Startup Funding Espresso -- Purpose of the Financial Forecast
Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing. Many entrepreneurs fail to build a financial forecast claiming they cannot predict the future. The purpose of the financial forecast is not for future predictions, but rather for communicating the business plan to the investors. From the forecast, the investor learns what growth rate the entrepreneur is considering. The forecast shows where break-even may come in. The investor can also gauge how much the entrepreneur knows about the costs and revenues of the business. Big round numbers in the forecast indicate little knowledge of the costs and revenues. Most financial forecasts can be driven by specific product quantities. Finally, the forecast shows the interdependence between revenues and costs. Increased revenues will drive variable costs higher leaving the fixed costs unchanged. A financial model is helpful for managing the business. If revenues double, the model shows what will happen to the costs.\xa0\xa0 If revenues get cut in half, the model shows what costs will drop and what will not. It\u2019s important to create a 3-5 year financial forecast to share with investors to inform them of the plan and demonstrate the startup\u2019s credibility. Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.Let\u2019s go startup something today. ___________________________________ For more episodes from Investor Connect, please visit the site at: \xa0 Check out our other podcasts here: \xa0 For Investors check out: \xa0 For Startups check out: \xa0 For eGuides check out: \xa0 For upcoming Events, check out \xa0 For Feedback please contact info@tencapital.group\xa0\xa0 Music courtesy of