Financial forecasting

This note outlines the questions to consider when appraising a business. You will find this helpful when you are looking at other businesses with view to investing in the business or buying it outright. You may find some of the questions appropriate to ask yourself if you are thinking of launching a new company in your target market.

When you make a capital investment, whether in equipment for your existing business or by investing in another business, you do so because you expect to generate income in the future. If this were not the case, you would not make the investment.

It is often helpful to split up funds within a business to show sources and applications. Sources show from where the money has come; applications show to where the money has gone.

By the time you have reached this factsheet you should have developed your export strategy and should have a plan of action.

You will be aware from running your business in your domestic market that there is a difference between costing and pricing. It is only rarely that businesses can add up all the costs, then add a margin, and call that the price.

As with many other aspects of business, the key to success in international trade and investment is careful preparation and planning.

Preparing forecasts will help you to assess your likely sales income, costs, external financing needs and profitability. Financial forecasts are essential if you need to raise money from a third party, such as a bank.