why you should prepare a forecast (and then ignore it)

I recently found myself preparing a mini business plan for a new venture – how exciting. This reminded me of how many times I got things wrong in the past, and when I got them right it was for the wrong reasons!
If you listen to podcasts or read business articles, you’ll often hear how entrepreneurs big and small tell how their forecasts were wide of the mark. This can happen for a variety of reasons, but in the end it’s just impossible to account for all the variables and unforeseen circumstances.
What we should concentrate on are the things that we can accurately cost out (like cost of equipment and goods, energy, legal costs, rent), then estimate the other variable costs, leaving a bit of leeway. Finally we should estimate what our sales will be based on how many customers we can serve and the average spend (be realistic!) No need to say you should always have a contingency in place.
When I opened my pizzeria, on opening day we had £40 left in the bank! Although I had reserves, the £10k had forecast to spend became £15k and although I had more money on the side, I didn’t want to invest too much without knowing whether our concept would be well received.
 
You have to decide whether you will be taking a salary and come to term with the fact that that may not happen for a while.
 
You have to work out what your break-even point is, and if you are using a range of outcomes, probably use the lower one.
 
Most important costs
 
Rent (premium if applicable)
Rates ( in England – or other applicable taxes)
Legal costs (for the lease)
Insurance
Furniture
Equipment
Staff (including preopening training)
Software (POS, Accounting, App ordering)
Owners  Salaries

Most important Sales
Number of customers
Average spend
Average dish price