A financial forecast is your best honest guess at what the business will sell and spend, month by month, for the next year. Nobody expects it to come true. Its job is to show whether the business works on paper and to give you something to check reality against. A lender or a landlord will ask for one, and you need it more than they do.
At a glance
| Feature | Detail |
|---|---|
| What it is | Sales and costs, month by month, for twelve months |
| What it is not | A promise. It is a set of assumptions you can be wrong about |
| Who asks for one | Lenders, landlords, grant bodies — and you, first |
| Build it | Bottom up, from your rate, your capacity and your first month |
| The two killers | Growth nobody believes, and confusing sales with take-home |
What a forecast is for
For you, first. It is where you find out whether the business works before you spend real money finding out. If the bottom line never turns positive, you have learned something valuable for the cost of an evening.
For the people who ask. A lender wants to see the repayment fits inside the numbers; a landlord wants to see the rent does. Neither expects the forecast to be right. They are checking whether the numbers connect and whether you understand your own business.
For checking yourself against, once you know what actually happened.
What goes in a financial forecast
Twelve columns, one per month, and these rows.
Sales, split by what you sell. A line for each product or service, with the price and how many you expect to sell. Sales is the plain word for money coming in from customers; HMRC and your accountant call it turnover, and it means the same thing.
The costs that move with sales. Materials, delivery, packaging, card fees, waste. These go up when sales go up.
The costs that arrive whether you sell anything or not. Rent, insurance, software, the accountant, and the vehicle in full — fuel, insurance, servicing, tyres, road tax, breakdown cover and the finance payment. Our guide to startup costs has the checklist.
Wages, including yours. Add roughly 10–15% on top of any employed salary for employer National Insurance and pension.
Marketing, as a real number, every month. If the forecast wins customers, something has to be doing the winning.
The bottom line. Sales less everything else, month by month. This is your profit plan, the page a lender turns to first.
Making assumptions when you have no history
This is the part people freeze on. You have never traded, so how can you say what month seven looks like? You anchor every number to something real rather than something hoped for.
Anchor one: your rate and your capacity. If you sell your time, start from what you charge and how many hours you can genuinely bill — not the hours you will work, the hours a customer pays for. Travel, quoting and no-shows take a large share of the week, and a forecast built on 40 paid hours from a 40-hour week is wrong before it starts.
Anchor two: your first month, defended. Write down where month one's customers come from, by name where you can. Two from the family business. Three from the local Facebook group. Five from leaflets, if one in a hundred works. Word of mouth is not a source in month one, because there is no word.
Anchor three: comparable businesses. Look at what similar businesses near you do — how many vans, what they charge, how many reviews they collect in a month. A competitor with 200 Google reviews over two years is telling you something about volume.
Anchor four: the shape of the year. Few businesses sell the same amount in January as in June. Decide whether yours is flat, growing or seasonal, and say why. Then pick your growth rate deliberately: above roughly ten percent a month, sustained for a year, is rare enough that anyone reading your forecast will question it.
A worked example
Take City Florists, a small subscription flower business. It sells a weekly bouquet plan at £40 a month and a fortnightly plan at £22 a month, and each delivery costs £6. The forecast starts with 250 subscribers on the weekly plan, growing at 6% a month.
Month one. 250 subscribers paying £40 is £10,000 of sales. Each gets four deliveries at £6, so £6,000 goes out on fulfilment, leaving £4,000 to cover everything else and pay the founder.
Month twelve. Growing at 6% a month for eleven months takes 250 subscribers to about 475. That is £19,000 of sales, £11,400 of delivery costs, and £7,600 left.
Now test the assumption, which is the real work. Six percent growth on 250 subscribers means 15 net new subscribers in month one. But some people cancel — say 3% a month, seven or eight of them — so she has to win 22 or 23 just to net 15. Her marketing budget is £540 a month, so each new subscriber costs about £23 to win. That is a number she can check against reality within a fortnight.
And here is what the forecast has to carry. By month eleven she has around 448 subscribers, so 6% growth means 27 net new ones plus about 13 replacing cancellations — 40 joiners in a single month. At £23 each, that is roughly £920 of marketing, not £540. A forecast where sales rise while marketing stays flat is telling you a story it cannot back up.
That chain — subscribers, cancellations, joiners, cost per joiner, marketing spend — is the whole discipline. Create a mini business plan in minutes with Plan.business. Put in your rate, your hours and your costs, and it works out the rest — what you will make, when you break even, and what you need to charge to hit your target.
The two mistakes that make a forecast useless
Growth nobody believes. The classic shape is flat for two months and then a rocket: 20 customers, 25 customers, then 400 by month twelve because the business "takes off". Anyone who reads business plans for a living stops reading at the bend. Worse, you will run the business against it and feel like you are failing in month three when you were never going to be there.
The fix is to make every rise explain itself. If sales double between month four and month eight, something has to cause it — a second van, an employee, more marketing. If nothing on the cost side changes, the growth is decoration.
Confusing sales with take-home. £19,000 of sales in month twelve is not £19,000 of income. It is £19,000 before the £11,400 of deliveries, before rent, insurance, software and the van, and before income tax and National Insurance. Sales at that level also put a business past the £90,000 VAT registration threshold, which changes both the prices and the paperwork. Every number in a forecast should know which of the two it is.
A forecast is a set of assumptions, not a promise
Nobody can predict a year of a business they have not started, and that is not what the document is for. What makes a forecast good is not accuracy. It is that every number has a reason behind it, written down where you can find it.
So keep a short list next to the numbers: price £40, growth 6% a month, cancellations 3% a month, cost to win a subscriber £23, marketing £540 rising to £920. Then set a date — the end of month three — and check them. If cancellations are running at 6% rather than 3%, you know exactly which assumption broke and you can fix it in ten minutes.
Figures correct as of September 2026. Tax thresholds, fees and rates change; check the linked GOV.UK pages before acting. Prices and costs shown are indicative and vary by area and by what's included.
What is Plan?
Plan is a free business operating system for people starting or newly running a UK business. It walks you, one simple step at a time, from your elevator pitch through brand, product and pricing, to a complete business plan — then uses everything it now knows about the business to help with the basics: logo and brand, marketing, a website, a bank account, funding, insurance, company registration. You can use as much or as little as you want.
You never fill in a spreadsheet. You answer short questions — what you charge, how many you expect to sell, how fast you think it grows — and Plan builds the month-by-month forecast and profit plan, marketing included, and reads it back in plain English. You can export it to Excel or CSV for an accountant or a funding application.
Frequently asked questions
How do I forecast sales for a business that has not started yet? Build it from the bottom up. Start with what you charge and how many customers you can physically serve, then say where month one's customers come from — specific sources, not "word of mouth". Add a growth rate you can justify.
How far ahead should a financial forecast go? Twelve months, month by month, is right for a new business and is what most lenders ask for. Some want a second and third year in less detail. Beyond three years, for a business that has not traded, it is guesswork dressed up as planning.
What growth rate should I put in my forecast? One you can explain. Growth above roughly ten percent a month, sustained across a year, gets questioned by anyone who reads plans regularly. Whatever rate you choose, something must cause it, and that cost belongs in the forecast too.
Is a financial forecast the same as a cash flow forecast? No. A financial forecast shows sales and costs in the month they are earned and incurred. A cash flow forecast shows when money lands in and leaves your bank account, which can be weeks later. A business can look profitable and still be short of cash.
What if my forecast turns out to be wrong? It will be, and that is normal. What matters is knowing which assumption was wrong. Write your assumptions next to the numbers — price, volume, growth, cost to win a customer — and check them at the end of month three.
Two ways to do this
Do it by hand. A spreadsheet with twelve columns and the rows listed on this page does the job. Anchor every number to something real, write your assumptions at the bottom, and set a date to check them.
Or let Plan build it with you. Start free in Plan. It runs in your browser — nothing to download. Answer short questions instead of filling in a spreadsheet, and Plan produces the month-by-month forecast and profit plan, then exports it for your accountant or a lender.