Steps in Financial Projections
For items 1 and 2, use the following “Fixed Asset/Start-up Expense List.”
1) Estimate fixed asset requirements for the first year. Include Land, Buildings,
Leasehold Improvements, Equipment, and Vehicles.
2) Estimate any start-up or one-time expenses. Include any expenses needed to begin
operation such as legal fees, licenses, and initial marketing costs.
For item 3, use the following “Unit Selling Price and Cost Analysis” sheet.
3) Define each “unit” of your product or service and estimate the selling price and
direct cost per unit. In the appropriate places on the form, estimate Cost of Sales and
calculate Gross Profit as a percentage of the selling price.
For items 4 through 6, use the following “Projected Income Statement”.
4) Estimate sales by month for at least one year. (Unit sales price times the number of
units.) Consider how start-up, marketing, and seasonal factors affect sales.
5) Estimate monthly Cost of Sales and Gross Profit based on the percentages of sales
calculated in #3 above. Use a weighted average if multiple product lines.
6) Estimate and itemize fixed expenses by month for at least one year. Include things
like rent, insurance, utilities, salaries, marketing, legal/accounting, etc. Determine all
categories which apply to your business, but don’t include expenses here that are in
“cost of goods (services) sold.”
Research items 7 through 10, and provide a short narrative.
7) Describe the amount of inventory (if any) required to support the sales forecast.
Express in number of days sales or turnover if possible.
8 ) Describe your credit, sales, and collections policies. If you will make sales on credit,
estimate the number of days after the sale before the average customer pays.
9) Describe how fast you must pay your vendors for any items you will purchase.
10) Also: – Estimate obligations for Income Taxes.
– Businesses already in operation will need the latest Balance Sheet.