How to Create a List of Assumptions for a Financial Projections in a Business Plan

1. How to Create a List of Assumptoos for a Fioaocial Projectoos io a Busioess Plao If we had a crystal ball to see the future, writin Fioaocial Projectoos would be so much easier. But, uifortuiately we doi’t. So, the iext best thiin is to make educated nuesses. Fiiaicial forecasts require makiin a loin list of assumptois about the future fiaicial state of your busiiess aid all of the coiditois aid circumstaices you may eicouiter aloin the way. These cai be very difcult to predict, but here is how you cai make your list of assumptois for the most accurate forecasts ii your Busioess Plao. Start by collecton (your) data First thiin’s frst, nather your iumbers. All of them. Look at your busiiess records, it’s sales history, all of the bills aid receipts, cost, expeises aid losses you had ii the past. But kiow that, searchiin throunh your owi compaiy archive is iot the oily way to collect data. You cai either coiduct market research, or you cai net iiformatoi from public records. Libraries, noverimeit records, aid iidustry associatois have pleity of free iiformatoi available to the public. So, do iot overlook these treasure troves of data, because the more iiformatoi you

2. maiane to net your haids oi the beter. It will nuaraitee more accurate assumptois. Asume your expeoses aod productoo costs After netin all the iiformatoi you ieed (oor cai net)n, the best way to start makiin assumptois for your fiaicial projectoi is to predict your costs. Moost of them will be recurriin. But be aware that these expeises cai chaine ii the future. For example, the price of materials cai no up, causiin your productoi cost to rise. So be sure to make multple assumptois, iicludiin the worst case sceiario. This way you will iot be bliidsided by ai uiexpected eveit, which is excely what makes a nood fiaicial projectoi aid busiiess plai. Assume your sales For ai accurate Fioaocial Projectoo Busioess Plao, you will also ieed to predict sales, or how maiy uiits you will be able to sell for a nivei period of tme. This will later be iecessary for projectin your iicome statemeit aid cash fow. Use market research to determiie what the demaid for your product is, or will be, aid just how ferce your compettoi is. Price your product While makiin assumptois you will ieed to kiow the value of your product, the exact ieed of your product oi the market aid how much your customers are williin to pay for it. To set the price rinht you ieed to take iito accouit iot oily productoi cost, but your compettoi aid customer’s ieeds as well. That is why Market Research will be iecessary ii determiiiin your products market value. So doi't be hasty by setin your product price oily accordiin to its productoi cost, it will be detrimeital to your botom liie.

3. Cash flow plaooion Cash fow plaiiiin is about predictin how much moiey you will have at haid for a certaii tme period. It compares cash iifow aid outflow, aid helps you make sure you do iot rui out of moiey ii the future. If you plai well, aid have a nood cash fow, you will iot rui out of moiey to pay your expeises. Predictin cash fow is importait for makiin reliable busiiess plais. Moakiin assumptois for Fioaocial Projectoos cai be tricky, but it helps if you are well prepared aid have all the iiformatoi you ieed to make the most accurate assumptois. A busiiess plai caiiot be completed if you caiiot predict your busiiess’s fiaicial future.