Financial Projection of Start-up Business in India

Financial Projection of Start-up Business in India

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Financial Projection of Start-up Business in India

Start-up Business in India: How to be started?

Business is all about profits and losses. When we are working on a new business plan, it is very important to forecast our future revenue and expenditure. This exercise of analysing future revenues and expenses before taking any step with respect to a business plan is referred to as ‘financial projections’. On the individual level that would be the essence of must have personal finance tools. It is basically the estimate of future financial performance on the business level. It varies from business to business; i.e. the kind of business taken up.

Funding: The Main Challenge

One of the main challenges faced by start-up business is the access to finance. A start-up business involves taking risk and therefore, no one is ready to invest in such a business and finance the same. Such a scenario discourages entrepreneurs to start new business. In order to solve this problem, Government of India has started, Start-up India Action Plan in the year 2016. This will ensure easy clearances, fast recognition of start-ups, easy funding indirectly through government, through registered Venture Funds with Securities and Exchange Board of India (SEBI) and other benefits. This scheme of the Government aims to enhance the start-up eco-system of India.

Financial Projections

The basic requirements to prepare a financial projection for a start-up business in India are:

  • Profit and Loss Statement
  • Balance Sheet
  • Cash – flow Statement

The following steps are involved in preparing a realistic and successful financial projection:

  1. Revenue Forecast and Profit & Loss: Firstly, a revenue forecast along with a profit and loss statement should be prepared. This gives us the basic idea about the receipts and the expenses. Supporting tables should be attached so as to have detailed information about costs with respect to marketing, personnel etc.
  2. Prepare a Monthly Forecast: To be precise and ensure reality in the calculations, prepare a spreadsheet with the help of revenue forecast (as already made; see point. If the business plan comprises of many years of financial projection, prepare a monthly forecast of income and expenditure.
  3. Reasonable estimate: Depending upon the business you plan to do assume the efficiency. For example, if the business deals with selling of certain goods then, include the forecast of goods sold. Also, give a reasonable estimate for the cost. When you hire competent personnel with the help of Fort Walton Beach HR services, you need to define the payroll for them as well. This should be estimated well in advance.
  4. Marketing Strategy: For any business, market strategy/planning is very important. Outline the market strategy in your business plan and highlight the costs involved in the same. More than one strategy can be formulated according to the business plan and costs for each of the strategy can be estimated. So as to have realistic figures and to plan the budget accordingly.
  5. Estimate the cost of running the business: There are certain miscellaneous and administrative costs involved in doing a business. The cost of general utilities, rent and other recurring costs may be forecasted. Every category of costs according to the business should be forecasted. Fees of legal services and other mandatory requirements should also be forecasted.
  6. Payroll Forecast: Human resource management is the most important aspect to be kept in mind while starting a new business. There are many labour legislations to be complied with, depending upon the type of business. The financial projection is generally made for more than one year, the percentage increase in salary should also be calculated for subsequent years, the best option would be to hire one of the best payroll companies to help you understand how a payroll forecast works, this will ensure matching of business strategy with human resource management.

The above mentioned steps,  covers the financial projection in general; the same may differ depending upon the kind of business people undertake to do. Therefore, for basic guidance these things should be kept in mind as they form the crux of financial projection.

Author: This blog is written by  Ms. Raina Verma, student of SVKM’s NMIMS School of Law, Mumbai, a passionate blogger & intern at  Aapka Consultant.

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