Let’s discuss how early startup finance is all about building wild guesses around vague costs and values, using those assumptions to forecast for the future, and constantly iterating until we get close to something right.

In order to begin building a forecast for our business, let’s dig into the most important assumptions about our business — like how much customers will pay for our product — and make a reasonable guess as to what those values might be.

Forecasting is all about figuring out what calculations to make based on our assumed values and determining what we need to achieve to make our business actually work profitably.

Now that we’ve set up an income statement, let’s see how to manage it every month. Good news: startup accounting is like trying to manage our expenses when as a college freshman — we don’t really have that many to manage.