Part 2: Preparing A Financial Plan

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

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