Many entrepreneurs may be intimidated by having to conduct financial forecasting when just starting out with their business. While it may be a time-consuming and tedious process, financial forecasting is imperative for entrepreneurs who are trying to attract investors or get a better sense of their business' future. Here are three business considerations to keep in mind while developing financial forecasts.

Compile a list of all expenses
With startup firms, it is nearly impossible to predict revenues, but it is fairly easy to know the expenses that the business will have. By listing all of these expected expenses, and how much capital is needed to support them, entrepreneurs will have a better idea of how much money they will be spending each month. Expenses can range from rent, utility bills and phone bills to marketing strategies, packaging and labor costs. Keeping track of all these expenses with budgeting software can make life easier for entrepreneurs and their teams.

Forecast revenues conservatively and aggressively
There are two typical entrepreneurial mindsets: overly ambitious and unfairly pessimistic. But rather than fall into one or the other, entrepreneurs may benefit from being mindful of both attitudes. They should map out two separate financial forecasts: The first should take a more aggressive approach and plan for new hires, a variety of marketing initiatives and the release of new products; the second should be more scaled back, with plans to keep staff levels the same and product development slow. After creating both, entrepreneurs may have a better idea of what approach is most realistic for their business.

Cross-check projections against key ratios
Ratios such as gross margin, operating profit margin and total headcount per client can bring entrepreneurs back to Earth as they are forecasting future revenues and expenses. Gross margins are the ratio of total direct costs to total revenue during a given time period. Operating profit margin is the ratio of total operating costs to total revenue during a given time period. Total headcount per client is the number of employees at your company divided by the total number of clients you have. By accounting for all of these ratios when financial forecasting, entrepreneurs will know how they will need to adjust their business model.

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