Part 2: Preparing A Financial Plan

Preparing the Income Statement

The items contained in a typical projected income statement are listed below along with explanations on how to calculate the more complicated items.

Assumptions

Sales

Start your financial projections by forecasting the sales of your product or service. Sales forecasting is extremely important so always make realistic estimates. Review your market analysis section before completing this item.

On the table below, list each category of product or service you sell. Estimate the market total, the percent market share and the amount you can sell, following the examples below. Total your year one sales and estimate the increase in sales for years 2 and 3.

Example:

As a results of a market survey or contracts, the market for groceries/clothing/hardware has been estimated at $1,379,000 / $212,400 / $70,500 of which a 65% / 40% / 55% market share is estimated, or $896,359 / $84,960 / $38,775. Year one sales total is $1,020,085. Sales increase by 5% for years 2 and 3.

 
 
 
 
 
 
 
 
 


Cost of goods sold

If you business sells a product, calculate the cost of goods sold. For example, you might sell a product for $50 (the retail price), but your cost for this product might be $30 (which includes meterial puchases, direct labour for processing, freight etc.). Skip this item if your business sells only a service - you have no cost of goods sold.

Calculate the Cost of Goods Sold
Historical
Year 1
Year 2
Year 3
+ Inventory        
+ Purchases        
+ Direct labout        
+Freight        
Sub total        
- Less inventory at the end of year        
= Cost of Goods Sold        

Attach detailed schedules of assumption and calculations.

The cost of goods sold can also be calculated as a percentage of sales based on historical performance or industry averages as reported by Dun & Bradstreet.

Example: Groceries 78.9%, Clothing 57%, Hardware 68.9%

Check historical performance or industry averages and enter percentages for your products here.

 
 
 
 
 
 
 
 
 

Bad debts

Bad debts assumptions can be calculated as a percentage of sales, on historical or industry averages. Go to a search engine such as bing.com and type in your state or province followed by its industry.

 
 
 
 
 

Interest

Calculate interest based on the actual interest costs you owe on loans and estimate bank charges. Also identify the bank.

 
 
 
 
 

Bank charges

Calculate bank chages on estimated bank service rates. Simply call the lending institution, or go to the web site and find out what they charge.

 
 
 
 
 

Professional fees

Base your assumptions for professional fees on estimates from your accountant, lawyer, business consultant, etc. Include your business support plan costs here.

 
 
 
 
 

Automoblie and travel expense

Calculate your automobile and travel expense costs assumption as a percentage of sales, based on historical performance, the industry average or on a detailed montly budget. Take a educated estimate of how much travel you are going to be doing for your business. I personally prefer a monthly basis for the first year, and increase that percentage based on the percentage increase in sales for the following year.

 
 
 
 
 

Business tax, fees, licenses, etc.

Base your assumptions of business tax, fees, licenses on estimates from various authorities where you would pay these costs or based on historical performance. Also, identify the authorities.

 
 
 
 
 

Property tax

Base your property tax assumption on estimates from various authorities where you would pay these costs or based on historical information. Also, identify the authorities.

 
 
 
 
 

Management salaries


Position

Number

Rate

Term: Full time

Wage amount

Manager
       

Assistant manager
       


       


       
Total
$

Other salaries and wages


Position

Number

Rate

Term: Full time

Wage amount


       


       


       


       
Total
$

Employee benefits

In the two tables above, you budgeted for salaries and wages. In this item budget amounts for mandatory and optional employee benefits. As your accountant or economic development officer and your insurance agent for assistance in completing this section. You can also go to a search engine such as bing.com and type in employee benefits plus your state or province.

Table 1
A
B
C
Mandatory
Rate
Total Wage & Salarie Costs
Employee Benefit Costs
Canada pension plan
2.2%
   
Unemployment insurance
%
   
Vacation pay
4.0%
   
Workers compensation
%
   
Total Mandatory      

Note: Multiply A and B to get C.

Table 2
A
B
C
Optional
Rate
Total Wage & Salarie Costs
Employee Benefit Costs
Medical insurance      
Life insurance      
Company pension plan      
Total optional      
       
Grand Total (table 1 and table 2)      

Rent

Base your rent assumptions on your rental contract. Also, identify the source.

 
 
 
 
 

Insurance

Base your insurance assumption on the quotation from your insurance agent. Also, identify the source.

 
 
 
 
 

Maintenance and repairs

Calculate the cost you assume for maintenance and repairs expense as a percentage of sales, based on historical performance or the industry average.

 
 
 
 
 

Telephone

Calculate your telephone expense as a percentage of sales, based on historical performance or the industry average. Include cost of hook ups plus deposits if required.

 
 
 
 
 

Utilities

Calculate your utilities assumptions as a percentage of sales, based on historical performance, on the industry average, or on estimates from utility companies (Hydro, water, waste and sewage disposal). Include costs of hook ups plus deposits if required.

 
 
 
 
 

Supplies

Calculate your supplies expenses assumption as a percentage of sales, based on historical performance or the industry average.

 
 
 
 
 

Freight

Calculate your freight expense assumption as a percentage of sales, based on historical performance, the industry average or estimates from freight companies. This calculation is essential in remote areas.

 
 
 
 
 

Office expenses, postage

Calculate your office expense assumption as a percentage of sales, based on historical performance or the industry average.

 
 
 
 
 

All other operating expenses

Provide a detailed breakdown of all other assumptions concerning operating expenses.

 
 
 
 
 

Continue to depreciation

<Previous page

Return to table of contents













------------

Enjoy This Site?

Then why not use the button below, to add us to your favorite bookmarking service?

| Homepage | Plan Outlines |Plan Templates |Plan Samples | Plan Writers | Business Loans |


Return to top

Copyright© Business Plans Guide 2010.