Whether you are seeking funding through a bank loan or investor, financial projections will be crucial in showcasing your company’s potential for success.
When discussing your financial projections, we will focus on three areas: your need for startup capital, expectations for revenue, and monthly operating expenses. Below are examples and explanations of how to determine these numbers.
- Startup Capital – If your business will have a physical location, deciding whether to buy or rent will have a significant impact on your capital need. Purchasing a location will impact your startup funding, whereas renting a property will increase your monthly expenses. Regardless, a renovations budget will likely be needed to ensure the atmosphere reflects your vision. Equipment may also require a large budget. If you aren’t sure about pricing, that’s ok; we research costs to put together the equipment list. The most important thing is having a good idea of the type of equipment you will need. Pre-open marketing may also be required and can include website development, marketing materials like flyers and brochures, or a grand opening. Additional capital may be needed for inventory, licenses, permits, or other industry-specific items.
- Revenue – Revenue is usually the trickiest part for our clients when it comes to putting together the financial projections. The first thing to decide is how many revenue streams you will have and what they will be. Next is to identify quantifiable figures, such as the number of items you plan to sell in a certain amount of time. For example, a fast casual restaurant would like to serve 500 customers per day with an average ticket price of $8. This would result in $4,000 in sales per day, or roughly $120,000 in sales per month.
- Operating Expenses – These expenses include, but are not limited to, salaries, insurance, rent, utilities, advertising, office supplies, accounting, and maintenance. We can use industry averages to calculate these numbers if you aren’t sure. Cost of goods sold is critical here as well.
We use a variety of resources to research the financial projections, so if you are stuck, it’s ok! We are happy to help guide you through this piece of the business plan.