As we put the holiday season behind us and focus on the new year that stretches ahead of us, many business owners are turning their attention to financial forecasting for 2025 and beyond.
But where do you start? A bit like the proverbial chicken and egg… what comes first, the business strategy or the financial goal?
I would say the financial goal, all day, every day. I believe you need to have a financial goal or two, both personal and from a business perspective, before you can decide what strategies you need to put in place to achieve them.
From my experience of chatting to business leaders, many don’t have a financial forecast, opting instead for the “ostrich approach” and, when they do start forecasting, they attempt to get everything accurate to five decimal places.
In my opinion, it’s better to have a forecast that is approximately right rather than accurately wrong.
As we turn over the calendar to a brand-new year, January, with its promise of new beginnings, provides a unique and strategic opportunity for business owners to reflect, plan, and set the stage for the year ahead. Among the most critical tasks is producing a financial forecast – a forward-looking estimate of your revenue, expenses, profit and cash flow.
NOW is the ideal month to tackle this essential planning activity, and here is why:
By the time you read this, you will have nearly a full calendar year of financial data at your disposal from whichever management accounting package you are using. This data offers a robust foundation for identifying trends, evaluating performance, and making informed projections. Analysing how your business has performed over the past year enables you to pinpoint areas of strength and opportunities for improvement.
So how do you bridge from 2024 results to 2025 targets?
Creating a set of robust financial forecasts (profit and loss, balance sheet and cashflow) allows you to align your business’ financial goals with your broader strategic objectives and your vision for the coming year. Whether you are planning to expand, invest in marketing, technology and people, or improve profitability, a detailed forecast allows to “test” the impact of any strategic decisions you might be thinking about before you do anything, ensuring what you are planning is realistic and actionable.
Businesses that plan ahead often outpace competitors who operate reactively. By forecasting in January, you can anticipate market conditions, plan for seasonal fluctuations, and prepare for potential challenges. It also positions you to seize new opportunities, such as wise investment or expanding into untapped markets.
Sharing a clear financial vision for the upcoming year and engaging your team so they can share the vision and see how what they do will help deliver it, will energise the whole business and ensure that everyone is aligned and pulling on the same piece of rope and in the same direction. A well-thought-out forecast provides transparency, inspires confidence, and gives your employees a sense of purpose and optimism as they embark on the new year.
As with a lot of things, the true value of a plan comes when it prompts you to take action. A robust forecast, that is reviewed and updated regularly, keeps you honest and enables you to monitor your actual performance against what you forecast you would be doing. This “information loop” enables you to tweak your strategies to stay on track or get back on track as each month passes so you can maximise your ability to hit your year-end goals. A good forecast will show you where, when and why you have future pinch points, enabling you to take evasive action.
January isn’t just the start of the calendar year – it’s a launching pad for future business success. By taking the time to create a robust financial forecast, you equip yourself and your business with a roadmap to navigate the challenges and opportunities of the coming year and beyond.
Every monthly meeting I hold with every client has a section to review financial performance against target so that business strategies can be updated, as required, to ensure quarterly and annual goals are met.
In the words of Winston Churchill, “He who fails to plan is planning to fail” so, if you don’t have a robust forecast, turn over a new leaf in 2025 and make a start, before it is too late.
