So you have a brilliant idea. No one else has thought of self-cycling bicycles that go as fast as motorbikes but without fuel. Have they? You're all set now. You've developed a product, and you know a whole bunch of people who are keen to emit fewer fossil fuels but don't feel like actually exercising to get around town. Bingo!

But, hold on a minute.

If starting out were this easy, we'd see a lot more success stories than we do. This is because it's not enough to have a good product and a market for that product. As Peter Thiel argues in his bestseller, Zero to One, sales matter just as much as product. To make a success of your startup, you need to plan for the future and anticipate future sales.

If starting out were this easy, we'd see a lot more success stories than we do.

Thiel argues that when it comes to envisioning the future, you need a healthy dose of optimism coupled with a definite plan. Luck plays a role, sure, but luck isn't enough to take your startup from idea to successful reality. Luck isn't enough to grow your business exponentially. You need to have a plan, a design to work with. And getting to this plan means you need to have a decent sense of what the future might look like.

It's important to work with financial projections, irrespective of the size of your business. Financial projections forecast your business’s future income and outgoings. These are helpful at both the external and internal level. Externally, you can use these projections to:

But they're just as valuable to the internal workings of your business, as forecasts help you:

Why should you forecast your business?

Forecasting plays a role in your company’s long-term strategic planning, helping translate goals into clearly defined targets or KPIs. Setting targets to evaluate regularly can be very helpful when it comes to determining which areas need improvement for your business to grow.

And when you're a startup, sales is a good place to begin.

If you set a sales target for the quarter and then notice that you missed the mark, you can use your sales forecast to identify what went wrong and then course correct before the problem gets out of hand.

According to research from the Aberdeen Group, businesses with accurate sales forecasts are 10% more likely to grow their revenue year-over-year and twice as likely to be at the top of their field.

Sales forecasting is notoriously difficult to conduct accurately. However, the advent of artificial intelligence (AI), means that it doesn't have to be this way. According to Forbes, "AI can be a force multiplier in terms of heightening the accuracy of sales forecasting" as "AI addresses many of the inherent flaws associated with weighted pipeline and other traditional forecasting methods." AI provides businesses with improved lead scoring capabilities which empowers them to project how their sales will fair in the future with greater precision.

To make good decisions, you need good data. So when you begin creating a forecast, you need to make sure you have the information you need to derive the most value. Here are some things to start with:

Once you have the information to hand, you can begin to build a forecast.

Now that you have this information, it's time to start building your forecast.

To make good decisions, you need good data.

Creating projections typically involves building versions of key financial statements (Cash Flow statement, Profit & Loss or income statement, and Balance Sheet) for points in time either months or years in the future. These statements are then used to predict how cash, revenue, and expenses are likely to look in this future period.

When forecasting sales, there are 4 different forecasting methods you can use:

The fourth option is one of the more reliable methods you can use but it can take you a lot of time to set up and calculate without the necessary tools.

When forecasting the weather, tools of the trade include a thermometer, a wind sock, weather maps, a hygrometer (which measures humidity), a weather balloon, a compass, and weather satellites. However, when it comes to forecasting your startup, the tools of the trade are a bit different.

You don't need to be a mathematician to create a forecast, but for an accurate projection, you would benefit from analytics software. Multivariable Analysis Forecasting provides you with a solid, long-term forecast that you can use to make informed business decisions. If you have clean, accurate data to work with, this is the forecast for you. You can then use software like Syft Analytics, which will take your data and transform it into an informative forecast.

There are a number of different forecasts to choose from that go into more detail than the automated forecasts, such as the 4-Way Forecast and Cash Manager. You can use Syft's Cash Manager to project your cash flow into the future and assess whether you'll be able to cover payroll and suppliers, as well as who owes you money, while the 4-Way Forecast integrates your profit and loss statement, balance sheet, cash flow statements, and financial ratios (which can be very useful when it comes to applying for a loan).

There are a range of different forecasts to choose from.

I've mentioned how important it is to forecast future sales, but there are other important areas to consider too. Other projections you may want to create include:

Syft's 4-Way Forecast can be very helpful when it comes to assessing these different metrics.

Predicting what's likely to happen in the future is difficult and daunting, especially when your business is just starting out. However, it's been shown time and again that those businesses who work with financial projections are more likely to grow and increase revenue in the future. Having a forecast to work with can help you preemptively avoid any major blunders and put you on the path to success.

So, now you have your self-cycling bicycle, your eager eco-friendly but lazy target market, and some forecasts to help you strategize the way forward. You can now use your data to make better decisions and take your startup from zero to one.