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Business Plan & Breakeven Analysis

Business Plan & Breakeven Analysis

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Published by prafulla dwivedi

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Published by: prafulla dwivedi on Sep 18, 2008
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Writing the Business Plan:
Part 1: The Financial Plan Section of the Business Plan 
It's at the end of your business plan, but the financial plan section is thesection that determines whether or not your business idea is viable, and is a keycomponent in determining whether or not your business plan is going to be ableto attract any investment in your business idea.
Basically, the financial plan section of the business plan consists of three financialstatements:
the income statement, the ca sh flow projection and thebalance sheet and a brief explanation/analysis of these threestatements.
This article will lead you through the preparation of each of these three financialstatements on the following pages. First, however, you need to gather together someof the financial data you'll need to prepare these financial statements for yourbusiness plan by examining your expenses.Think of your business expenses as broken into two categories; your start upexpenses and your operating expenses.All the costs of getting your business up and running go into the start up expensescategory.These expenses may include:
business registration feesbusiness licensing and permitsstarting inventoryrent deposits< /SPAN>down payments on propertydown payments on equipmentutility set up fees
This is just a sampling of start up expenses; your own list will probably expand as soonas you start writing them down.Operating expenses are the costs of keeping your business running. Think of these asthe things you're going to have to pay each month. Your list of operating expensesmay include:
salaries (yours and staff salaries)rent or mortgage paymentstelecommunicationsutilitiesraw materialsstoragedistributionpromotionloan paymentsoffice suppliesmaintenance
Doc. Prafulla
 
Once again, this is just a partial list to get you going. Once you have your operatingexpenses list complete, the total will show you what it will cost you to keep yourbusiness running each month.Multiply this number by 6, and you have a six month estimate of your operatingexpenses. Then add this to the total of your start up expenses list, and you'll have aballpark figure for your complete start up costs.Now let's look at putting some financial statements for your business plan together,starting with the Income Statement. 
Part 2: The Income Statement
The Income Statement is one of the three financial statements that you need toinclude in the Financial Plan section of the business plan. 
The Income Statement shows your Revenues, Expenses, and Profit for aparticular period. It's a snapshot of your business that shows whether or not your business is profitable at that point in time; Revenue - E xpenses =Profit/Loss.
 While established businesses normally produce an Income Statement each fiscalquarter, or even once each fiscal year, for the purposes of the business plan, anIncome Statement should be generated more frequently - monthly for the first year. Here's an Income Statement template for a service-based business. It's followed byan explanation of how to adapt this Income Statement template to a product-basedbusiness. 
 YOUR BUSINESS NAME 
Income Statement for the year ending _____________  (Row listing each month) REVENUEREVENUE: ServicesService/Month 1Service/month 2Service/month 3::Service/month12TOTAL REVENUE: Services/month=
Doc. Prafulla
 
 REVENUE: MiscellaneousBank InterestTOTAL REVENUE: MISCELLANEOUS TOTAL REVENUE DIRECT COSTSMaterialsEquipment RentalsSalary (Owner)WagesEI ExpenseCPP ExpenseWCB ExpenseTOTAL DIRECT COSTS GENERAL AND ADMINISTRATIONAccounting and Legal FeesAdvertising and PromotionBad DebtsBank ChargesDepreciation and AmortizationInsuranceInterestOffice RentTelephoneUtilitiesCredit Card CommissionsCredit Card ChargesTOTAL GENERAL AND ADMINISTRATION TOTAL EXPENSES NET INCOME BEFORE INCOME TAXES INCOME TAXES NET INCOME
 
Not all of the categories in this Income Statement will apply to your business. Leaveout those that don't apply and add categories where necessary to adapt this templateto your business.
Doc. Prafulla

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