Financial projections for a new business, built simply

Quick answer

Build financial projections for a new business in four parts: a sales forecast built from customers and prices rather than a guessed total, a list of start-up costs, monthly running costs, and a twelve-month cash flow that shows when money actually arrives and leaves. Use three versions, cautious, expected and good, and write down every assumption.

Most people open a spreadsheet, type “Year 1 sales: £100,000” into a cell and then work backwards to make the costs fit. A bank manager, an investor or a sensible partner can spot that number from across the room, because it has no workings under it. Good projections are not about predicting the future accurately. They are about showing that you understand what drives your numbers, so that when reality turns out different, you know which lever to pull. Here is a simple way to build them, step by step, with nothing more than a spreadsheet.

What you are building

The government’s guide to writing a business plan links to free templates, and the Start Up Loans scheme publishes cash flow templates that lenders already recognise. Using a familiar format makes your projections easier to read.

Step 1: forecast sales from the bottom up

Start with customers, not totals. For each month, estimate how many customers you can realistically reach, how many will buy, and what each pays. Then multiply.

A new mobile mechanic might reason: “I can do three jobs a day, five days a week, once I am busy. In month one I expect about a third of that, rising over six months. My average job is £120.” That gives month-one sales of roughly 20 jobs, about £2,400, rising towards around 60 jobs and £7,200 by month six. Each number now has a reason a reader can challenge, which is the point.

Check your forecast against capacity (can you physically do this many jobs?), against the market (are there enough customers in your area?) and against your marketing (how will these people hear about you?). If you have not settled your prices yet, our guide to pricing your services helps.

Step 2: list every start-up cost

Write down everything you must pay for before money comes in. Typical items include equipment, stock, a vehicle or deposit, insurance, licences, a website, branding, a first marketing push and professional fees. Add a contingency line of around ten per cent for the things you have forgotten, because you will have forgotten some.

Be honest about the brand and website line. A business that looks home-made struggles to charge proper prices, so budget for it properly rather than leaving it at zero. For reference, our brand identity design is £299 and a custom WordPress website is £499; our guide to starting a trade business lists the other first-year costs most people miss.

Step 3: estimate monthly running costs

Split costs into two groups. Fixed costs stay the same whatever you sell: rent, insurance, software subscriptions, phone, hosting, loan repayments, your own minimum drawings. Variable costs rise with sales: materials, fuel, card fees, packaging, subcontractors.

Express variable costs as a share of sales where you can (“materials are about 30% of each job”), so they update automatically when you change the sales forecast. That single habit makes your spreadsheet far more useful than a column of typed-in numbers.

Step 4: turn it into profit and cash flow

Profit is sales minus costs. Cash flow is when the money actually moves, and the two are not the same. If you invoice on 30-day terms, the sale appears in month one but the cash arrives in month two. If you buy a year’s insurance upfront, the cost hits your bank in one month even though it covers twelve.

Build a simple monthly grid: opening bank balance, plus money in, minus money out, equals closing balance, which becomes next month’s opening balance. Any month where the closing balance goes negative is a month you need a plan for: savings, a loan, an overdraft, or a slower start on spending. Lenders read this table more closely than any other.

Step 5: allow for tax properly

Tax catches new businesses out because it is paid later than it is earned. Set aside a share of profit every month in a separate account. Two thresholds are worth knowing at the time of writing, November 2026. GOV.UK says you must register for VAT once taxable turnover goes over £90,000 in a rolling twelve months, and its Corporation Tax rates page lists a 19% small profits rate for limited companies with profits of £50,000 or less, rising to 25% above £250,000. Sole traders pay Income Tax and National Insurance instead. An accountant can confirm what applies to you; it is one of the best-value hours a new business can buy.

Step 6: build three versions

Copy your sheet twice. In the cautious version, sales start slower and costs come in higher. In the good version, the opposite. Your expected version sits between them. The cautious version is the one that matters most: if the business survives it, the plan is robust. If it runs out of cash in month four, you know exactly how much buffer you need before you start.

Step 7: write down your assumptions

Add a short list at the top or on a separate tab: average price, conversion rate, jobs per day, payment terms, the cost of materials as a share of sales, when you start paying yourself. Every reader will look for this list, and so will you in six months when you compare the forecast with what actually happened. Updating the projections monthly with real figures turns them from a document for the bank into a tool for running the business.

Where projections fit in your plan

Projections sit at the back of a business plan, but they shape everything in front of them. Our guide to the one-page business plan shows how to keep the rest of the plan short and useful, and our one-page marketing plan connects your sales forecast to the marketing that has to produce it. If you need the plan’s words written up clearly for a lender or partner, our content and copywriting service starts at £199 a month. Every Luxbranding price is on our pricing page.