The items contained in a typical projected income statement are listed below along with explanations on how to calculate the more complicated items.
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.
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.
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.
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.
Check historical performance or industry averages and enter percentages for your products here.
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.
Calculate interest based on the actual interest costs you owe on loans and estimate bank charges. Also identify the bank.
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.
Base your assumptions for professional fees on estimates from your accountant, lawyer, business consultant, etc. Include your business support plan costs here.
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.
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.
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.
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.
Note: Multiply A and B to get C.
Base your rent assumptions on your rental contract. Also, identify the source.
Base your insurance assumption on the quotation from your insurance agent. Also, identify the source.
Calculate the cost you assume for maintenance and repairs expense as a percentage of sales, based on historical performance or the industry average.
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.
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.
Calculate your supplies expenses assumption as a percentage of sales, based on historical performance or the industry average.
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.
Calculate your office expense assumption as a percentage of sales, based on historical performance or the industry average.
Provide a detailed breakdown of all other assumptions concerning operating expenses.