Financial Forecasting

Network Marketing Startup

By Terrel Transtrum, Co-founder LaunchSmart™

A business plan depends on both words and numbers. You can’t describe a business in words alone, and the numbers don’t work without the words. Forecasting for network marketing growth and party plan development is more art than science, a combination of good research, logic, simple math, and educated guessing. It’s hard to forecast, but it’s harder to run a business without forecasting.

The financials aren’t as hard as you think, particularly if you have the patience to follow the steps. A good plan includes sales forecast, cash flow, profits, and related financials.

Think of your network marketing sales forecast as an educated guess. Forecasting takes good working knowledge of your business, which is more important than advanced degrees or complex mathematics. It really is more art than science. Whether you have business training or not, don’t think you aren’t qualified to forecast. If you can run a business, then you can forecast its sales. Most people can guess their own business’s sales better than any expert device, statistical analysis, or mathematical routine. Experience and passion for your niche count more than any other factor.

Cash is king, and cash flow elements are critical for planning. You don’t want to be one of those businesses that goes broke even while producing profits. The cash plan is vital, the most critical financial analysis in the business plan. It has to manage the difference between cash and profits. The cash flow stands between income statement and balance sheet, and brings the two together. It is the forecast of the inflow and outflow of cash on a weekly and monthly basis.

Profits are what is left over after you start with sales, then subtract cost of sales, expenses and taxes. The income statement is the same as the Profit and Loss statement. They are also called “pro forma income” or “pro forma profit and loss.” The pro forma income is the same as a standard income statement except that the standard income statement shows real results form the past, while a pro forma statement is projecting the future.

The resulting related financials include balance sheet, business ratios, profitability ratios, activity ratios, debt ratios, liquidity ratios, and break-even analysis. With your financials completed, you can turn to strategy and tactics.

This section will give you the checklist for tracking the key elements of the network marketing financial plan.

Financial Forecasting Checklist & Key Considerations

  • Have we created the financial forecasts to support funding?
  • Are our forecasts based on established trends and known seasonal variables?
  • Have we estimated the correct expenses and overhead?
  • Have we factored autoship into the revenue plan?
  • Have we properly analyzed product pricing and profits?
  • Does our cash plan support the forecast?
  • Have we run “what if” scenarios so that we’re comfortable with projections?
  • Do we have inventory and growth projections?
  • Is the information easy to present (charts and reports)?
  • Are assumptions credible and clearly stated?
  • Are the reports and outputs consistent with best practices?
    • Important Assumptions
    • Key Financial Indicators
    • Break-even Analysis
    • Projected Profit and Loss
    • Projected Cash Flow
    • Projected Balance Sheet
    • Business Ratios
    • Long-term Plan
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