Many people think that coming up with a great business idea is the hardest part, but then they hit a wall when it comes to financing their idea. The unfortunate reality is that many of the great creative minds in business simply lack the numerical skills to back up their ideas. If you have a killer business idea but are struggling with how to convert it into cash, then its time to start learning how to forecast revenue and growth. Without a solid financial plan, it can be nigh on impossible to gain investments or loans to help you finance your business. So, while it may seem like a big waste of time, there are actually real and tangible effects that come with projecting your finances that could make or break your business. It may sound scary, but it’s simpler than you think – once you know how. Here are some tips to send you in the right direction:
Calculate Your Expenses
First thing’s first, you will need to calculate all of the expenses associated with your business’s set up. Rather than relying on projections and complex calculations and forecasts, expenses are relatively easy to get right. Having said that, it is important to always bear in mind that there will be unforeseen costs cropping up left, right and centre, so always give yourself large margins to cover these elements. You will need to consider all of your overheads, such as rent, bills, technology, legal costs, permits, accounting, salaries and marketing. On top of this, you will need to factor in some more variable costs, including materials and supplies. Key areas which are difficult to predict are advertising, marketing and legal costs. As each of these areas typically ends up far beyond estimated costs, it is advisable to double or even triple your estimates.
Research Loan Providers
If you are starting your first business, it can sometimes be difficult to find a provider who is willing to loan you capital. However, services such as Max Funding are specifically set up to help new business owners get their ideas off the ground, giving you a chance to start over even if you have bad credit. It is important to establish what is required by a loans company from the beginning, so that you can project your finances around their requirements.
Forecast Costs and Revenue
Next, you will need to forecast both costs and revenue. In terms of costs, you should keep detailed records of all of your initial investments and business dealings, as these will help you to estimate your future financial needs. In terms of revenue, it is important to make both conservative and best-case projections in order to get a realistic overall figure. While it is important to set your expectations low in order to protect yourself, it is equally important not to lose your belief in your ideas, which is why it is useful to provide yourself with a dream financial projection too in order to keep your creative juices and motivation flowing.
Creating a realistic financial forecast for your new business can not only help you to secure a loan, but it can also ensure that your plan is viable and able to succeed.