Why Forecasting Is Important for a Successful Business Plan

By Gene Marks
The Hartford Small Biz Ahead
Originally Published: October 18, 2023

When someone gives me a business plan to review, I do what almost every other recipient of such a document does: I flip to the numbers.

Yes, it’s important to understand a little history about the company. I want to know the bios of the founders and management team. I’m interested in the products and the vision. And assuming the owner wants financing — I want to know how much money is needed and why.

In the end, a business plan is just a request for financing, and no one is going to finance a company without looking at the numbers.

By numbers, I don’t mean the past. I mean the future. I mean a spreadsheet that shows me a sound, reasonable and rational forecast of where the owners and managers expect the company to be in the next three years (anything after that is really just a guess and not worth the effort).

Business is about math. It’s about buying low and selling high. It’s about managing expenses, figuring out margins and pricing correctly. Show me profits, and I can figure out whether or not an investment is worth it or not.

So, I look at the numbers, and I expect to see a reasonable, rational forecast on a spreadsheet. How can you do this? Follow these general steps.

1. Format your spreadsheet in a way that financial people are used to seeing.

Down the side, you list your revenue and expense accounts. Across the top, your columns should be Year 1, Year 2 and Year 3. Your forecast should be based on cash in and cash out. You should include a “notes” column which cross-references your assumptions behind each number. These assumptions should be detailed and based on research. It’s OK not to include these details on the sheet as long as you’ve got supporting documentation and schedules that back up your assumptions. The people reading your plan want a forecast built on the best facts available. It will look like this…[MORE]

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To read the entire article by Gene Marks at The Hartford Small Biz Ahead website, visit: Why Forecasting Is Important for a Successful Business Plan