Business Forecasting Without Historical Data: A Step-by-Step Guide

Business forecasting without historical data starts with assumptions, not past results. Build your first forecast from the drivers you can estimate: how the business will make money, what it will cost to operate, when cash is expected to come in and go out, and which assumptions are most uncertain.

This guide walks through that process step by step for a new business. You do not need historical financials to begin, but you do need to make your assumptions explicit, keep them simple enough to test, and update the forecast as real data becomes available.

• Where do I even begin?
• How do I ensure the numbers are accurate?
• Do I even have enough time to create a forecast?

A first forecast does not need historical financials to be useful. Start with explicit assumptions, build the revenue and cost drivers you can reasonably estimate, and revise them as real-world data becomes available.

How to Forecast Without Historical Data: A Practical 6-Step Process

A practical way to build a first forecast is to:

1. Identify how the business will generate revenue.
2. List the main direct costs and operating expenses.
3. Estimate the drivers behind each revenue and cost category.
4. Put those assumptions into a monthly forecast and check the timing of cash.
5. Test an alternative scenario for the assumptions that matter most.
6. Replace estimates with actual data and revise the forecast as the business operates.

The goal is not to predict the future perfectly. It is to make the assumptions behind the business visible enough to test and update.

Who is this guide for?

This guide is perfect for entrepreneurs who are just starting out, have no real-world financial data to rely on, and are concerned about keeping their numbers on track.

A few tips before you start forecasting…

• Don’t aim for perfection: Treat your forecast as a working set of assumptions. Make those assumptions explicit, then revise them as you learn more about the business.
• Set a time limit: The key to successful forecasting is staying focused. Set a time limit of 30-45 minutes and see how far you can go. This will keep you from getting bogged down in the details.
• Break up the work: You may need more than 30 minutes to complete your forecast. Plan 3-4 short sessions and step away in between. Taking breaks will make it easier to return to your forecast with fresh insights.
• Seek feedback: Even if your forecast is a work in progress, ask a trusted colleague or mentor to review the assumptions with you. A second perspective can help you question assumptions or spot considerations you may have missed.
• Think of your business story: Forecasting is not just about numbers. It helps you connect revenue, cost, and cash assumptions to the story behind your business. BznsBuilder supports both business planning and financial forecasting in one workspace.
• Experiment with the numbers: Financial forecasting is about exploration and iteration. Test different assumptions, compare how the results change, and revise the assumptions as new information becomes available.

By following these tips and using BznsBuilder’s powerful tools, you’ll be well on your way to creating a realistic financial forecast, even without historical data.

Session 1: Ideas and Educated Guesses

Goal: Get comfortable making educated guesses and create your first draft of revenue and expense forecasts.

1- Figure out how you will make money and what you will pay for

Before you start crunching numbers, it’s important to identify your revenue and expense categories. These will be the individual line items you’ll forecast later on.

Don’t overcomplicate this step. Spend just a few minutes listing potential revenue streams and expenses. If you’re unsure where to begin, tools like BznsBuilder can help generate ideas and guide you through the process.

In the end, you should aim for 3-6 revenue categories and 3-6 expense categories.

If you have more than six, consider grouping similar revenues and expenses together. Keeping the number smaller makes it easier to manage and adjust your forecast as needed.

Example

Let’s say you plan to sell mobile accessories in various colors—blue, red, green, and metallic magenta. Instead of listing each color individually in your revenue forecast, you would group them into one category called “mobile accessories.”

The same approach applies to your expenses. If you have costs like electricity, insurance, and a water bill, you can group them under a category like “utilities.”

2. Make Your Best Guesses

Now that your forecast categories are set, it’s time to add your numbers.

To make the process more manageable, avoid tackling all your revenue and expense categories at once. Instead:

1. Start with either revenue or expenses.
2. Pick one category and add your numbers.
3. Move on to the next category.

Only after completing one side of the forecast—either all the revenue or all the expense categories—should you move on to the other side. Remember, these are educated guesses for each month. They don’t need to be perfect and will likely change as you refine your forecast.

Should you start with revenue or expense forecasts?

I recommend starting with revenue, as it tends to be more exciting. After all, it’s how you will generate income for your business. The anticipation of seeing your business grow financially can provide the momentum you need to complete your forecast.

Starting with expenses is also reasonable if those numbers are easier for you to estimate, such as rent, payroll, insurance, and other recurring costs. The sequence matters less than completing both the revenue and expense sides of the forecast.

Ultimately, there’s no right or wrong choice—just start with whichever part feels most comfortable for you. You’ll need to forecast both sides anyway, so don’t get stuck on the decision.

Guessing for Revenue (Sales)

Think of forecasting revenue as setting goals for your business.

If revenue is the hardest part to estimate, the related guide to sales forecasting explains how to break sales assumptions into a more usable forecast.

Avoid starting with the size of the entire market and simply assuming you will capture a fixed percentage of it. Instead, build the estimate from operating assumptions you can test and revise.

Starting with a large market size—like predicting you’ll reach 40,000 people within 10 miles of your business—can lead to unrealistic expectations. Instead, start by evaluating your own capabilities and actions as a business owner and work your way up from there.

Here are some questions to help guide your process:

• How many potential customers can you reach out to?
• How many will respond or visit?
• How many of those will end up purchasing from you?
• What is the average amount they will spend?

Example:

Let’s say you are opening a new café in New Cairo. Based on foot traffic and marketing outreach, you predict that within one month:

• 10,000 people will learn about your café.
• 8% (800) will visit the store.
• Of those who visit, 70% (560) will make a purchase.
• On average, each customer will spend 100 EGP.

Guessing for Expenses

For your expense forecast, list how much and when you expect to pay for each category. Here are a few tips to get started:

• Don’t overcomplicate the types of expenses yet: At this stage, you don’t need to classify expenses under fixed, variable, or COGS (Cost of Goods Sold). Keep it simple for now.
• Include your salary: Even if you don’t plan to pay yourself immediately, note down when and how much you expect to earn eventually.
• Forecast personnel costs separately: If you plan on hiring employees, include their salaries under a category such as “personnel” or “payroll.”

3. Repeat the Process

After you’ve made your first set of guesses for either revenue or expenses, repeat the process for the category you haven’t worked on yet.

If you’ve been working on your forecast for more than 30-45 minutes, it’s a good idea to step away and return for another session. Taking breaks will help you maintain a fresh perspective and ensure that you don’t get bogged down by the details.

Session 2: Make the Numbers Fit Your Business

Goal: Adjust your revenues and expenses to align with the “story of your business.”

In this session, come with an open mind and a willingness to experiment with your numbers. Remember, you’re not finalizing your forecast yet—you’re simply checking if your initial guesses match your expectations.

To help get into the right mindset, try explaining your business to someone. Imagine talking about it to a friend, family member, or potential investor. How would you describe it?

If you’re unsure where to start, try answering the following questions:

• What are your plans for this month, next month, and this year?
• What outcomes are you expecting? Are these expectations realistic?
• Do your current numbers reflect this vision?

Repeat this process for each month. If your current numbers don’t align with your expectations, consider adjusting individual revenue streams or expenses. By the end, your numbers will start resembling a working forecast that aligns better with your business goals.

Tips for Telling Your Business Story with Your Forecast

• Connect to a graph or chart: Use a visual to compare how revenue, costs, profit, and cash change as you adjust assumptions.
• Watch out for unrealistic performance: If your expenses seem too low or your sales growth appears overly optimistic (such as the typical “hockey stick” growth), take a moment to revisit the numbers and ensure they’re grounded in reality.
• Focus on profits: If expenses exceed sales at the beginning, track whether losses narrow and margins improve as assumptions change. That can be one signal to review when assessing the model, but it does not by itself prove that the business is sustainable or will become profitable.

Session 3: Get Specific

Goal: Make your revenue and expense forecasts fit standard financial statements.

You’re almost there! Now it’s time to organize your revenue and expense categories into the appropriate types so the numbers fit into your financial statements. After this step, you can make any final adjustments.

If you’re using BznsBuilder to create your forecasts, your financial statements will automatically be generated as you input your data—no extra work required on your part!

Revenue Considerations

When forecasting revenue, here are the three key questions you should ask:

1. Are materials, labor, or other costs directly tied to delivering what you sell?
   If yes, include those direct costs in the forecast. Product businesses often classify these as cost of goods sold (COGS); service businesses can also have direct delivery costs, sometimes described as cost of services. The appropriate classification depends on the business model and accounting treatment.

   Isolating these costs from other expenses helps you understand how efficient your business is. If you’re spending too much to produce your product, leaving little room for other expenses, you’ll struggle to achieve profitability.

   Tip: If possible, make COGS a percentage of each specific revenue stream. That way, when you adjust revenue, your COGS will automatically adjust as well.

2. Will customers make recurring purchases?
   This is important if you offer a subscription-based product or service. In that case, customers will be automatically charged either monthly, quarterly, or annually.

   You’ll need to account for recurring revenue as well as the possibility of customers “churning” or canceling their subscriptions.

   Tip: Don’t stress about accurately predicting churn just yet. Pick a percentage of customers you expect to lose each month, and adjust as real results come in. Use resources like Stripe’s churn rate guide to help estimate this.

3. Will you see seasonal changes?
   Many businesses experience fluctuations in sales based on the time of year. For example, Halloween stores often see dramatic upswing in August through October, followed by a sharp decline. While your seasonality may not be as obvious, it’s still important to consider potential sales spikes or declines throughout the year.Tip: As your business grows, it’ll become easier to predict seasonal demand. In the meantime, you can use Google Trends to see if interest in your industry or product shifts during different seasons.

Expense Considerations

Aside from separating COGS, you’ll need to categorize your expenses as follows:

• Fixed Costs: These are expenses that remain consistent, such as rent and insurance.
• Variable Costs: These change month-to-month, like marketing or utility expenses.
• Personnel Costs: Separate employee-related costs so you can model how staffing changes total operating costs and cash needs over time.
• Assets: Some large purchases, such as vehicles or machinery, may be capitalized as assets rather than expensed immediately, depending on the applicable accounting policy and circumstances. The cash purchase affects cash flow, the asset is recorded on the balance sheet, and depreciation or other accounting charges may affect profit and loss over time.

Tip: Don’t overcomplicate your expense types. If you’re unsure, you can always adjust or leave some expenses unclassified for now.

Session 4: Understand Your Cash (and Funding) Needs

Goal: Determine whether you have enough cash to cover expenses.

It’s time to dive into your cash flow. When you review your current forecast, you might see negative cash flow. This isn’t necessarily a bad thing—and in fact, I encourage you to expect this at this stage.

At this point in your business journey, you might not know exactly how much cash you need to start and run your business. That’s why you’re creating a forecast in the first place.

Now, use this session to determine how much cash you need and where it will come from.

1. Drop in Your Starting Cash

This is the money you plan to invest in your business. It could come from your savings, a bank loan, an initial investment from friends or family, or a combination of these sources.

If you’re not using any personal cash or haven’t secured a loan yet, don’t add any starting cash to your forecast.

2. Review Your Cash Position and Runway

Now, look ahead and start asking yourself some important questions:

• Is this starting cash enough to cover expenses until you generate revenue?
• How much cash are you burning through each month?
• Even if you start generating revenue, will you run out of cash? If so, when?

The goal here is to determine whether you have enough cash to cover your obligations until the business reaches a period of positive cash flow, when cash inflows exceed cash outflows. If the forecast shows a cash shortfall before then, you may need to change assumptions, reduce planned outflows, delay spending, or consider additional funding.

3. Figure Out What It Will Take to Avoid Being “Cash Negative”

Think of financing as your “cash band-aid.” It helps fill the gap in your cash flow until your business can generate enough revenue.

A practical way to estimate funding needs is to project cash inflows and outflows over time and identify the largest cumulative cash shortfall. Then consider a separate contingency assumption for uncertainty or delays. The result is a planning estimate; actual funding needs can differ.

4. Decide If Additional Funding Is Necessary

Look at the number you calculated and ask yourself, “Am I comfortable taking on this amount of debt?”

If the answer is no, revisit your revenue and expense forecasts. Look for ways to start with less additional cash. If the answer is yes, explore your funding options and think about the loan terms or other funding details you’re comfortable with.

Bonus: If you’re feeling ambitious, create an alternative financial scenario that includes the funding you are considering and compare it with your base case. If the funding is a loan, include expected repayments so you can see how debt service affects future cash.

You’re Already Better at Financial Forecasting

For a new business, a financial forecast provides a structured way to examine assumptions about revenue, costs, and cash flow. Even without historical data, founders can use those assumptions to explore possible outcomes and revise their plans as the business develops.

By taking the first step and creating your initial financial forecast, you’re setting yourself up to make informed, confident decisions for your business.

Remember, no one knows your business better than you do. You’re the best person to carry out this work. The more you predict, review, and adjust your forecasts, the easier financial forecasting will become.

A forecast is meant to change as assumptions and actual results change; if you are also setting a fixed financial target, see budget vs forecast for the practical distinction.

BznsBuilder supports financial forecasting and what-if scenario planning. Launch includes 1 what-if scenario, Build includes up to 3, and Decide includes up to 10. Performance dashboard features are available from Build, with real-time dashboard functionality in Decide. QuickBooks Online integration is available in Decide. These tools help founders examine financial assumptions, compare potential outcomes, and review business performance against plan.

Once your assumptions are in a forecast, changing one assumption lets you test what it does to the rest of the numbers. BznsBuilder lets founders build financial forecasts and compare what-if scenarios against a base case. Build your forecast and see how your decisions affect cash. Start your 7-day free trial.

If you’re not quite ready to invest in a tool but still want to learn more about forecasting for your business, check out these resources:

• Manage your business better with a living forecast: Learn how to keep your forecasts alive with regular plan vs. actual analysis.
• Tips for more accurate cash flow forecasts: Use these five tips to improve your cash flow projections.
• Inform your forecasts with industry benchmarks: Discover how to leverage industry data to start your forecasts and see if your estimates are on the right track.