- Learn to Calculate Costs.

While forecasting sales involves a lot of guesswork and most of it is based on instinctive feelings about the market, calculating costs is a more simple forward exercise. It is just a matter of basic math - you add the cost of producing and operating and you have the costs of production. You just need to consider all the inputs that will go into the product before it is ready to be sold and then add them up - that will give the cost of the product or service. Your inputs may be rent, advertising, and salaries. Of course, these are over and above the actual cost of production like space, raw materials, labor and so on. To ensure that you get the best deal on all supplies and services, make a few phone calls to understand where you can get good quotes on rent, equipment and supplies. Though it may sound more costly, try not to engage in long-term, fixed price contracts which will allow you small business to stay flexible and keep open options of buying from cheaper outlets in the future.

If you would like to see whether the pricing of your product is compatible with the costs you are incurring, you can use many of the business costs and performance comparison tools being provided increasingly by governments.

- Cash Flow Projections

Revenues do not always mean cash. In fact, most customers who buy will take anywhere from 20 to 90 days to make cash payment. That brings in the issue of cash flow. While your customer may need so many days to pay, your cash requirements will still be in force. To provide for those days when you may face a potential cash threat, it is very important that you have your cash flow projections ready.

To understand what may cause these problems start by speaking to people in the industry. Speak to suppliers and other veterans. Make sure you account for the industry practice into the cash-flow forecasts. For example, if the average payment that is made by a customer is only after 45 days you may need to go for almost two months without any cash coming in for that particular sale. And if you have a large portion of fixed costs coming in sometime then, you are going to have a serious cash crunch, which will affect your business.