Financial Projections
How to Project Sales:
1. Based on actual results from tax returns or financial statements. If you
have both tax returns & financial statements, compare the two for
significant deviations. If there are large deviations, always used the Tax
Returns as a basis for financial projections.
2. Based on industry statistics such as Sales per Square Foot (Retail),
Number of Turns per Meal (restaurant) average is 1.5 turns for average
restaurant, but fast food can have up to 4 turns per meal, dollar of average
on-hand inventory X number of turns per year, per RMA book or trade
association. A good website for industry statistics is
http://www.bizstats.com .
3. Sales as a function of advertising - example: number of direct mail pieces
X response rate X Sales price = Total Sales (I personally use this method
the least).
4. Conservative Estimates - Conservatively, estimate number of customers
or patients. This method is used when you are unable to obtain a
reasonable basis for a service type business.
How to Project Expenses:
1. Variable Expenses - Based on component percentages, sometimes
referred to as profitability & operating ratios, for the industry such as
inventory or Cost of Goods Sold (COGS) or Labor as a percentage Sales,
per RMA book or Trade Association. This can be put in the Cash F)ow
Statement as a formula. Once again, another good resource for
profitability & operating ratios is http://www.bizstats.com .
2. Fixed Cost - Based on actual results from tax returns or financial
statements. Usually, take total annual expense divided by 12 months to
obtain monthly expenses.
3. Other Expenses: Based on quotes received from insurance agents,
prospective landlords, accountants, past usage rate on utilities, etc.
4. Loan Payment: Calculated with a loan amortization program in Excel.
Name of Client
Postal Center
Sources & Applications of Funding
Sources:
Owner's Contribution
Inland Empire Lenders CDC Loan
$
16,500
33,500
33%
67%
Total
$
50,000
100%
$
8,400
2,500
3.800
8,000
3,000
2,000
2.500
800
2,000
1.000
16,000
17%
5%
8%
16%
6%
4%
5%
2%
4%
4%
32%
$
50,000
100%
Applications:
Equipment
Initial Inventory
Furniture & Fixtures
Tenant Improvements
Legal & Accounting
Lease Deposit
Mail Boxes
Outside Signs
Supplies
Initial Advertising
Working Capital
Total
Collateral: Loan will be secured by a blanket UCC filing on business
assets and personal real estate.
Name of Client
Postal Center
Income Statement
Fiscal Year
Sales:
Stamp Sales
Postage Meter
Shipping
Retail Sales
Service
Other
I
:
.....;.::
·.·.ysCl.r1
...............,
.··i>· Yea{2:>:.•·..· · · ··<1
I
< Yeat3·
$
45,500
38,500
150,500
73,500
31,500
10,500
13% $
11%
43%
21%
9%
3%
50,050
46,200
180,600
88,200
37,800
11,550
12% $
11%
43%
21%
9%
3%
55,055
55,440
216,720
105,840
45,360
12,705
11%
11%
43%
21%
9%
3%
Total Sales
$
350,000
100% $
420,000
100% $
504,000
100%
Cost of Sales:
Cost of Goods Sold - Nontaxable
Cost of Goods Sold - Retail Sales
$
110,600
36,015
32% $
10%
132,720
43,218
32% $
10%
159,264
51,862
32%
10%
Cost of Goods Sold
$
146,615
42% $
175,938
42% $
211,126
42%
Gross Profit on Sales
$
203,385
58% $
244,062
58% $
292,874
58%
Operating Expenses:
Advertising
Auto Expense·
Bank Charges
Cash - Short/(Over)
Computer Expense
Claims Payments - UPS
Dues & Subscriptions
EQ Rents
Insurance
Licenses & Permits
Repairs & Maintenance
Miscellaneous Expense
Office Supplies
Owners' Salaries
Penalties
Printing & Reproduction
Professional Fees
Promotions
Rent
Security
Taxes - Owners' Salaries
Taxes - Property
Telephone
Utilities
Interest IELCDC Loan
$
10,500
5,653
3,304
740
142
8,428
852
806
10,042
76
4,262
642
2,616
38,400
302
1,406
8,488
1,625
26,400
378
5,376
554
5,512
2,988
2,597
$142,089
Total Expenses
Net Income
$
61,296
3% $
2%
1%
0%
0%
2%
0%
0%
3%
0%
1%
0%
1%
11%
0%
0%
2%
0%
8%
0%
2%
0%
2%
1%
1%
41%
18% $
12,600
6,784
3,965
888
170
10,114
1,022
967
642
91
5,114
770
3,139
46,080
362
1,687
10,186
1,950
31,680
454
6,451
665
6,614
3,586
2,408
$158,390
85,672
3% $
2%
1%
0%
0%
2%
0%
0%
0%
0%
1%
0%
1%
11%
0%
0%
2%
0%
8%
0%
2%
0%
2%
1%
1%
38%
20% $
15,120
8,140
4,758
1,066
204
12,136
1,227
1,161
642
109
6,137
924
3,767
55,296
435
2,025
12,223
2,340
38,016
544
7,741
798
7,937
4,303
2,203
3%
2%
1%
0%
0%
2%
0%
0%
0%
0%
1%
0%
1%
11%
0%
0%
2%
0%
8%
0%
2%
0%
2%
1%
0%
$189,253
38%
103,621
21%
Name of Client
Postal Center
Footnotes - Projected Cash Flow & Income Statements
1. Sales: Annual Sales were projected at $350,000, which is a $163,910 or
32% less than the annual Sales of $513,910 for a similar size Postal
Center in their geographic market. Sales were allocated by month and
product line based of the actual Sales of the aforementioned Postal
Center.
2. Cost of Goods Sold - Nontaxable: This expense was calculated at 40% of
Sales, excluding Retail Sales, based of the actual results of a similar
Postal Center.
3. Cost of Goods Sold - Taxable: This expense was calculated at 40% of
Retail Sales based of the actual results of a similar Postal Center.
4. Advertising & Promotional Activities: Calculated at three percent of sales
$350,000 x .03 = $10,500 per year.
5. Owners' Salaries: The month expense of $3,200 ($1,600 per owner) is
comparable with the owners' compensation from their previous positions.
6. Rent: Postal Mania will lease 900 square feet at approximately $2.44 per
square foot = $2,200 per month or $26,400 annually (see lease
agreement).
7. All Other Expenses: All other expenses were calculated based of the
actual results of a similar Postal Center.
8. Loan Payment: Monthly loan payment of $406.45 is based on a $33,500
loan @ 8.00% interest, amortized over ten years (see loan amortization
schedule).
.
Break-Even Analysis
,
.
A cash-based bre3}(..;even analysis can be performed using the formula BES = VC + FC, where:
BES= Br~ak-EvenSales,
VC == Variable. Costs (expressed as a percent of sales), and
FC = Fixed Costs (in absolute dollar amounts).
According- to the Forecasted Statement of Operations for Months 1-12, the Variable and Fixed
Costs of the }Joopa Family Fitness Center are as follows:
,I ...!.V~an~·a~b~le~C~o!::!.:st~s_ _---.,,....,-:.-'$"'-."'-'Am=o~un=.:....t...:...crt~o.:::,;of~S~.al~e=s ~Fi=x=ed=-=C=os=t~s_ _~_-:-,........._--=$Am~=oun~t
$ 84,075
14.,98% AccountingILegal
$ 13,500
I CostofSales
II
Advertisingipromotion
Insurance
Management Salaries/F.B.
Office Supplies
PtrintingIP 0 stage
Cable Television
Janitorial Services
Lease - Facilities
Maintenance/Repairs
Payroll/F.B.
.
.1
i
j
~
I"
:i
.
$ 84,075
$ 23,500
$ ,24,000
$ 90,000
$ 4,000
$ 6,000
$ 3,600
$ 24,000
$ 72,000
$ 6,000
$223,836
14.98%
Substituting these figures into the formula, the Break-Even .Sales are determined as follows:
BES = .1498S +$515,636 '
.8502S = $515,636, and ,
BES = $606,488 per year, or $50,541 per ~onth.
Based on the sales
operations. -
forecasts~ the break-ev~~ sales volume will be achieved by the ninth month of
.'
.