Things You'll Need

Instructions

1

Gather information such as financial records and past business plans, and get input from employees and managers. Financial records include bills, bank records, tax information and canceled checks. Such information should give you an idea of the direction the company intends to take in the future. It is also a starting point for your projections. Determine what projects or partnerships, such as a developing a new product, might have an effect on the company's cash flow and growth.
2

Research the current market climate. Look for costs and risks associated with entering the market, or expanding the company's role in it. Also, use consumption trends from competitors in the market to estimate how well the company, or a specific part of it, will fare in the future. In order to accurately project how much the company can grow in a specific period of time, compare the company's ability to create a good or service with the market's demand for it.
3

Outline a rough rendition of the financial projection for a specific period of time. The Small Business Association recommends you aim to cover five years; for the first two years, compute financial projections monthly or quarterly, switching to annual projections in the third year. Incorporate financial performance goals into the outline as well. Performance goals measure progress based on specific objectives over time, such as increasing profit margins by 2 percent each month.
4

Expand the projection to include all known variables and business processes which it will cover. The quality and reliability of your data and research determine the usefulness of your projections. Compare related variables such as sales growth and any costs associated with it. For example, if your research indicates that sales will grow by 10 percent in one month and costs will grow by 2 percent, you can safely project an 8 percent growth in revenue for that month. Repeat these functions for each financial variable you identified in that specific time frame.
5

Incorporate goals and performance targets for specific time periods into the projection. Existing performance data and projections should inform your performance benchmarks. As you account for goals and performance targets, be sure the projections reflect how you will reach those goals and what factors must exist. For example, if your goal is to lower the annual cost of production by buying raw materials in bulk, the financial projection should indicate what conditions facilitate that goal.