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Create Your Ultimate Business Plan

Lesson 7 of 10

Financial Projections: Dominate Your Cash Flow


Create Your Ultimate Business Plan

Lesson 7 of 10

Financial Projections: Dominate Your Cash Flow


Lesson Info

Financial Projections: Dominate Your Cash Flow

By now in all the sections we have talked about how your business operates and how you want to market it, which is in the marketing strategy. When you talk about the numbers, in the financial projections is where you really trying to demonstrate the viability of your business being a sustainable business. So that's the number one objective. As we look at numbers have we looked at the different supporting information that you will provide? You have to be able to communicate that this is a business worth investing in because it will be sustainable. It's typically also done over time. The assumptions that you make are really what will determine whether you have a realistic plan or not in order to achieve your profit goals, your cash flows that you need to operate all the time, and whether you can manage the expenses that you're incurring with your specific go-to-market choices. It includes historical data if you have been in operations. So you would talk about how you've been performing t...

o date. If you're just a brand new business, you would put the estimates on what you expect to happen year-on-year with your forecasted sales. And then finally the forecast needs to be realistic because once you do that forecast all the numbers and all the additional financial figures will be based on those assumptions. And a very important input of course is how much you expect to sell. That number that you promise is something that it cannot be not based in reality in a sense that your business plan if it's not robust enough you could really tell if you're just making up the numbers, or those numbers are just a wish, or really there's a path on achieving those numbers. Specifically when it comes to the sales forecast you want to be able to do two things. One, break down the total sales figures into the components in which your transact, meaning the level of products or the hours of service. The more you can explain how your ultimate goals are achieved by the quantity of sales, customers, or units that you're planning to sell, the easier it will be to see whether everything that you have been offering and proposing in terms of investment will actually come through. The second part in addition to breaking down to the unit that you transact in is look at what is the level of sales that you actually need to break even. By break even means how much you need to sell to cover all your costs. This is a quick calculation that you can do, and it's very important to do to really suggest how much growth you actually need to be achieving right at the beginning to be actually a business that can be self-sustaining. So that's a question that you most likely will get anyways when you're looking at investors. So you should be upfront calling out in your financial projection what is needed for you to break even. Let's look at the different components of the financial projection. First, you would have the P&L, which is the profit and loss analysis that you do for your business. It's a forecast. It gives you a clear indication how the business will move forward in the one to five years. It includes actual sales, expected sales, costs, and profit. Let's look at an example so that you can do this on your own. There will be links in the materials that you can do this for your own business. Let's take a look. This is a very simple version of a profit and loss statement that you need to be able to build for your business and include in your financial projections. You would do this for every year that either you plan to be in business, call it one to five years, or include previous years and you build the additional years out. The way it works is you would include first your income. This is where you would include the sales generated by the unit in which to transact in. That's the income section that you see there. Then you have all your expenses, which are those that you really need to operate. It could be as detailed as needed, all the way from accounting, employees, from just operating your business. It depends what your business is. These type of expenses or categories of expenses will vary based on the structure of what is needed to run your business. Then with income minus the expenses, you should be able to estimate approximately the profit, or the loss, that you're making year-on-year based on your estimate. As you can imagine the larger the income, the smaller the expenses, the higher the profit. Or the smaller the income, the higher the expenses, the smaller the profit. What you're trying to do is maximize profit by generating as much sales as you can and keeping your expenses low. That's what an investor would be looking at with the P&L, which is what is really the return of your business. So very important to have this upfront, and again, this is a simple example that you can reference and you replace the numbers for your own business so that you could have an accurate picture on what is your ability to sustain yourself and generate profit over time. That's the profit and loss section. The section exhibit to include in the financial projection is called cash flow. What a cash flow is is a financial analysis that shows how much money you expect to be flowing in and out, call it, of your bank account on what is needed to keep your business running. So if the P&L shows you how much profit you generate year-on-year, cash flow shows you what you will have available in terms of cash available to run your business. This is important to include because what an investor also wants to know is whether you will have enough business to survive and continue operating. What is the likelihood that you will have enough resources to keep things running? So that's why the two analysis are complementary and they show different things. Here's an example of a cash flow. Again, the link will provide an example and specific tips on how to do it. But you will see here that you would also create the cash flow for as many years as you have been operating or intend to operate. Again, the timeframe is between one to five years. How you construct the cash flow is always starting with the cash on hand that you have, call it the beginning of day one. Then you would add any of the sales or the receipts that you get from the sales that you have generated. Then you subtract the cash payments. Cash payments can include cost of goods sold, basically what it costs you to make the product or the service possible that you offer, operating expenses, which are different types of costs in terms of being able to make that product available to the customers, and other expenses. Then, as you have basically the beginning of cash on hand then how much you were able to get in terms of sales that month, then the cost of what left your bank account, if you will, that month. That, at the end, the cash position is the output of that adding and subtracting that we're really articulate whether you ran out of money by the end of the month, you had a buffer, or you were able to continue to operate. The cash position, again, gives you a sign of whether you have a healthy way of operating, or whether you will start to run out of money that month in order to sustain your business. Again, a very important exhibit to show, and is really demonstrating your viability as well, along with the P&L.

Class Description

If you are looking to start a business or have one already established, the idea of having to write a business plan can be really daunting.

The reality is while daunting you really need one to set up your business on the right track.

That is what a business plan is - an essential roadmap for business success.

Carolina Rogoll has been successfully leading small and large businesses and building brands for over a decade.

In this short class, she will be walking through step by step on how to create a business plan using the easy to use template she has put together. By the end of this class, you will have a business plan you can share, reference, and start using right away.

Having a brilliant strategy without a plan to execute won’t get you far. Not having a strategy is a non-starter, for sure. Once you have a strategy, you need to turn that into an operational plan that can be carried to make it a reality.

Anyone who own a business or is starting a business and benefit from having a physical plan for themselves and gather investor or partners.


Becky Kavanagh

Second class with Caroline Rogoll - - - another excellent, clear, actionable and amazing experience! THANK YOU!

Darlene Rosa

This was a great class! Very thorough with Lots of questions to consider for each section. Would definitely recommend for anyone like myself starting their first business.

Michelle Damm Photography

Carolina is a very knowledgeable and articulate speaker. I felt like the content in the video as well as the PDF's were on the light side. After purchasing, watching the video and seeing the PDF's I googled Business Plan and was able to find a SCORE template that was more of what I expected.