You’re starting a new business. What are the key considerations when creating a budget or forecast? (2024)

Before you start crunching numbers, you need to have a clear idea of why you are creating a budget or forecast and what you want to achieve with it. For example, are you trying to secure funding from investors or lenders? Are you trying to measure your profitability and cash flow? Are you trying to identify opportunities and risks in your market? Depending on your purpose, you may need different types of budgets or forecasts, such as a startup budget, an operating budget, a sales forecast, or a cash flow forecast.

To create a realistic and accurate budget or forecast, you need to collect and analyze relevant data from various sources. This may include historical financial statements, industry benchmarks, market research, customer feedback, competitor analysis, and economic trends. You also need to consider any assumptions, constraints, and uncertainties that may affect your projections, such as seasonality, inflation, exchange rates, regulations, and customer behavior. You should document and justify your data sources and assumptions, and update them regularly as new information becomes available.

There are different methods and tools you can use to create a budget or forecast, depending on the level of detail and complexity you need. Some common methods are the top-down approach, which starts with your overall goals and works down to the individual components; the bottom-up approach, which starts with the individual components and works up to the overall goals; and the scenario analysis, which creates different scenarios based on different assumptions and variables. Some common tools are spreadsheets, software applications, templates, and calculators. You should choose the methods and tools that suit your purpose, data, and skills.

Your budget or forecast should reflect your strategy and vision for your new business. It should align with your mission, values, objectives, and action plans. It should also support your marketing, operations, human resources, and financial decisions. Your budget or forecast should not be a static document, but a dynamic tool that helps you monitor and evaluate your performance, identify gaps and opportunities, and adjust your strategy and vision as needed.

Creating a budget or forecast is not a solo task. You need to communicate and collaborate with your team, partners, stakeholders, and advisors. You need to share your budget or forecast with them, explain your assumptions and methods, solicit their feedback and input, and address any questions or concerns they may have. You also need to review your budget or forecast with them regularly, report on your actual results, and discuss any variances or issues. By communicating and collaborating effectively, you can ensure that your budget or forecast is realistic, accurate, and aligned with your goals.

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

Budgeting & Forecasting

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