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What is Financial Forecasting To A New Start-up Business?

Financial Targets

"Turnover is vanity, profit is sanity." (And cash is King!) Just selling a load doesn't make you money - there are all your costs of production or running the business to deduct from what goes into the till. This section should focus you on exactly what these costs are, what gets you into profit, and how much you need to sell to breakeven. Download the spreadsheet to see if the futures looking bright for your business!

Your Product Cost

You need to consider all of the costs you incur when running your business and these can be fitted into two categories, Direct and Indirect.

Direct Costs are all of the costs directly associated with producing the product you are selling. For example a bread-maker would have to buy flour, yeast, salt e.t.c

Indirect Costs are all of the costs that you would incur whether you sold anything or not. For example a business may have to pay for rent, electricity bills, storage space e.t.c.

Your Profitability

In order to make a profit your selling price must be higher than the direct cost of making your product or delivering your service. You must also ensure you make enough to pay off your indirect costs.

Gross Profit per item is the money left over after deducting direct costs from your selling price. This is the cash you will bring in from each sale.

Net Profit is your income after using your gross profits to pay off indirect costs. This is all yours to save or squander!

Break Even Point is the number of units you have to sell in order to pay off all your costs. It's money, money, money from this stage on!

Your Cashflow

Even businesses that are making huge net profits are sometimes overdrawn at the bank. That's because money from sales doesn't come in as fast as you pay out for direct and indirect costs.