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10 Step Venture eMentoring Program™

Session 6: Forecasting

Why forecast?

Forecasting is where you will determine and organize the financial information for your business, showing costs and revenues. The forecasts become your budget. There is nothing mysterious about forecasting - it is a thoughtful process of thinking about each part of the business operation and determining what kinds of expenses will be generated by these activities. Think about your rent, phone system and all other operational issues that have associated costs. The process will help you to also identify the sources and amounts of revenues that will be generated.

The Forecasting Model
Revenue How Much What Source(s)
Expenses How Much What Source(s)
Profit (Loss) Revenue minus Expense

Forecasting may seem like a complex and mysterious process - you are in fact guessing about what may happen in the future. While you are guessing about what may happen in the future, it is possible to do so in a very careful framework that helps you to make those guesses as accurate as possible - and so as valuable as possible. We have included a fair amount of information in this section - take and use what makes sense to you. Just keep in mind that the equation remains very simple:

  • How much revenue are you going to expect? Why?
  • How much in costs are you going to expect? Why?
  • Are there more revenues than costs? If not, why?

Read the next section, "Why Forecast," to get an idea of what you are doing and why. The section following that article, "Forecasting - the Seven Steps," will help you think through this process, and give you a format to list your sources of expenses and revenues. Two separate articles, one on cash flow and one on breakeven analysis will help you further in understanding the forecasting process. A financial calculator is also provided to help in calculating ratios and looking at other relationships of the financial data.

Once the data is assembled, if you need help organizing this data into an actual forecast, you can sit down with a resource professional. The good news is that you will have already done the hard part. You have thought through how the business functions, what costs are associated, and how you are going to generate revenues. Once you have this information, they can then show you how the data is used in developing a forecast of your operation for the next two or three years.

Forecast Counseling

The Knowledge Institute's Business Utility Zone Gateway is a small business resource community listing thousands of free and low cost public programs available to help small businesses to get started and grow. These public assistance agencies exist to help you with various aspects of your business objectives. You will find an alphabetical listing organized by town of the organizations and people that are available to help you develop an appropriate action strategy.

Each state has a Small Business Development Center (SBDC) network, cosponsored with the US Small Business Administration and state-based college or university system. These SBDCs employ professional counselors who provide guidance to small businesses at no charge. SCORE is another counseling network where experienced business executives volunteer their time to assist smaller companies at no cost.

  1. Why Forecast?
  2. Forecasting - The Seven Steps
  3. Breakeven Analysis
  4. Cash Flow Management
  5. Financial Calculators
  6. Profit / Loss Forecast
  7. Summary

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