Financial Forecasting

For your business plan you need to provide information that talks about your business in terms of money. This includes how much capital you need, if any. What security are you able to offer to the people that may be lending you any money? And what will your sources of revenue be?

Your financial forecast should include the following:

• Cashflow forecast. This will be your balance of cash and cashflow patterns for the first 18 months at least. This is to make sure that the business will be able to survive the first 18 months of trading.

• Profit and Loss forecast. This will be the amount of profit you expect to make, the amount you have projected for your sales and cost of goods and your overheads.

• Sales forecast. This will be the amount you expect to generate in sales.

This information should run for at least the next 3 years, but include most of the detail in the first 12 months. The investors should be able to clearly see what the thinking has been behind all the numbers.

A major concern to you may be how do you survive while you business is getting started. The easiest answer to this is to make you sure plan well. Be aware that you may not make any money in the first year of trading, and cover your back to at least make sure you can pay for all your outgoings (salaries, rent/mortgage, overheads etc.). Make the provisions also for any unexpected payments that may need to be made, for example, building works. Seek the advice from a financial advisor of how you can help yourself in the early days as well.

Making personal savings can help you. Small things like consolidating your debts. This can involve you paying a 0% APR and a single monthly payment is usually much cheaper than several. Re-mortgaging your property could be another way to release some money that would otherwise be tied up. Think about your own personal overheads like your bills and see if you can contact the companies concerned and make any additional savings. Set yourself a personal budget, but ensure that you are realistic in the process.

Make sure that you do not waste money at home or in your new business premises. Don’t use electricity unnecessarily and think about your gas bills. All these little things will contribute to you having more money in the long-run.

As it may be difficult initially, it is a good idea to try and work out much money you made need to source within the first 12 months of trading.

You can do this by taking the following steps:

• work out what your estimated income will be from your sales

• work out what your expenses will be

• estimate what you will pay for salaries, including the tax

• and estimate what is left after your monetary requirements and how much you will take out.

Once calculated, this figure will tell you how much you may need to source from elsewhere. Be careful not to rely too much on external funding on things like bank overdrafts as this money can be spent very quickly and you reach your borrowing limits before you know it.

In the initial stages of starting up, you will more than likely always need money. Here are a few suggestions of places to look for where this may be found:

• Savings

• Sell unwanted assets

• Borrow from your family and friends

• Debt factor

• Release any unused equity

• Get another job!

To avoid disappointment, make sure you plan well and take advice from business tools that have dealt with business failures. Commonly, make you sure you do adequate market research, plan you finances well and thoroughly, always be aware of your competitors and know what they are doing as far as possible, make sure you have a high standard of customer service as customers are your main driver for success in your salon and make sure that you employee the right type of people with the right attitude.

All in all plan, plan, plan. If you fail to plan, you plan to fail and so make sure that everything is above board and you have a really good strategy in place. Apart from barriers to entering the market that are outside of your control, there is then no reason why you cannot succeed.