financial estimates and projections pdf

Financial Estimates And Projections Pdf

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The financial section of your business plan determines whether or not your business idea is viable and will be the focus of any investors who may be attracted to your business idea. The financial section is composed of four financial statements: the income statement, the cash flow projection, the balance sheet, and the statement of shareholders' equity. It also should include a brief explanation and analysis of these four statements. Think of your business expenses as two cost categories: your start-up expenses and your operating expenses.

Financial Projections 3 Years Template

The development of realistic financial planning documents for a business is an important process. The following pages provides you with tips, that if followed, will result in the completion of financial forecasts worthy of presentation to lenders, investors, and others. By reading through the following pages you will receive a high level understanding of the following:.

TIP: Remember it takes time, good research and a great team effort to achieve a realistic financial plan on which good decisions can be made! Entrepreneurs, start-up companies, or existing companies will utilize and require the development of numerous financial documents during the planning and operational stages. Each plays an important role in planning and managing your business.

Some may be used in the earliest stages - simply to determine whether or not your proposed or existing business is feasible or sustainable. Others will be used to provide information that will enable you to attract partners, investors or financing capital; while some will monitor and benchmark your business activities on an ongoing basis.

The structure of your business will determine the variation and format of some of the financial documents that you will utilize. The typical business structures are: sole proprietorship, partnerships or corporations. Additional types of business structures may possibly include new generation co-ops or joint ventures.

Critical business decisions need to be made before you invest significant time and capital. It is important to adequately complete market research, hold discussions with possible suppliers and be able to place estimated costs into models that will enable you to more accurately complete feasibility assessments.

The development of your financial documents is an important step in bringing your new start-up business, or new product launch to reality. Once prepared, these financial documents will assist you in attracting investors, satisfying the needs of your lenders, and monitoring your business on an ongoing basis.

Building these documents requires utilizing key assumptions. These key assumptions are the building blocks of information that are collected and used to develop your financial and business plans - and to help make critical decisions based on solid information.

Key assumptions are critical to all aspects of the financial forecasts — balance sheets, income statements, cash flow, business plans and so on. They include detailed forecasted sales volumes; cost of sales, general administration expenses, and others. Tip: It is important to understand that all three financial statements are related and connected indicators of the businesses feasibility, risk and profitability.

As you go through the preparation of your financial documents and business plans, you will need to document and sort the information that is used to create these documents. A spreadsheet or combination of several spreadsheets is one of the most effective tools for gathering, compiling and managing this information. Tip : Linking your spreadsheets to one another and merging the data together will make it much simpler and faster to update your documents.

It is highly recommended that you discuss your business start-up or expansion idea in advance with your financial coach so he or she may provide you with guidance in the key assumptions they suggest or recommend.

They may help you develop detailed spreadsheets, and provide supporting comments. Utilize your suppliers and other business contacts as needed to aid you in gathering up-to-date information. Not all assumptions require a detailed breakdown. Your financial professional will aid you in finding the best spreadsheet tools suited to your needs. Every business is unique and therefore each may require additional or specific information to be collected.

What will it cost to get your business off the ground or implement expansion plans? Begin collecting the data. Talk to potential suppliers for initial pricing of supplies and materials.

If you require capital, make some early inquiries to determine anticipated borrowing expenses and terms. As you collect your information, keep a record of the information you gather. This example shows some of the basic information that would commonly be used in a start-up business.

Combine and add your own specific information that is right for your business. Tip: You should use startup cost planning for a start-up company and also when expanding your business or launching a new product line.

Customize the spreadsheet for your own purposes. In addition to tracking the total estimated costs of starting up your business, this particular spreadsheet example also allows you to assign the source s of the capital required.

Figure Consider how long it will be before your business will be generating enough revenue to offset expenses. In this example, most of the monthly expenses have been multiplied by 3 which in this case ensure the expenses are covered until the business generates sufficient revenue to cover costs. A spreadsheet can easily accommodate additional lines as required. You may wish to link merge them together to quickly make changes and updates.

Missing or underestimating key expenses at this stage could be the difference between success and failure. Tip: You may come across items which require more in-depth data to be gathered or updating. Colour-coding the spreadsheet entries may help you identify those areas that require additional information or updating. For example as shown in the example below green areas may be used for items that you are very certain of. Yellow shaded areas require some additional information, while red areas may mean you require more extensive updating or critical information to be gathered.

Tip: It is important to have sufficient capital funding for the startup of your business. A startup capital worksheet will help you to calculate how much is needed before you begin to generate income.

Tip: Developing smaller spreadsheets will assist you in recapping the individual costs associated with the project. Remember: It isn't necessary to utilize a spreadsheet in all cases, as long as you are realistic in your assumptions and you can support them when needed. Similar to startup or expansion costs, you need to investigate and give careful consideration to the development of other key data that would be utilized in the completion of the opening balance sheet, forecasted profit and loss statements and the development of cash flows.

One of the first key assumptions that needs to be addressed in the startup of a new business venture, and or expansion, is the source of equity and or debt. This would be the assumption around the contributions to be made to the business by ownership, whether sole proprietor, partners, or shareholders.

You would be advised to develop a spreadsheet that shows the timing and amount of each contribution and the terms in which they are being made. The spreadsheet should show both contributions and the formation of the business and throughout the planning period. Production costs need to be forecasted. The production cost is determined by your research and accurate determination of the cost of all inputs that make up all your manufacturing costs.

These costs should include all material costs, labour, service and manufacturing overhead requirements that are required in the development of your products.

Prior to forecasting your sales projections and revenue, you need to calculate a realistic cost for your product s and break the cost down into a per unit basis. Labour costs associated with production should be addressed here as well. Below is an example of a basic worksheet to calculate product cost. Tip: Once you calculate the input costs on a per unit basis, you can begin the sales and revenue forecasts. Each individual product that you produce would require its own individual calculations for these per unit costs.

Tip: If you manufacture a product, it is advisable that you include not only your material costs in your cost of sales, but all manufacturing costs such as rent only equipment rent utilities and labour - anything that is variable and related to manufacturing your product.

Placing the right selling price on your product or service can be the difference between financial success and failure. In order to price your product or service profitably, you need to take into consideration many factors such as cost of production, your customer, your competitors and how much value the market places on your product.

The cost of production includes both variable and fixed costs. This is a very important step and is the foundation to establishing an accurate price for you product. Do not guess, know your costs and be sure to include all costs. Price is not the same as value. Value is a perception in your customer's mind.

If you have a unique product that the customer needs or wants, they will place a higher value on it. Your price should reflect how much value your customer places on your product. If the product you are producing is commonly available and you have considerable competition customers will place less value on your product and it may be very difficult to establish a market share.

Critical Questions to ask yourself are:. Answers to these and many other critical questions will require thorough market research and other investigation efforts. Once you have established that you have a product worthwhile to market, and you have established a realistic price for your product a cost price to produce, ship and market, plus a profit margin you can then determine if the market will support your venture.

Tip: Research into pricing of similar or like products can include the use of your own inquiries into the marketplace, focus groups, trial markets or enlisting the assistance of professionals.

One of the most significant expenses a business will incur is that of salaries wages and benefits. Create an accurate monthly estimate of your labour costs through each of your planning stages. You will also need to project labour costs in your cash flow summaries, to ensure your business can manage and meet payroll obligations. Below is an example of a labour cost spreadsheet that also estimates the company costs of employee benefits.

If you intend to pay bonuses, you would simply add another row or rows as required. It will be critical to outline your assumptions as to the timing of these bonuses as your financial advisor will require this information to manage your cash flow.

Bonuses should only be paid out if the company is profitable. Tip: Using a spreadsheet that allows you to easily make quick adjustments throughout the forecasted year and handle changes such as wage increases, personnel changes and so on, will help you manage and prepare for your cash-flow requirements document.

In this particular spreadsheet example, the jobs have been highlighted in different colours. This is to help assign their associated cost to either overhead costs fixed or cost of sales. Often janitorial and maintenance services will be split between fixed costs and cost of sales. Tip: You may wish to consider the development of additional spreadsheets to support other general and administration expenses. Tip : At times you may have special sales, seasonal highs or lows that affect your forecasts.

It is very important that you include in your key assumptions how you managed to arrive at these various forecasted levels. Maintain a record of your specific assumptions in these areas. The preparation of your projected income statement is the planning for the profit of your financial plan.

Figure Tip : As you are developing your sales forecast, it is critical that you document and develop a narrative in your business plan that can support your projections including the best estimate of timing of the conversion of sales to cash. The assumption of the timing from invoice to conversion of cash is required by your financial coach.

Understanding financial projections and forecasting

The development of realistic financial planning documents for a business is an important process. The following pages provides you with tips, that if followed, will result in the completion of financial forecasts worthy of presentation to lenders, investors, and others. By reading through the following pages you will receive a high level understanding of the following:. TIP: Remember it takes time, good research and a great team effort to achieve a realistic financial plan on which good decisions can be made! Entrepreneurs, start-up companies, or existing companies will utilize and require the development of numerous financial documents during the planning and operational stages. Each plays an important role in planning and managing your business. Some may be used in the earliest stages - simply to determine whether or not your proposed or existing business is feasible or sustainable.

Financial Projections Template

Depending on context the term may also refer to listed company quarterly earnings guidance. For a country or economy , see Economic forecast. Typically, using historical internal accounting and sales data, in addition to external industry data and economic indicators , a financial forecast will be the analyst's modeled prediction of company outcomes in financial terms over a given time period.

In order to get the attention of serious investors, it is important to have realistic financial projections incorporated into your business plan. Projections can be a tricky business as you try to anticipate expenses while trying to predict how quickly your business will grow. In its simplest form, a financial projection is a forecast of future revenues and expenses. Typically the projection will account for internal or historical data and will include a prediction of external market factors.

Budgets and forecasts

Financial forecasts assist you to meet your business goals.

Unlike a past balance sheet that shows a business's actual, historical financial positions, a projected balance sheet communicates expected changes in future asset investments, outstanding liabilities and equity financing. Businesses may consider the creation of a projected balance sheet as a way to facilitate long-term, strategic planning. A business' long-term plans often concern future asset growth and how it may be supported by increased financing through both debt and equity.

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    y Estimates of sales and production y Cost of production y Working capital requirement and its financing y Profitability projections y Projected cash flow.

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    Financial Estimates and Projections (Chapter 6) Submitted To: Rowshanara Islam Assistant Professor Department Of Finance Jagannath.

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