales you’re making are profitable. The first component of that is forecasting your COGS, or for SaaS business, cost of revenue , which are the costs incurred directly in bringing your product to market.

For SaaS companies, this generally includes things like hosting costs, payment processing fees, and some engineering expenses related to keeping your product running for customers. Essentially, anything that is required to keep the service live and operational.

Gross Profit

You can subtract COGS from your sales figures to calculate a gross profit estimate. When creating financial forecasts, it’s useful to include the gross profit figure as a separate line item, as it makes it easy to compare the forecast financial performance to the current and historical data. Generally speaking for SaaS businesses a gross margin of 70% is where you should aim to be.

Operating Expenses

COGS aren’t the only costs incurred by a business, and we need to project other expenses to get an accurate forecast of the overall profitability of a company. Operating expenses are costs like marketing campaigns, HR or management spend, travel expenses, professional memberships, rent, utilities, and employee benefits such as health insurance. If you nailed your headcount forecast earlier, salaries for employees should flow into your payroll, benefits and payroll tax line items.

Another great tip is to carve out the top 10 vendors and forecast this spend with a fine tooth comb. The video below shows how Mosaic helps with vendor level forecasting.

Net Income (Loss)

Now, you can subtract the operating expenses figure from the gross profit to get to your net profit forecast. This is the bottom line profitability of a company. While the overall goal of most companies is to maximize net profit, a SaaS startup may have that as a long-term objective only. In the short term, net profit might actually be a negative, as it could be a sign that not enough reinvestment of earnings is taking place.

Every business will create their financial projections slightly differently. Certain executives place more emphasis on specific areas that they want to watch closely, and some financials are more important in different sectors or for certain business models.

That’s where there is huge value in using the right cash flow forecasting software tools. Platforms like Mosaic allow you to access detailed forecasts of just about any financial metric you can imagine, without the need to build a specific model for each one.

How To Create a Financial Projection For a Startup

Now let’s take a look at the step-by-step process of creating a financial projection for a startup. Firstly, you can take what’s known as a top-down or a bottom-up approach to projections.

For most companies, bottom-up makes the most  sense. In a bottoms-up approach to budgeting, you build your forecasts from ‘the bottom up’ using your own financial data. But that doesn’t mean ignoring the macroeconomic environment or market segment trends.

Headcount Planning

Regardless of which approach you take, headcount planning has to be the starting point. Salaries, benefits, payroll taxes and other forms of compensation can all add up to a significant amount of money, often 75-80% of a SaaS business’ total costs.

Before you start to forecast your financials, you need to create a robust headcount plan . It’s only once you have a clear outline of how your team is going to grow, that you’ll be able to accurately forecast all of the costs and revenue associated with them.

A bottom-up headcount forecast at a departmental level will provide a solid starting point for the rest of your financial projections.

Forecast Expenses

It makes sense to start with expenses when creating a financial projection, once you have a clear view on headcount. You generally have more control over them and because of that, they’re easier to project accurately.

Expense forecasting can be done at a high level using some of your operational metrics (which can also be built and viewed in minutes using Mosaic), or you can project out individual line items, or break down expenses by departments or by vendor. You want to leverage your internal departments here to gain as much insight as possible for more accurate figures.

As with all of the components of your projections, the more granular you get, the more accurate the results are likely to be. It’s best to use software with real-time data because the process can become too unwieldy or time-consuming to be practical if you’re working off manual spreadsheets.

Historical costs can be the best place to start if you have them, but these should be adjusted based on the strategic plan and objectives for the coming year. Engineering costs may have averaged $500,000 over the past three years, but what does the coming year hold? Has the team grown?

Run your best financial planning cycle yet with this blueprint

A key point to consider in your spend forecasting is which of your expenses are fixed operating expenses and are unlikely to change based on sales (like office rent or employee healthcare) and which expenses are variable costs and could change substantially (like sales team commissions).

Quick tip: figure out a per head cost for things like software spend, travel, and equipment such as laptops and monitors to nail these line items and have them grow proportionally as more people join the business.

Build a Sales Forecast

The next step in building a financial projection is to forecast your sales or bookings. Accurate revenue forecasting requires a clear understanding of how a company will generate sales. Will it be sales-led? A sales capacity model (in conjunction with the headcount plan) will help you to estimate the performance of your sales team and the revenue they expect to generate.

A sales forecast is not just about the headline figure. You also need to understand the typical length of the sales cycle, the expected win rate of your sales team, and the average annual contract value.

For a company that is more product-led, you’ll need to understand the expected amount of traffic that your marketing team can generate to your website and what conversion rates will be reasonable.

This process becomes easier with more historical data, but even new companies can rely on the expertise of their sales and marketing teams to help provide context on what is achievable.

Get started with a quota capacity model template

To help you with building this as accurately as possible, you’ll want to get together your SaaS metrics, such as:

• Sales team performance
• Average revenue per user (ARPU)
• Sales rep ramp
• Quota attainment
• Closing rates

As mentioned in the previous section, don’t forget to consider how the macroeconomic environment might impact those numbers.

When doing this manually, there is a significant amount of work and time that goes into building a forecast that is realistic. FP&A modeling using a tool like Mosaic makes this process substantially faster and more accurate and allows for multiple scenarios to be built and reviewed.

Forecast Cash Flow Statement, Income Statement, and Balance Sheet

With your sales and expenses forecasts completed, you can use these figures to generate projected cash flow statements, income statements, and balance sheets. These simply require taking actual figures from the last financial period and forecasting them forward based on the numbers in your projections.

Here, it’s important to ensure that you include financial details not directly related to your product, such as debt expenses, depreciation, or income from bank account interest.

This type of financial reporting can be a complex area, but we have a range of different resources to help you with cash flow projections and balance sheet forecasting .

Get a sample template to build your own financial projections

What most startup founders get wrong about financial projections.

Creating a financial projection isn’t a hard science. There are many different ways to look at the numbers, which can lead to common mistakes. Here are a few of the key things startup founders often get wrong when it comes to their financial projections:

Overly Optimistic

At a startup, it pays to be an eternal optimist. Sure, there are a lot of things that can go wrong, but you believe in your company, and you want to focus on best case scenarios. That’s great, but with financial projections you also need to keep things grounded in reality.

Projections can, and should be, ambitious. But it’s important to make sure they’re also realistic.

Rely on Past Performance

Financial projections will obviously take into account the historical performance of the company, the market, and the economy as a whole. But a common mistake is to focus only on these past numbers without looking carefully at how these might change in the coming period and properly accounting for new business strategy and bets the company is making.

Accurate financial projections shouldn’t just ask ‘How can we maximize our performance in the current market?’ but also ‘How might the market change and how will that impact our performance?’

The best way to avoid this pitfall is to have conversations with your department heads to ensure their plans for the year are accurately captured in your financial forecasts.

Underestimate Costs

The flip side of overestimating sales is underestimating expenses. This is particularly true with engineering when developing a new product, as the timeline and work involved can often be unclear at the outset.

This is why, when creating financial projections, there should be ample allowance for unexpected delays, costs, or product fixes.

Automate Financial Projections And Gain More Insight Than Ever With Mosaic

All of this is great, but as you’ve probably realized, it’s a huge amount of work. Sure, anyone can slap a 5% growth percentage on every line item and be done with it, but that’s not going to lead to accurate forecasts that help inform business strategy and keep stakeholders happy.

To do forecasts right, you need access to detailed financial data, and the best way to do that is through the use of financial data analytics software . Mosaic brings all of your financial data together in one place, allowing you to access any metric imaginable at the click of a button.

Not only can you access that real-time data instantly, but you can also use it to create forecasts and projections for multiple scenarios without any need to create manual financial models. Mosaic gives everyone in your finance and FP&A team the capabilities of a highly experienced financial analyst and allows you to scale the finance team efficiently as the company grows.

When you use software like Mosaic in your forecasting process, the numbers can easily be changed as needed. Realized after Q1 that your sales funnel conversion rate is much higher than you expected? A couple of clicks, and your forecasts are updated.

Mosaic allows your finance and FP&A team to spend less time on the ‘what’ of your company financials, and more time on the ‘why,’ adding strategic value and becoming a more integral part of the direction of the company.

See Mosaic in action. Request a demo today .

Related Content

• What Is the Difference Between Financial Forecasts vs. Projections?
• How to Build a Workforce Planning Process that Boosts Growth (+ Examples)
• Sales and Marketing Expenses + Forecasting Guide

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