Include monthly sales for the first year, then quarterly for the following two years. Adding these four gives you the net income, which is a measure for profitability.
In the first year of business, you’ll want to create a monthly income statement.
You will hopefully come to a point where your business is growing.
To expand as a small business owner, you’ll need additional financing.
However, with a little market and industry research, you’ll actually have a lot of data to work with to help you create realistic financial projections. You may have worked at a similar business within the same industry before striking out on your own.
In this case, you will probably have an idea of what realistic financial projections look like, how long it will take to scale, what growth rate is ideal, and what profit margins are normal within your industry.For the second year, quarterly statements will suffice.In the following years, you’ll just need an annual income statement.I was glad to be asked about common mistakes with financial projections.I read about 100 business plans a year for angel investment and business plan competitions. More people doing business plans should realize that most startups are unprofitable at the beginning; and that high growth correlates with losses, not profits.With this analysis, you’ll be able to see if your business is consistently falling short of your projections or surpassing them. And when the cost of goods sold is also taken into account, gross profit can be estimated for each of those years.If your projections are falling behind, then you’ll need to make some changes by raising prices, cutting costs, or rethinking your business model. After accounting for all of your operating costs, subtract this from your gross profit to calculate your actual profit — otherwise known as net income (or profit). You don’t need to do an incredibly detailed breakdown, such as listing the cost of every office chair. Financial projections include three financial statements that are fundamental to achieving better financial performance for your business: Otherwise known as a profit & loss statement.Have a look at how each of the financial templates below can help your business.Creating financial projections is an important part of your startup’s business plan.You may also choose to seek advice from a finance professional such as an accountant or bookkeeper.ASIC’s Money Smart website can help you choose a financial adviser, or you can find out more about the costs of financial advice.