Kirsten, a friend of yours, plans to open a fashion boutique that will sell women’s clothing and accessories. she told you that she leafed through several books on how to prepare forecasts and pro forma financial statements but that the books were geared toward existing firms that have several years of historical financial statements on which to base their projections. if kirsten asked for your advice about how to prepare forecasts for a completely new women’s fashion boutique, what would you tell her?

Generally, a small-business owner follows four steps to develop the pro forma income statement:

Establish a sales projection

Set up a production schedule

Calculate your other expenses

Determine your expected profit

After using your sales projection as a starting point, you calculate the cost of goods sold if you are selling a physical product.

I would also suggest looking at trade organizations and asking other small business owners to help forecast costs.

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