Okay.
Let's talk for a few minutes about the financial projections that you're going to include in
the business plan.
Well, generally, particularly with startup businesses, you're not going to have detailed
cash flow statement or balance sheet.
One, you don’t have a ton of equipment or assets to put on the balance sheet or outstanding
that is early in the business nature.
So, that's of lesser importance, plus your cash flow statement is going to be ancillary
first to the income statement.
For planning purposes, the income statement is kink, okay?
Because it lays out the startup cause, the assumptions that you have along with that.
Your revenue projections, your expense projections, and then, you can include in there your break
even analysis or your targets for when you would need around of equity infusion or more
debt infusion of capital in order to continue operations to continue a given growth path.
So basically, your income statement in the startup phase along with startup projections,
your assumptions there will demonstrate almost the entirety of your business plan.
Someone who is skilled at developing and then reading the financial projections can gain
almost everything they need to understand from the operations right there in the income
statements.
So, you'll start up with general presumptions about cause for different things.
What level of startup, the expenses are you going to have for equipment, leases, product
and development, pre-launch salaries, things of that nature that are going to be the expense
you have – you incur just to get off the ground, just to get started.
Then you're going to have in the section to identify what you believe you made in working
capital.
Now, working capital is basically going to indicate the amount of money you need before
you break even or before you get the next round of funding that can carry on operations.
So, lots of times, startup business is particularly small businesses try to, or lifestyle business
has try to turn the corner as quickly as possible and try to make a profit.
So, you're trying to see how much money you need to get there.
Well a startup ventures generally not going to make a profit anytime soon because any
available money, they're going to spend it on market to achieve that growth curve that
they're attempting towards it.
Because growth is generally instrumental to obtaining outside equity investment because
your objective is to reach a sufficient size that you can ultimately recapture your money
through either the sell of the business or some other exited via – and that the business
has some lighter point would be profitable.
But for now, you incur a losses by spending outside investor money or that in order to
achieve that growth.
So, if that's the assumption, you have to demonstrate how much working capital you are
going to need until you get to that next level.
So you got your startup cost and then you've got your working capital that you're going
to need there.
Then, you take that information and that's what you used to build the income statement.
So, on the revenue side, you might having your assumptions that the price that you're
going to charge for your product or the hourly rate, you're going to charge for your product.
You're going to use that to project your revenue at any given time interview either by month
by month for the first 12 months and then maybe every quarter for the second year.
And sometimes, people would do a third year projection out there.
But normally, the end of the second year projection is about all you can [inaudible 00:04:05]
project out to, it already sinuous with the month by month and the quarterly.
A third year is extremely difficult to accurately project.
So anyway, with that in mind, you're going to take the assumptions in here about price
and things like that.
And estimate what your level of sales will be.
So you can estimate from that your revenue each given time period.
Below that, you will put your expenses of your calls that you will incur.
And that will level out at the bottom as either a profit or a loss and as I say it, it will
generally be losses all the way up until, say with the lifestyle business you break
even, okay?
Or, with a startup venture you get your next infusion of capital, okay?
So with that and that generally comes from an outside equity investor or some ability
to incur additional debt but normally through some sort of outside equity investor.
So, you will constantly have to compare your expenses against your revenue and your revenue
should be going up.
But your losses could also be going up because like I say, you're incurring a lot of marketing
causing expenses there.
And then, like I say, you will take that period between startup and when you break even or
when you get the next round of equity investment and that will be your working capital needs
plus some.
You won't have some pillow or some margin.
You may want to add as much as 100 percent double that amount to account for the amount
of money you will need in working capital to secure when kicking off the business.
So, that's the general story told by the financial projections in the income statement.
Your assumptions about revenue and expenses which will be your price and then your given
expenses and startup cost.
And then your working capital will come from revenue minus expenses added up until you
reach a new infusion event.
And again, that would tell the story for your projections for sales, expenses, growth rate,
et cetera right there in the income statement.
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