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Forecasting revenues

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Forecasting the revenue you will bring in during your first year of operation is one of the most difficult steps in preparing your cash flow projections and business plan. Review your market research materials and estimate how many clients you can hope to attract each month. Be realistic and take into consideration how many events you alone can produce in a day, a week, a month.

Also consider the amount of time necessary to get your marketing materials into circulation to build a customer base. Prepare a chart of the revenues you anticipate each month for a year. Consider planned vacations and other personal commitments. Do several different versions, including the least amount of revenue generated or client events you will require each month to reach a break-even point after your fixed expenses.

At this point you should have all the information you need on the fixed expenses and overhead, start-up costs, and projected revenues for one year. Now you are ready to prepare a cash flow forecast. You can do this manually using a standard 13-column accounting pad or on your computer if you prefer, using spreadsheet software.

To prepare a basic cash flow forecast, you will need a list of your expenses, broken down monthly, quarterly and annually. This is your comprehensive list of all outgoing monies for overhead and fixed expenses, which includes business expenses, marketing expenses, and interest and bank charges for start-up costs. You will also need your forecasted monthly revenues. The cash flow breaks down the expenses by month and charts your total cash (revenues + any other income dedicated to your special events business) at the start of each month. The formula is basically —

revenues – expenses = cash flow

Your cash flow forecast will act as your guide by keeping you to a budget that shows you on paper when you are on or off your plan. It will be difficult to be absolute in your first forecasting efforts. Remember, these are projections, not bookkeeping exercises. You will have to make certain assumptions in the beginning, especially when it comes to preparing your projected revenues. However, by trying to be as accurate as possible when it comes to expenses, you will have a clearer idea of the kind of revenues you will need to produce in order to pay yourself an income and potentially break even.

There are many terrific sources for more information on preparing financial forecasts. Banks often have good information at both their physical and online locations, and government departments do as well. Visit the United States Small Business Association at <www.sba.gov/financing/index.html> or the Canadian federal government Business Start-Up Assistant site at <bsa.cbsc.org/gol /bsa/site.nsf/en/index.html> on the internet.

Either way, it is absolutely necessary for the ongoing success of your business to prepare these financial forecasts now and on an ongoing basis as your business grows and prospers. Good financial management helps you control your business and plan for success.

Start & Run an Event-Planning Business

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