Growth & Customers

Business plan financials and how to estimate them

Expecting to seek financing for your startup? You’ll need a solid understanding of your project’s financials to show how the business could make money and what it may cost to run.

Published 5 August, 202610 min read Share

Business plan financials estimate your sales, costs, cash flow, and profit so you can understand whether your business model is realistic. They also show how much money you have available and whether you need additional funds to support your plans. 

When you’re creating a business plan, you’ll need to have a good understanding of these figures to start off on a firm footing, especially if you’re looking for investment. Potential investors will want to see how the money will be used and when investors can see a return. You should know your figures inside out, as this will show confidence and an understanding of your business. 

Jennifer O’Toole, senior partner at accountancy firm Thomas R Dixon, acknowledges that the financial side of business planning can be intimidating because “it can often be difficult to predict sales and costs if you have nothing to work from—but it’s not impossible.” 

Key takeaways

• Business plan financials cover six things: sales forecast, costs, cash flow, profit and loss, available funds, and finance needed — together they show whether the business model is realistic and how much outside money it will take to get going.
• Lenders and investors read your figures as a test of your assumptions, not just your ambition — a lender wants to know whether cash flow supports repayment, while an investor is looking at when the business turns profitable and what the return might be.
• You can build credible estimates with no trading history — competitor accounts, industry reports, supplier prices, and sales data for comparable products give you benchmarks to work from rather than guessing.
• Sales and cash don’t arrive at the same time — invoices get paid late, supplier credit shifts when costs bite, and separating fixed from variable costs shows how much you need to sell before the business breaks even.
• Forecast month by month for the first 12 months, then annually for the two years after — and err on the cautious side, since you won’t capture the whole market, win every pitch, or reach capacity straight away.

Here’s what we’ll cover:

What are the financial components of a business plan?

Business plan financials typically include a sales forecast; estimates of your costs, cash flow, and profit and loss; the amount of funds you already have; and the amount of money you need from investors. 

Sales forecast: an estimate of how much revenue your business expects to generate over a set period, usually broken down month by month for the first year.  

• Costs: a breakdown of the money you expect to spend, including start-up costs, stock, materials, rent, software, wages, marketing, and other overheads.  
• Cash flow: a forecast showing when money is expected to come in and go out, so you can spot potential shortfalls before they happen.  
• Profit and loss: a summary of expected income and expenditure, showing whether the business is likely to make a profit or loss over time.   
• Available funds: the money you already have to put into the business, such as savings, existing business funds, or confirmed financial support. 
• Finance needed: Any additional funding you may need to start, run, or grow the business, along with how that money will be used. 

How do investors and lenders use the financial information in your business plan?

Investors and lenders use your estimated financials to understand whether your business model is realistic, sustainable, and likely to generate enough money to support your plans.  

Your figures help them see how much funding you need, what the money will be used for, and whether your expected sales and costs are based on reasonable assumptions. 

They will also look at your forecasts to assess risk. For example, a lender may want to know whether your cash flow will allow you to repay borrowing on time, while an investor may be more interested in when the business could become profitable and what kind of return they might expect.

Clear, realistic financials show that you understand your market, your costs, and the practical challenges of building a business.

What are the key steps of calculating business plan financials?

To calculate business plan financials, start with realistic benchmarks, then work through your expected sales, costs, cash flow, profit and loss, available funds, and any funds needed. 

Find benchmark figures for your business

Your business plan doesn’t have to be perfect, but if you can estimate the financials fairly accurately, it will be helpful—and can save any nasty shocks later.  

So where should you get the data?  

O’Toole says, “Look for information in the public domain, such as competitors’ accounts, to give you examples of sales/costs/ratios that are relevant to your market”. 

You can access these via websites like Company Check, which allows you to download up to 100 sets of company accounts for free each month. 

Estimate your probable sales

This is a key measure for your business and its success. Your sales forecast should show a month-by-month breakdown for the next 12 months and then an annual overview for the two years following. 

There are a number of ways to calculate your sales, but this approach can be useful: 

• List each of your products or services. 
• Work out the price for each of those products or services.
• Think about the market and how many sales you may achieve each month. This might be as a percentage of capacity (e.g., available hours or tables occupied in a restaurant) or as a number of units. Remember that you won’t be at capacity all the time (if at all).
• Allow time to get established; it may take you some time to get your first sales, or you may have an initial flurry of sales from your first contacts, followed by a quieter period.
• Consider seasonal effects on each type of sales or service. This doesn’t just happen for people selling deckchairs and Christmas trees. For example, if you sell to businesses, you may find sales drop during the summer and over Christmas as people are on holiday. 
• If you have a new product, look at sales figures for similar types of products. 

How your expected revenue streams affect your business plan financials

Your revenue streams are the different ways your business expects to make money, such as product sales, subscriptions, retainers, project fees, or billable hours. 

Breaking these down helps you create a more realistic sales forecast. A shop might estimate sales using customer numbers and average spend, while a consultant might use day rates and available working hours.

By separating each revenue stream, you can make clearer assumptions about how much income the business could generate and when that money is likely to arrive. 

Estimate your probable costs

Every business has costs, either to produce the products, to buy in materials, or to manage overheads. You need to estimate these costs in your plan. 

• Work out what costs you will have
• Do some research into what prices you may need to pay. Remember that as a new business, you may be charged a higher amount than more established companies.
• Buying in bulk can lower costs, but you need the cash to be able to do this, and it ties up your money in stock. 

Your costs should have a month-by-month breakdown for the next 12 months and show annual figures for the two years following. 

How fixed and variable costs shape your financial forecast 

Fixed costs are expenses that stay broadly the same each month, such as rent, insurance, software, or salaries. Variable costs change depending on how much you sell, such as stock, materials, packaging, delivery, or payment processing fees. 

Separating these costs helps you understand how much money the business needs to cover its regular commitments and how costs may rise as sales increase.

This makes your forecast more realistic and helps you see how much you need to sell before the business can become profitable. 

Estimate your probable cash flow

Your cash flow forecast will show when the money comes in and goes out. Once you have your sales and costs figures, you’re part of the way there. However, do remember: 

• You may not get paid for a sale when you make it. Factor in time for people to pay invoices—and the unfortunate reality that some of these will be paid late. 
• You may be able to get credit with your suppliers, which can delay when the costs affect your cash flow. However, some small businesses can’t get credit when they first start, so check with your prospective suppliers to see what terms may be available. 

Once you have that information, you can create your monthly cash flow forecast for the next two years. 

Estimate profit and loss

Your profit and loss forecast shows whether your business is expected to make or lose money over a set period. It brings together your sales and costs, then shows what is left once expenses have been deducted. 

When estimating profit and loss, consider: 

 Expected sales income: use your sales forecast to show how much revenue the business expects to generate.  

• Direct costs: include costs linked directly to delivering your product or service, such as materials, stock, packaging, or subcontractor costs. 
• Overheads: add regular running costs such as rent, software, insurance, marketing, accountancy fees, travel, and utilities.  
• Salaries and wages: include what you expect to pay yourself and anyone else working in the business.  
• One-off or start-up costs: factor in early expenses such as equipment, deposits, branding, website development, or initial stock.  
• Expected profit or loss: subtract your costs from your income to estimate whether the business is likely to make a profit, break even, or need further funding.  

Use this section to sense-check your assumptions. If the figures show a loss in the early months, that may be normal for a new business, but your plan should show how long that position could last and what needs to happen for the business to become profitable. 

Outline your available funds and finance needed

While these estimates are valuable, you can provide a fuller picture by describing your current financial situation and what is needed to start, run, or grow the business. 

Include: 

• Available funds: money you already have access to, such as personal savings, existing business funds, confirmed grants, committed investment, or other agreed support. 
• Finance needed: any additional funding required to cover start-up costs, working capital, stock, equipment, marketing, wages, or other planned spending.  
• Use of funds: a clear explanation of how the money will be spent, so lenders or investors can see the purpose behind the figure.  
• Funding gap: the difference between the money available and the money required, which helps show whether the business can move ahead as planned or needs further support. 

Writing a business plan with realistic financials

Realistic financial estimates help you set achievable targets, avoid overconfidence, and build a business plan that lenders, investors, and advisers can trust. 

Some business plans contain figures that are clearly unachievable. If you’ve watched Dragons’ Den, you’ll see that this can be a common scenario. Most entrepreneurs are optimistic people, so they can get carried away with their numbers. It pays to err on the side of caution, as the income pays for your day-to-day living expenses and the future of your business. 

O’Toole says, “Be realistic about your abilities and that of your team. It can often be demotivating to set targets that are unobtainable; that said, you need to set goals that ‘raise the bar’.” 

Remember: 

1. You won’t capture the whole market.
2. It takes time to build up a business. 
3. You won’t win all work you pitch for. 

Look at your figures again and ask yourself if they are achievable. If you’re unsure, your accountant may be able to offer some advice.

FAQs about estimating business plan financials

Browse more topics from this article

• Creating a business plan
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