Financial plans & forecasts don’t have to be scarily complicated.
Anyone can come up with a simple forecast I promise – as a starting point, break it down into these categories:
Sales
Can also be called turnover, revenue or income. Think about how many products you’re planning to sell this year.
How many weddings do you want to work at? How many monthly retainer clients do you have – do you have space for anymore?
The best place to start with forecasts is your current actuals and build up from there. Work on product or client numbers and then multiply up by price.
Direct costs & costs of sale
These are costs that come as a result of a sale. So for example, if you’re a wedding florist it would be flowers – the more weddings you do the more flowers you need. Or if you’re a clothing company it would be the cost the materials & labour to make the clothes.
Overheads
These are costs that you’ll have to pay no matter what volume of sales you have. So if you’re a virtual assistant it would be all the software license fees you use in your business or the utility bills of the place you work. In most cases this won’t change even if your number of clients change.
If you can’t split the costs into these categories don’t worry just get all of them down so you can work out your profit.
Profit
Sales minus costs = profit
TAX
Always budget and think about tax. Yes, it can be complicated but a starting point for profits under £50k is around 20%. I highly recommend you get in contact with an accountant for a more accurate figure though!
Take home
Profit minus tax = take home. This is how much you’ve actually got to play with for extra things!
Other things to think about:
Investments in the business – have you got any one-off investments you want to do this year? Will this come out of money already in the business or are you going to pay for it out of this year’s profit or get a business loan?
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