Free Small Business Income Statements, Spreadsheets, and Templates
By Andy Marker | April 6, 2022
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We’ve compiled a collection of the most helpful small business income statements, worksheets, and templates for small business owners and other stakeholders, free to download.
Included on this page, you’ll find a small business income statement template , a small business balance sheet and income statement template , a simple small business cash flow template , and a small business comparative income statement . Plus, you’ll find helpful tips on using a small business income statement template .
Printable Small Business Income and Expenses Template
Download Printable Small Business Income and Expenses Template Microsoft Excel | Microsoft Word | Adobe PDF | Google Sheets
Use this printable small business income and expenses template to determine your net income over a period of time. Enter values into the customizable line-item rows, and the template will calculate your revenue and cost of goods sold (COGS) to determine your gross profit. Enter your expenses (such as rent, utilities, and office supplies) to see your total net income. This template is a great tool to track your business's finances over time.
Read our article on free small business expense templates to find additional resources and to get the most out of your small business budgeting.
Yearly Small Business Income Statement Template
Download Yearly Small Business Income Statement Template Microsoft Excel | Google Sheets
Use this yearly small business income statement template to manage your profit and losses over a three-year timeline. Track your costs in the customizable Expenses column, and enter your revenue and expenses to determine your net income. The template also includes a built-in tax rate calculator for a more accurate account of your net profit.
To find more resources, check out our comprehensive roundup of free profit and loss templates .
Monthly Small Business Income Statement Template
Download Monthly Small Business Income Statement Template Microsoft Excel | Google Sheets
Use this monthly small business income statement template to track and manage your small business finances. Enter the number of customers and the average sale per customer to determine your total monthly sales. Then, enter your operating, payroll, and office expenses to determine your total expenses. The template will automatically calculate these totals to show your net profit.
Sample Small Business Income Statement Template
Download Sample Small Business Income Statement Template Microsoft Excel | Google Sheets
Use this simple small business income statement template for an overall analysis of your net income. You can customize the Revenue and Expenses lines to include items specific to your business; additionally, the template includes a Years Represented column that allows you to compare numbers over a two-year timeline. This is the perfect tool for taking a quick snapshot of your business cash flow.
To find more resources, check out our small business budget templates.
Printable Monthly Small Business Income and Expenses Worksheet Template
Download Printable Monthly Small Business Income and Expenses Worksheet Template Microsoft Excel | Adobe PDF | Google Sheets
This simple, printable template is the perfect tool for tracking your business’s income, expenses, and transactions. The template includes three separate worksheets — simply enter monthly financial data, and the template will automatically calculate yearly totals. Help ensure you meet your financial goals, accurately predict projections, and make necessary adjustments with this template.
Freelance Income Statement Template
Download Freelance Income Statement Template Microsoft Excel | Google Sheets
Self-employed individuals can use this template to track their business income from clients, along with any business expenses. Enter your personalized expenses, including rent, office supplies, and insurance, to see your cash outflow. Then, enter your taxes, and the template will automatically calculate your net income. This is a must-have tool for small business owners looking to understand their business profits.
Daily Income and Expenditure Template for Small Business
Download Daily Income and Expenditure Template for Small Business Microsoft Excel | Google Sheets
For a daily analysis of your small business’s cash flow, use this template to track cash receipts, cash payments, and operating expenses. The template automatically calculates these totals on a daily basis to provide you with a detailed financial report. The template also shows your monthly ending cash position, so you can avoid any shortcomings.
Check out our profit and loss templates for more resources on tracking your business’s cash flow.
Small Business Balance Sheet and Income Statement Template
Download Small Business Balance Sheet and Income Statement Template Microsoft Excel | Google Sheets
Use this income and expenses spreadsheet to help ensure that you never lose sight of your small business’s financial outlook. Enter your revenue and expenses, and the template will automatically calculate your net income. Plus, the customizable year columns enable you to compare your net income over a five-year timeline so that you can easily forecast your business’s economic health.
Read our article on small business balance sheet templates for more resources on tracking your business expenses.
Small Business Income Statement Template
Download Small Business Income Statement Template Microsoft Excel | Google Sheets
This simple small business income statement template calculates your total revenue and expenses, including advising, equipment, and employee benefits, to determine your net income. Use this template to track and compare your finances over a two-year timeline. Save the document so that you always have quick insight into the financial status of your business.
Startup Business Income and Expenses Template
Download Startup Business Income and Expenses Template Microsoft Excel | Adobe PDF | Google Sheets
Use this startup business income and expenses template to track your business’s cash flow. Compare your budgeted expenses and funding to your actual spending to understand any discrepancies. Overall, this template can help you make well-informed, financially accurate predictions so that you can reach your business goals.
Simple Small Business Cash Flow Template
Download Simple Small Business Cash Flow Template Microsoft Excel | Google Sheets
Use this simple small business cash flow template to monitor your cash increase or decrease over a certain period of time. Enter your cash receipts, payments, COGS, and operating expenses, and the built-in formulas will calculate your total cash payments, net cash change, and month-ending cash position.
Simple Small Business Profit and Loss Template
Download Simple Small Business Profit and Loss Template Microsoft Excel | Google Sheets
Regardless of your industry, you can use this simple small business profit and loss template to analyze your business’s financial status over a specific period of time. Customize your expenses by adding or removing line items, and the built-in formulas will calculate your gross profit and net income.
Read our article on small business profit and loss templates to find additional resources and to get the most out of your small business’s profit and loss tracking.
Small Business Comparative Income Template
Download Small Business Comparative Income Template Microsoft Excel | Google Sheets
Use this detailed small business comparative template to closely maintain watch over your financial position. Enter line items for income and expenses to compare your budget to actual calculations. With detailed use, this template will enable you to never lose sight of your business's cash flow.
What Is a Small Business Income Statement Template?
A small business income statement template is a financial statement used to report performance. Templates include calculations for revenue, expenses, and overall profit and loss, and they are used to document, analyze, and project business finances.
If you are a current or prospective small business owner, it’s imperative that you track your income and expenses, as doing so will ensure you have accurate information regarding how your company spends and makes money. An income statement template helps you to identify areas of risk and patterns in profit and loss, and to make educated decisions around your budget.
A small business income statement template typically includes the following line items for tracking your business's financial status:
- Budget: A budget is a spending plan for your business based on your estimated income and expenses.
- Cash Ending Position: This refers to the money your business has at any specific point in time.
- Cash Flow: This is the amount of money that moves in and out of your business.
- Cost of Goods Sold (COGS): This is any money spent that is associated with your product, such as packaging and labor.
- Expenses: List anything on which you spend money to run your business, such as rent, advertising, equipment, insurance, phone, and employee salaries.
- Gross Profit: Determine this number by subtracting the COGS from your total sales.
- Gross Revenue: The formula to calculate gross revenue is total revenue less the COGS.
- Income: List anything that brings money into your business, such as sales and donations.
- Net Income or Net Profit: This number reflects the amount earned from sales.
- Revenue: Calculate revenue by adding together the total amount of income made by sales and services.
- Tax: This includes any mandatory monetary contributions made to the government.
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How to Write an Income Statement for Your Business Plan Your income statement shows investors if you are making money. Here's everything you'll need to create one.
By Eric Butow • Oct 27, 2023
- An income statement is your business's bottom line: your total revenue from sales minus all of your costs.
Opinions expressed by Entrepreneur contributors are their own.
This is part 2 / 11 of Write Your Business Plan: Section 5: Organizing Operations and Finances series.
Financial data is always at the back of the business plan, but that doesn't mean it's any less important than up-front material such as the description of the business concept and the management team. Astute investors look carefully at the charts, tables, formulas, and spreadsheets in the financial section because they know that this information is like the pulse, respiration rate, and blood pressure in a human being. It shows the condition of the patient. In fact, you'll find many potential investors taking a quick peek at the numbers before reading the plan.
Related: How to Make Realistic Financial Forecasts
Financial statements come in threes: income statement, balance sheet, and cash flow statement. Taken together they provide an accurate picture of a company's current value, plus its ability to pay its bills today and earn a profit going forward. This information is very important to business plan readers.
Why You Need an Income Statement
In his article, How to Do a Monthly Income Statement Analysis That Fuels Growth , Noah Parsons writes: "In short, you use your income statement to fuel a greater analysis of the financial standing of your business. It helps you identify any top-level issues or opportunities that you can then dive into with forecast scenarios and by looking at elements of your other financial documentation.
Related: How to Make a Balance Sheet
You want to leverage your income statement to understand if you're performing better, worse or as expected. This is done by comparing it to your sales and expense forecasts through a review process known as plan vs actuals comparison. You then update projections to match actual performance to better showcase how your business will net out moving forward."
What Is In an Income Statement
An income statement shows whether you are making any money. It adds up all your revenue from sales and other sources, subtracts all your costs, and comes up with the net income figure, also known as the bottom line.
Related: How to Make a Cash Flow Statement
Income statements are called various names—profit and loss statement (P&L) and earnings statement are two common alternatives. They can get pretty complicated in their attempt to capture sources of income, such as interest, and expenses, such as depreciation. But the basic idea is pretty simple: If you subtract costs from income, what you have left is profit.
To figure out your income statement, you need to gather a bunch of numbers, most of which are easily obtainable. They include your gross revenue, which is made up of sales and any income from interest or sales of assets; your sales, general, and administrative (SG&A) expenses; what you paid out in interest and dividends, if anything; and your corporate tax rate. If you have those, you're ready to go.
Related: Tips and Strategies for Using the Balance Sheet as Your Franchise Scorecard
Sales and Revenue
Revenue is all the income you receive from selling your products or services as well as from other sources such as interest income and sales of assets.
Your sales figure is the income you receive from selling your product or service. Gross sales equals total sales minus returns. It doesn't include interest or income from sales of assets.
Interest and Dividends
Most businesses have a little reserve fund they keep in an interest-bearing bank or money market account. Income from this fund, as well as from any other interest-paying or dividend-paying securities they own, shows up on the income statement just below the sales figure.
Related: How to Measure Franchise Success With Your Income Statement
If you finally decide that the branch office out on County Line Road isn't ever going to turn a decent profit, and you sell the land, building, and fixtures, the income from that sale will show up on your income statement as "other income." Other income may include sales of unused or obsolete equipment or any income-generating activity that's not part of your main line of business.
Costs come in all varieties—that's no secret. You'll record variable costs, such as the cost of goods sold, as well as fixed costs—rent, insurance, maintenance, and so forth. You'll also record costs that are a little trickier, the prime example being depreciation.
Related: How to Use Financial Ratios to Understand the Health of Your Business
Cost of Goods Sold
Cost of goods sold, or COGS, includes expenses associated directly with generating the product or service you're selling. If you buy smartphone components and assemble them, your COGS will include the price of the chips, screen, and other parts, as well as the wages of those doing the assembly. You'll also include supervisor salaries and utilities for your factory. If you're a solo professional service provider, on the other hand, your COGS may amount to little more than whatever salary you pay yourself and whatever technology you may use for your business.
Related: My Company Hears Hundreds of Pitches Every Year — Here's What Investors Are Actually Looking For.
Sales, General, and Administrative Costs
You have some expenses that aren't closely tied to sales volume, including salaries for office personnel, salespeople compensation, rent, insurance, and the like. These are split out from the sales-sensitive COGS figure and included on a separate line.
Depreciation is one of the most baffling pieces of accounting wizardwork. It's a paper loss, a way of subtracting over time the cost of a piece of equipment or a building that lasts many years even though it may get paid for immediately.
Related: 10 Mistakes to Avoid When Pitching Investors (Infographic)
Depreciation isn't an expense that involves cash coming out of your pocket. Yet it's a real expense in an accounting sense, and most income statements will have an entry for depreciation coming off the top of pretax earnings. It refers to an ongoing decrease in asset value.
If you have capital items that you are depreciating, such as an office in your home or a large piece of machinery, your accountant will be able to set up a schedule for depreciation. Each year, you'll take a portion of the purchase price of that item off your earnings statement. Although it hurts profits, depreciation can reduce future taxes.
Paying the interest on loans is another expense that gets a line all to itself and comes out of earnings just before taxes are subtracted. This line doesn't include payments against the principal. Because these payments result in a reduction of liabilities—which we'll talk about in a few pages in connection with your balance sheet—they're not regarded as expenses on the income statement.
Related: How to Craft a Business Plan That Will Turn Investors' Heads
The best thing about taxes is that they're figured last, on the profits that are left after every other thing has been taken out. Tax rates vary widely according to where your company is located, how and whether state and local taxes are figured, and your special tax situation. Use previous years as a guidepost for future returns. If you are just opening your business, work carefully with your accountant to set up a system whereby you can pay the necessary taxes at regular intervals.
EBIT stands for earnings before interest and taxes. It is an indicator of a company's profitability, calculated as revenue minus expenses, excluding tax and interest.
Related: Don't Make This Huge Mistake on Your Financial Model
Important Plan Note
Don't confuse sales with receipts. Your sales figure represents sales booked during the period, not necessarily money received. If your customers buy now and pay later, there may be a significant difference between sales and cash receipts.
More in Write Your Business Plan
Section 1: the foundation of a business plan, section 2: putting your business plan to work, section 3: selling your product and team, section 4: marketing your business plan, section 5: organizing operations and finances, section 6: getting your business plan to investors.
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How to Prepare an Income Statement
- 09 Dec 2021
When it comes to financial statements , each communicates specific information and is needed in different contexts to understand a company’s financial health.
The income statement is one of the most important financial statements because it details a company’s income and expenses over a specific period. This document communicates a wealth of information to those reading it—from key executives and stakeholders to investors and employees. Being able to read an income statement is important, but knowing how to generate one is just as critical.
Here’s an overview of the information found in an income statement, along with a step-by-step look at the process of preparing one for your organization.
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What Is an Income Statement?
An income statement is a financial report detailing a company’s income and expenses over a reporting period. It can also be referred to as a profit and loss (P&L) statement and is typically prepared quarterly or annually.
Income statements depict a company’s financial performance over a reporting period. Because the income statement details revenues and expenses, it provides a glimpse into which business activities brought in revenue and which cost the organization money—information investors can use to understand its health and executives can use to find areas for improvement.
Related: How to Read & Understand an Income Statement
An income statement typically includes the following information:
- Revenue: How much money a business took in during a reporting period
- Expenses: How much money a business spent during a reporting period
- Costs of goods sold (COGS): The total costs associated with component parts of whatever product or service a company makes and sells
- Gross profit: Revenue minus costs of goods sold
- Operating income: Gross profit minus operating expenses
- Income before taxes: Operating income minus non-operating expenses
- Net income: Income before taxes
- Earnings per share (EPS): Net income divided by the total number of outstanding shares
- Depreciation: Value lost by assets, such as inventory, equipment, and property, over time
- EBITDA: Earnings before interest, depreciation, taxes, and amortization
Related: 13 Financial Performance Measures Managers Should Monitor
Steps to Prepare an Income Statement
1. choose your reporting period.
Your reporting period is the specific timeframe the income statement covers. Choosing the correct one is critical.
Monthly, quarterly, and annual reporting periods are all common. Which reporting period is right for you depends on your goals. A monthly report, for example, details a shorter period, making it easier to apply tactical adjustments that affect the next month’s business activities. A quarterly or annual report, on the other hand, provides analysis from a higher level, which can help identify trends over the long term.
2. Calculate Total Revenue
Once you know the reporting period, calculate the total revenue your business generated during it.
If you prepare the income statement for your entire organization, this should include revenue from all lines of business. If you prepare the income statement for a particular business line or segment, you should limit revenue to products or services that fall under that umbrella.
3. Calculate Cost of Goods Sold (COGS)
Next, calculate the total cost of goods sold for any product or service that generated revenue for your business during the reporting period. This encompasses direct and indirect costs of producing and selling products or services, including:
- Direct labor expenses
- Material expenses
- Parts or component expenses
- Distribution costs
- Any expense directly tied to the production of your product or service
4. Calculate Gross Profit
The next step is to determine gross profit for the reporting period. To calculate this, simply subtract the cost of goods sold from revenue.
5. Calculate Operating Expenses
Once you know gross profit, calculate operating expenses (OPEX).
Operating expenses are indirect costs associated with doing business. These differ from cost of goods sold because they’re not directly associated with the process of producing or distributing products or services. Examples of expenses that fall under the OPEX category include:
- Office supplies
6. Calculate Income
To calculate total income, subtract operating expenses from gross profit. This number is essentially the pre-tax income your business generated during the reporting period. This can also be referred to as earnings before interest and taxes (EBIT).
7. Calculate Interest and Taxes
After calculating income for the reporting period, determine interest and tax charges.
Interest refers to any charges your company must pay on the debt it owes. To calculate interest charges, you must first understand how much money you owe and the interest rate being charged. Accounting software often automatically calculates interest charges for the reporting period.
Next, calculate your total tax burden for the reporting period. This includes local, state, and federal taxes, as well as any payroll taxes.
8. Calculate Net Income
The final step is to calculate net income for the reporting period. To do this, subtract interest and then taxes from your EBIT. The number remaining reflects your business’s available funds, which can be used for various purposes, such as being added to a reserve, distributed to shareholders, utilized for research and development, or to fuel business expansion.
Income Statement Example
Below is an example income statement for a fictional company. As you can see at the top, the reporting period is for the year that ended on Sept. 28, 2019.
Go to the alternative version .
During the reporting period, the company made approximately $4.4 billion in total sales. It cost the business approximately $2.7 billion to achieve those sales. As a result, gross profit was about $1.6 billion.
Next, $560.4 million in selling and operating expenses and $293.7 million in general administrative expenses were subtracted. This left the company with an operating income of $765.2 million. To this, additional gains were added and losses subtracted, including $257.6 million in income tax.
At the bottom of the income statement, it’s clear the business realized a net income of $483.2 million during the reporting period.
A Critical Skill for Business Leaders
Although the income statement is typically generated by a member of the accounting department at large organizations, knowing how to compile one is beneficial to a range of professionals.
Whether you’re an individual contributor, a member of the leadership team in a non-accounting role, or an entrepreneur who wears many hats, learning how to create an income statement can provide a deeper understanding of the financial metrics that matter to your business. It can also help improve your financial analysis capabilities .
Do you want to take your career to the next level? Consider enrolling in Financial Accounting —one of three courses comprising our Credential of Readiness (CORe) program —which can teach you the key financial topics you need to understand business performance and potential. Not sure which course is right for you? Download our free flowchart .
Company b income statement.
For Year Ended September 28, 2019 (In thousands)
Go back to the article .
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Sample balance sheet & small business income statement (with examples).
By examining a sample balance sheet and income statement, small businesses can better understand the relationship between the two reports. Every time a company records a sale or an expense for bookkeeping purposes, both the balance sheet and the income statement are affected by the transaction. The balance sheet and the income statement are two of the three major financial statements that small businesses prepare to report on their financial performance, along with the cash flow statement.
With FreshBooks, you don’t need to become an accountant overnight to run your business the way it deserves.
Your balance sheet will be separated into two main sections, cash and cash equivalent assets on the one side, and liabilities and equity on the other. Documenting the financial details of your business will give you a thorough understanding of available cash flows so that you can make informed decisions about the viable future of your business.
FreshBooks provides a range of income statement and balance sheet examples to suit a variety of businesses, no matter if you have just started out or if you are looking for a different solution.
Find the best finance statement templates for you and your business.
These topics will show you the connection between financial statements and offer a sample balance sheet and income statement for small businesses:
Income Statement vs Balance Sheet
How do you prepare a balance sheet from an income statement, difference between an income statement and balance sheet, sample income statement, sample balance sheet.
The income statement and the balance sheet report on different accounting metrics related to a business’s financial position. By getting to know the purpose of each of the reports you can better understand how they differ from one another.
A balance sheet format can be broken down into two main sections – assets on one side, and liability and equities on the other. These sections will need to be recorded in a balanced format, meaning when an entry is inserted in one column, a corresponding entry will be made in the other column.
What Goes on an Income Statement?
An income statement, also called a profit and loss statement , lists a business’s revenues, expenses and overall profit or loss for a specific period of time. An income statement reports the following line items:
- Sales: Revenue generated from the sale of goods and services
- Cost of Goods Sold: Including labor and material costs
- Gross Profit: The cost of goods sold subtracted from sales
- General and Administrative Expenses: Includes rent, utilities, salary, etc.
- Earnings Before Tax: Your business’s pre-tax income
- Net Income: The total revenue minus total expenses, which gives the profit or loss
The end goal of the income statement is to show a business’s net income for a specific reporting period. If the net income is a positive number, the business reports a profit. If it’s a negative number, the business reports a loss.
What Goes on a Balance Sheet?
A balance sheet reports a business’s assets, liabilities and equity at a specific point in time. A balance sheet is broken into two main sections: assets on one side and liabilities and equity on the other side. The balance sheet formats require the two sides must balance out, meaning they should be equal to one another. It reports the following line items:
- Current Assets: Assets that will be converted to cash within a year, including accounts receivable , inventory and prepaid expenses
- Long-Term Assets: Assets that won’t be converted to cash within a year, including land, buildings and equipment
- Current Liabilities: Debts owed within a year, including rent, utilities, taxes and payroll
- Long-Term Liabilities: Long-term business loans, pension fund liabilities
- Shareholders Equity: A business’s net assets, including money generated by the business and donated capital
- Amortization Expenses: These are also called depreciation expenses, and account for any long-term assets over the life span of their use (such as cars or expensive technology)
- Account Balances: The amount of money that is in your financial accounts at any given time, after debits and credits have been accounted or. This includes any long term saving accounts or checking accounts.
The balance sheet tells you what your business owns and what it owes to others on a specific date. It gives a snapshot of the business’s overall worth.
A business’s financial statements are all interconnected and they report some of the same information, but for different purposes. Because some of your financial statements draw from data reported on other statements, there’s a particular order you should follow when preparing them, which is why we have prepared the following financial statement example:
- Income Statement
- Balance Sheet
- Cash Flow Statement
To prepare a balance sheet, you need to calculate net income. Net income is the final calculation included on the income statement, showing how much profit or loss the business generated during the reporting period. Once you’ve prepared your income statement, you can use the net income figure to start creating your balance sheet.
Using a balance sheet template will streamline the next step of the process, so that you don’t have to manually insert all of the fields yourself. This is a vital step towards understanding the core strength of a company, and to assess the business performance .
On the balance sheet, net income appears in the retained earnings line item. Net income affects how much equity a business reports on the balance sheet.
The Relationship Between Income Statement and Balance Sheet
In double-entry bookkeeping, the income statement and balance sheet are closely related. Double-entry bookkeeping involves making two separate entries for every business transaction recorded. One of these entries appears on the income statement and the other appears on the balance sheet.
To have a more thorough look at how double-entry bookkeeping works, head to FreshBooks for a gallery of income statement templates.
Every time a sale or expense is recorded, affecting the income statement, the assets or liabilities are affected on the balance sheet. When a business records a sale, its assets will increase or its liabilities will decrease. When a business records an expense, its assets will decrease or its liabilities will increase.
In this way, the income statement and balance sheet are closely related. Balance sheets will show a more thorough overview of the security and investment health of a business, however they are both indispensable financial statements.
Dummies.com put together this helpful illustration demonstrating just how closely the two reports tie together:
The income statement and balance sheet report different financial accounting information about your business. The key differences between the two reports include:
Line Items Reported: The income statement reports revenue, expenses and profit or loss, while the balance sheet reports assets, liabilities and shareholder equity.
Timing: The income statement reports on financial performance for a specific time range, often a month, quarter or year. The balance sheet reports on financial activity for one specific date.
Metrics: The line items on the income statement are compared to the sales figure to find your company’s gross margin, operating income and net income, as percentages. The line items on the balance sheet can be used to understand the liquidity of your business. Recording financial business activities in this section helps keep track of the strength of the company.
This sample income statement from Accounting Coach shows the different figures used to calculate net income, the layout of the report and how it differs from a balance sheet:
To see more balance sheet samples, head to FreshBooks. The blank balance sheet template can be downloaded in a range of formats to suit your preferred software program, from Microsoft Excel and Microsoft Word to Google Docs or Google Spreadsheets.
Accessing balance sheet and income statement software is a surefire way to save you time, stress, and money — as you make the right decisions towards letting your business be the best that it can be.
This sample balance sheet from Accounting Coach shows the line items reported, the layout of the document and how it differs from an income statement:
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Income Statement Template
Your business plan should include a three-year forecast of your income statement..
Refer to the sample income statement in the tab below while reviewing this section as a guideline or income statement template for your own business. The income statement shows revenue and expenses, usually by month. At the bottom, total expenses are subtracted from total revenue to arrive at Net Ordinary Income—which is essentially profit, though in an actual business there will be some accounting and tax adjustments made to arrive at true profit. That’s why profit is often referred to as “the bottom line.” Your business plan should include a three-year forecast of your income statement. Here’s a closer look at some specifics of the income statement, and guidance on how to prepare your own income statement.
Sample Income Statement
Finish your business plan in one day., getting started.
It’s much easier to think ahead for one year than it is for three. So, start with a one-year view. After putting together a reasonably thorough view of year one, it will be relatively easy to create years two and three by thinking of the changes that are expected to occur in the following years.
Notice how the income statement template is organized. Each column is labeled and represents a time period (usually a month) with totals for the year in the far right column.
Review from top to bottom the leftmost column of the sample income statement, to see all the categories of revenue and expenses, plus some subtotals for organization.
Again, looking at the sample income statement, notice that a separate line is used for each major revenue category. The sample company includes lines for Programming Services, Software Sales and Network Maintenance. Think of the significant distinctions in your areas of revenue and create your own categories. Remember at this point to keep it simple. As you put together your income forecast, think carefully about the timing (when sales will begin) and growth rates you project. You will be asked if the business is ready to support the sales you are forecasting and whether you will have done in advance the necessary things to drive the level of sales you’re predicting in the time periods shown.
Cost of Goods Sold
Moving down the left column, look at the Cost of Goods Sold section, which is right below our Income categories. For companies selling products, the cost of the products being sold goes into this section. In our sample company, notice that in February they forecasted software income of $250, and there is a corresponding cost of goods sold of $150. This represents a product they purchase for $150 and resell for $250.
Some service businesses have costs associated with the services they sell. These would be treated in the same way, but would be called ‘costs of sales’ instead of costs of goods sold. Even sales commissions are sometimes included in the cost of sales category, both for product businesses and service businesses.
Whether it’s a cost of goods sold or cost of sales, this section should include outside expenses that are incurred whenever a sale takes place.
Gross profit is completely different from the more common term “profit.” Gross profit is the total revenue, minus the cost of goods sold or the cost of sales. If your business sells furniture and you buy a desk for $300 and sell it for $500, your gross profit is $200. If you are a consultant and you invoice a customer for $500 and you have no cost of goods sold, your gross profit is the same as your sales ($500 sales minus $0 cost of sales = $500 gross profit).
The sample company sells mostly services, with some software sales. So their gross profit is quite high. Look, for example, at July and notice that they have $24,500 in total sales and cost of goods sold of $1,200. Why so low? Because the cost of goods sold is for software they purchase and resell. In July they had software sales of only $2,000. If we were to break it down further (this is not shown on the sample statement) they had software gross margin of $800 ($2,000 sales minus $1,200 cost of goods = $800 gross profit.)
Businesses that sell mostly products need to watch their gross profit carefully. What matters in this type of business is not how much you sell, but how much you keep—that’s gross profit.
The expenses for the sample company are broken down into 14 categories. The major categories are self-explanatory (payroll expense, rent, etc.). When creating the list of expense categories for your business, keep it simple, using as few as 5 and no more than 20. It’s not critical whether you include the cost for small expenses in their own category, such as “office supplies,” or in a more general category such as “Office Expenses” (which would also include telephone, Internet and similar expenses).. The important thing is that all of your expenses are accounted for in one category or another.
Pay special attention to payroll costs, marketing costs and rent. These are likely to be your largest expenses. In your business plan you have probably addressed adding staff and marketing activities. Be sure that the income statement reflects the expense for these things in the time period when you said you were going to initiate the activity (or in advance, to allow for preparation time). Also make sure that your rent keeps pace with your payroll or headcount. You would expect to need more office space for 10 employees than for 3. There will be other corresponding expenses that grow with head count.
Look carefully at your revenue, payroll expense and overall expenses to be sure they are all moving in a logical pattern. If you study this carefully , you will get in tune with what it’s going to take to grow your business. You’ll soon find that you’re “living your business” on paper and able to make changes and decisions that will have a significant impact on your business. That’s what it’s about!
Net Ordinary Income. Net ordinary income is what is left when you subtract all of the expenses from all of the income:
Total Income – Cost of Goods Sold – Total Expenses = Net Ordinary Income
Since gross profit already subtracts the cost of goods sold from income, another way to calculate net ordinary income is:
Gross Profit – Total Expenses = Net Ordinary Income
So for year one in our sample company, the Total Income was $236,000, gross profit was $226,100, total expenses $204,597 and Net Ordinary Income was $21,503.
Wait a minute—isn’t that profit? Almost. If these become your actual numbers, your accountant will add a few more lines to take into account taxes, depreciation and a few of those other details we said were not critical for small-business-plan financial statements. For your business plan, rather than forecast profit, stop here at Net Ordinary Income.
Take your time to study our income statement template and get comfortable with it. For additional perspective, you might want to review the Wikipedia article on income statements which is linked here .
Business Plan Income Statement: Everything You Need to Know
Business plan income statement is an important financial document, which shows a company's profitability in a given period of time. 3 min read updated on February 01, 2023
Business plan income statement is an important financial document, which shows a company's profitability in a given period of time.
Understanding an Income Statement
An income statement or a profit and loss statement helps to understand a company's sources of revenue and various items of expenses. In other words, it tells you where the money is coming from and where it's going. A glance at the income statement can tell anyone whether the business is profitable. Basically, an income statement lists out various items and amounts of revenue and expenses, with the net profit figure at the bottom.
You might have heard people talking about a company's bottom line. It's the last line in an income statement, which shows you the amount of net profit of a company in a given period of time after meeting all expenses.
This is the “profit” referred to in a profit and loss statement or the letter “P” of “P & L” account. The “loss” or “L” is the figure that appears if the total amount of expenses exceeds the total amount of revenue.
An income statement is probably the most common and standard financial statement. Another similar statement called the projected profit and loss statement is a standard financial projection tool used in business planning.
Breakdown of a Business Plan Income Statement
It's essential to include a projected income statement in your business plan. Whether you are planning for the internal purpose of the company or preparing a financial document to present before your investors, it's important to know whether you expect the business to be profitable over a specific period of time.
You should start a business plan with an executive summary, followed by other standard components. It must include a financial plan section, complete with a projected balance sheet, cash flow, and income statement. In business planning, the word “projected” is often replaced with the word “pro-forma,” but it means the same thing.
An income statement typically includes the following components:
- Direct cost of sales.
- Production expenses.
- Gross margin.
- Operating expenses.
- Marketing expenses.
- Depreciation .
- Utility expenses.
- Insurance premiums.
- Payroll taxes .
- Profit before interest and taxes.
- Interest expenses.
- Net profit.
Sales or Revenue
The top line in your income statement represents revenue from sales. It's the net sales amount remaining after deducting goods returns and sales discounts. All the direct expenses associated with sales will be deducted from this figure.
Direct Costs of Sales
The cost of goods sold includes all the direct costs incurred in making and delivering the products or services that contributed to sales. It does not include office rent, salaries, and other expenses that are not directly connected with sales.
Gross Margin or Gross Profit
Subtracting the direct cost of goods sold from the number of net sales gives you gross margin. This is the profit before considering operating expenses and taxes.
Except for the cost of goods sold, all other expenses necessary to run the business are covered under this head. Rent, utilities, payroll, and marketing costs are examples of operating expenses.
Operating expenses include marketing and administrative expenses like:
- Sales salaries.
- Collateral and promotions.
- Travel, meetings, client meals, etc.
- Office salaries.
Operating income or earnings before interest, taxes, depreciation, and amortization (EBITDA) is the most reliable indicator of a company's profitability.
If the company is making any interest payments on a loan, it should be included under this head.
This is the sum total of all expenses, excluding taxes and interest.
Depreciation and Amortization
These are the expenses incurred on tangible and intangible assets. Since the assets do not lose their utility in a single accounting period, the total cost of assets is spread over their total lifetime. The cost applicable for a single accounting period is deducted from revenue as depreciation.
Net Income Before Taxes
This figure represents total earnings of the business before paying income taxes.
This item represents the amount of income tax paid or owed to the federal, state, and local governments. Some companies allocate an estimated amount of taxes they expect to pay in the future.
Net Income or Net Profit
This is the net profit of the business remaining after paying income taxes. This is the bottom line figure that tells at a glance whether a company is making profits or incurring losses.
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How to prepare an income statement for a small business
What’s an income statement?
Why is an income statement important, your reporting period, the type of income statement you need, how to create a single-step income statement, how to create a multi-step income statement, one step at a time, small business income statement template, example of a single-step income statement, example of a multi-step income statement, keep your business organized for easy reporting.
An income statement details revenue and expenses to provide insights into a business’s financial performance during a period of time.
Read on to learn what an income statement is, what it includes, why it’s important, and how to make an income statement for your small business. We’ve even included a free small business income statement template you can use.
Also referred to as a profit and loss (P&L) statement, an income statement is one of three main financial reports a business of any size needs to prepare, alongside the balance sheet and cash flow statement .
An income statement gives insights into your business’s operations, how efficiently it is being managed, what departments are underperforming, and how well it’s doing compared to the competition.
The income statement calculates the company’s net income or net profit by taking into account its earnings, gains, expenses, and losses over a period. A balance sheet, on the other hand, only lists the fiscal situation on a specific date.
Unlike a cash flow statement, an income statement includes the full sums of all sales and purchases, whether they were done in cash or credit. This means that an expense is listed in full, even if you’re paying for it in installments or with net terms after the end of the reporting period. The same goes for revenue, which is listed whether it was collected yet or not.
A properly prepared income statement gives business owners a clear picture of the company’s financial position.
Using the income statement, a business owner can adjust their business plan according to the company’s actual performance. They can also explore which business activities produce the most revenue and profit
to assess their viability and contribution to the business’s overall health.
An income statement is also a viable tool for figuring out the balance between expense management and additional investment. In other words, which expenses can be cut back and where you should invest more. And, it helps find areas for improvement, for example, a business activity that has potential but is suffering from inefficiencies.
What’s included in an income statement
When you prepare an income statement, there are four main categories to take into account: revenue, gains, expenses, and losses.
These are used to calculate the company’s gross profit Profit Profit is the earnings that remain after you deduct expenses from revenues. Net profit is what’s left when all types of expenses are deducted from sales. Gross profit is what’s left after deducting the costs associated with making and selling the products, or the costs associated with providing services. and net income for the reporting period.
- Operating revenue. This refers to revenue directly linked to sales from your primary business activities. Depending on your industry and specialties these can be goods, services, or both. For example, if you own a coffee shop, all the coffee, pastries, and teas you sell at the shop, go into your operating revenue.
- Non-operating revenue. Recurring revenue driven from secondary non-core activity. This can be for example, from interest on your savings in the bank, renting out unused space, selling branded merchandise, or ad space in public areas of your establishment. If we go back to the coffee shop example, the money from ads hanging in the bathroom or from selling reusable takeaway cups goes under non-operating revenue.
- Returns and concessions. This item has a negative value as it represents sales that have been canceled for whatever reason and need to be deducted from your revenue.
Unlike revenue, gains refer to non-recurring income. It is typically generated not from the sale of goods or services but from other non-core business activities such as the sale of a branch, property, and used equipment or winning a lawsuit or insurance claim.
These are relatively rare activities, especially for a small business, so they may not apply for every period.
All money spent during the reporting period including:
- Cost of goods (COGS) . The total costs directly associated with producing or acquiring goods for sale or providing a service.
- Operating expenses. Costs directly linked to sales related to your primary business activity. This includes marketing, payroll, packaging, etc.
- Non-operating expenses. All expenses not directly related to the core activity but essential to the general management of the company. For example, cleaning, rent, overhead, office supplies, etc.
- Income tax. The total amount of taxes owed for the business’s income during the reporting period.
- Interest. The total amount of interest your business incurred for loans and other forms of debt over the period.
Losses can include:
- Depreciation. The lost value of assets over time due to wear and tear, outdated technology, or other factors. Depreciation is a percentage of the asset’s original cost that is deducted every year to reflect this decline.
- Legal remedies. Losses that occur when a company loses a court case or reaches a settlement requiring it to pay another party.
How to create an income statement
Before you can start preparing your income statement, you first need to figure out two things:
Income statements are usually produced for a 12-month period but some companies may choose shorter time spans, for example, quarterly or even monthly statements.
A longer reporting period gives a better picture of your business performance without the fleeting effects of seasonality.
A shorter period, on the other hand, gives you more oversight for quickly adjusting your strategy according to the performance. During times of transition, it may be beneficial to produce more frequent reports.
When deciding your reporting period, also examine when it should begin or end. For simplicity, many businesses choose to do annual reports beginning January 1st and ending December 31st.
However, companies sometimes define their fiscal year independently from the calendar year. This means, for example, that their annual report may cover a year ending on June 30th instead.
Regardless of what you choose, it’s important to clearly state your reporting period at the top of your income statement.
There are two types of income statements:
A single-step income statement in which all expenses and losses are bundled together and deducted from all revenues and gains.
A multi-step income statement in which you separate operating income and expenses from non-operating income and expenses to get a better picture of the performance of your various business activities.
Generally speaking, a single-step income statement is usually enough for small and medium-sized businesses (SMBs) that have a simple business structure and a single core activity.
A multi-step statement would be a better fit for larger businesses with diverse business activities and multiple departments.
That said, if your SMB is looking to secure a loan or any other type of financing, you may be required to produce a multi-step statement as well.
Contrary to what the phrase single-step might suggest, there are a few steps you need to take to prepare your income statement:
- Add up all your revenue and gains.
- Add up all your expenses and losses.
- Deduct your expenses and losses from your revenue and gains to reach your income before tax and interest (EBIT).
- Add up your tax and interest.
- Deduct tax and interest from EBIT to reach net profit.
As you’ve probably already figured out, a multi-step statement has a lot more steps.
Here’s how to do an income statement using the multi-step method:
Step 1: Operating revenue Add up all your revenue from sales during the reporting period and deduct your returns and concessions.
Step 2: Cost of goods sold (COGS)
Add up all expenses directly related to the manufacturing or acquisition of goods sold or the provision of services to determine your COGS.
Step 3: Gross profit
Deduct your COGS from the operating revenue.
Step 4: Operating expenses
Add up all operating costs incurred in the reported period. Remember that this should not include COGS, which are already accounted for.
Step 5: Total operating income
Deduct the operational expenses from your gross profit.
Step 6: Non-operating revenue
Add up all income from non-core activities.
Step 7: Non-operating expenses
Add up all expenses for non-core activities.
Step 8: Non-operating income
Subtract non-operating expenses from non-operating revenue.
Step 9: Gains and losses
Add up all your gains then deduct your losses.
Step 10: Income before tax and interest (EBIT)
Add gains and losses to non-operating income and operating income to reach your EBIT.
Step 11: Taxes and interest
Add up the income tax for the reporting period and the interest incurred for debt during that time.
Step 12: Net profit
Subtract the taxes and interest from your EBIT to reach net profit.
Handling financial statements can be overwhelming for anyone, especially small business owners who are more passionate about serving their customers than about spreadsheets and numbers.
To save you time, we’ve prepared an income statement template for small businesses to leverage.
It comes in a spreadsheet format (.xlsx) that you can open with Microsoft Excel, Google Sheets, or any other compatible spreadsheet program you’re used to.
In the file, you’ll find two sheets to choose from: one for a single-step income statement and the other for a multi-step statement. All you have to do is fill out your company’s information. We’ve already put in the formulas so all the calculations are done automatically.
Feel free to change the description of the items to fit your business. You can also add or delete lines as needed.
Download the free small business income statement template here.
Income statement examples
In case you’re confused, here are examples of what an income statement using both methods would look like for a pet supply store called Rocky’s Pet Supplies.
We used Melio’s income statement template to create both versions. As you can see, the numbers are the same but the way they are presented is quite different.
Here’s what Rocky’s Pet Supplies’ single-step income statement for 2023 looks like.
Here’s what Rocky’s Pet Supplies’ multi-step income statement for 2023 looks like.
Using an online payment platform like Melio to pay your business bills makes it easy to find all your expenses when it’s time to make an income statement. Sign up for Melio today to start sending digital payments to all your vendors.
P.S. Don’t forget to pick up our small business income statement template.
*This blog post is intended for informational purposes only and is not intended as financial advice. **Melio does not provide legal, tax or accounting advice, and you should consult with a professional advisor before making any financial decisions.
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How to Create a Profit and Loss Forecast
7 min. read
Updated October 27, 2023
An income statement, also called a profit and loss statement (or P&L), is a fundamental tool for understanding how the revenue and expenses of your business stack up.
Simply put, it tells anyone at-a-glance if your business is profitable or not. Typically, an income statement is a list of revenue and expenses, with the company’s net profit listed at the end (check out the section on income statement examples below to see what it looks like).
Have you ever heard someone refer to a company’s “bottom line”? They’re talking about the last line in an income statement, the one that tells a reader the net profit of a company, or how profitable the company is over a given period of time (usually quarterly or annually) after all expenses have been accounted for.
This is the “profit” referred to when people say “profit and loss statement,” or what the “p” stands for in “P & L.” The “loss” is what happens when your expenses exceed your revenue; when a company is not profitable and therefore running at a loss.
As you read on, keep in mind that cash and profits aren’t the same thing. For more on how they’re different, check out this article .
What’s included in an income statement?
The top line of your profit and loss statement will be the money that you have coming in, or your revenue from sales. This number should be your initial revenue from sales without any deductions.
The top line of your income statement is really just as important as the bottom line; all of the direct costs and expenses will be taken out of this beginning number. The smaller it is, the smaller the expenses have to be if you’re going to stay in the black.
If you’re writing a business plan document and don’t yet have money coming in, you might be wondering how you would arrive at a sales number for a financial forecast. It’s normal for the financials of a business plan to be your best educated guess at what the next few years of numbers will be. No one can predict the future, but you can make a reasonable plan.
Check out this article about forecasting sales for more information.
Direct costs, also referred to as the cost of goods sold, or COGS, is just what it sounds like: How much does it cost you to make the product or deliver the service related to that sale? You wouldn’t include items such as rent for an office space in this area, but the things that directly contribute to the product you sell.
For example, to a bookstore, the direct cost of sales is what the store paid for the books it sold; but to a publisher, its direct costs include authors’ royalties, printing, paper, and ink. A manufacturer’s direct costs include materials and labor. A reseller’s direct costs are what the reseller paid to purchase the products it’s selling.
If you only sell services, it’s possible that you have no direct costs or very low direct costs as a percentage of sales; but even accountants and attorneys have subcontractors, research, and photocopying that can be included in direct costs.
Here’s a simple rule of thumb to distinguish between direct costs and regular expenses: If you pay for something, regardless of whether you make 1 sale or 100 sales, that’s a regular expense. Think salaries, utilities, insurance, and rent. If you only pay for something when you make a sale, that’s a direct cost. Think inventory and paper reports you deliver to clients.
What’s your biggest business challenge right now?
Gross margin is also referred to as gross profit. This number refers to the difference between the revenue and direct costs on your income statement.
Revenue – Direct Costs = Gross Margin
This number is very important because it conveys two critical pieces of information: 1.) how much of your revenue is being funneled into direct costs (the smaller the number, the better), and 2.) how much you have left over for all of the company’s other expenses. If the number after direct costs is smaller than the total of your operating expenses, you’ll know immediately that you’re not profitable.
Operating expenses are where you list all of your regular expenses as line items, excluding your costs of goods sold.
So, you have to take stock of everything else your company pays for to keep the doors open: rent, payroll, utilities, marketing—include all of those fixed expenses here.
Remember that each individual purchase doesn’t need its own line item. For ease of reading, it’s better to group things together into categories of expenses—for example, office supplies, or advertising costs.
Operating income is also referred to as EBITDA, or earnings before interest, taxes, depreciation, and amortization. You calculate your operating income by subtracting your total operating expenses from your gross margin.
Gross Margin – Operating Expenses = Operating Income
Operating income is considered the most reliable number reflecting a company’s profitability. As such, this is a line item to keep your eye on, especially if you’re presenting to investors . Is it a number that inspires confidence?
This is fairly straightforward—here you would include any interest payments that the company is making on its loans. If this doesn’t apply to you, skip it.
Depreciation and amortization
These are non-cash expenses associated with your assets, both tangible and intangible. Depreciation is an accounting concept based on the idea that over time, a tangible asset, like a car or piece of machinery, loses its value, or depreciates. After several years, the asset will be worth less and you record that change in value as an expense on your P&L.
With intangible assets, you’ll use a concept called amortization to write off their cost over time. An example here would be a copyright or patent that your business might purchase from another company. If the patent lasts for 20 years and it cost your company $1 million to purchase the patent, you would then expense 1/20th of the cost every year for the life of the patent. This expense for an intangible asset would be included in the amortization row of the income statement.
This will reflect the income tax amount that has been paid, or the amount that you expect to pay, depending on whether you are recording planned or actual values. Some companies set aside an estimated amount of money to cover this expected expense.
Total expenses is exactly what it sounds like: it’s the total of all of your expenses, including interest, taxes, depreciation, and amortization.
The simplest way to calculate your total expenses is to just take your direct costs, add operating expenses, and then add the additional expenses of interest, taxes, depreciation, and amortization:
Total Expenses = Direct Costs + Operating Expenses + Interest + Taxes + Depreciation + Amortization
Net profit, also referred to as net income or net earnings, is the proverbial bottom line. This is the at-a-glance factor that will determine the answer to the question, are you in the red? You calculate net profit by subtracting total expenses from revenue:
Net Profit = Revenue – Total Expenses
Remember that this number started at the top line, with your revenue from sales. Then everything else was taken out of that initial sum. If this number is negative, you’ll know that you’re running at a loss. Either your expenses are too high, you’re revenue is in a slump, or both—and it might be time to reevaluate strategy.
- Income statement examples
Because the terminology surrounding income statements is variable and all businesses are different, not all of them will look exactly the same, but the core information of revenue minus all expenses (including direct costs) equals profit will be present in each one.
Here is an income statement from Nike, to give you a general idea:
An income statement from Nike .
As you can see, while Nike uses a variety of terms to explain what their expenses are and name each line item as clearly as possible, the takeaway is still the bottom line, their net income.
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Table of Contents
- What’s included in an income statement?
2 Min. Read
Common business ratios
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Plan your exit strategy
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How to Write an Income Statement for Your Business Plan
Financial data is always at the back of the business plan, but that doesn’t mean it’s any less important than up-front material such as the description of the business concept and the management team. Astute investors look carefully at the charts, tables, formulas, and spreadsheets in the financial section because they know that this information is like the pulse, respiration rate, and blood pressure in a human being. It shows the condition of the patient. In fact, you’ll find many potential investors taking a quick peek at the numbers before reading the plan.
Financial statements come in threes: income statement, balance sheet, and cash flow statement. Taken together they provide an accurate picture of a company’s current value, plus its ability to pay its bills today and earn a profit going forward. This information is very important to business plan readers.
Why You Need an Income Statement
In his article, How to Do a Monthly Income Statement Analysis That Fuels Growth, Noah Parsons writes: “In short, you use your income statement to fuel a greater analysis of the financial standing of your business. It helps you identify any top-level issues or opportunities that you can then dive into with forecast scenarios and by looking at elements of your other financial documentation.
You want to leverage your income statement to understand if you’re performing better, worse or as expected. This is done by comparing it to your sales and expense forecasts through a review process known as plan vs actuals comparison. You then update projections to match actual performance to better showcase how your business will net out moving forward.”
What Is In an Income Statement
An income statement shows whether you are making any money. It adds up all your revenue from sales and other sources, subtracts all your costs, and comes up with the net income figure, also known as the bottom line.
Income statements are called various names—profit and loss statement (P&L) and earnings statement are two common alternatives. They can get pretty complicated in their attempt to capture sources of income, such as interest, and expenses, such as depreciation. But the basic idea is pretty simple: If you subtract costs from income, what you have left is profit.
To figure out your income statement, you need to gather a bunch of numbers, most of which are easily obtainable. They include your gross revenue, which is made up of sales and any income from interest or sales of assets; your sales, general, and administrative (SG&A) expenses; what you paid out in interest and dividends, if anything; and your corporate tax rate. If you have those, you’re ready to go.
Sales and Revenue
Revenue is all the income you receive from selling your products or services as well as from other sources such as interest income and sales of assets.
Your sales figure is the income you receive from selling your product or service. Gross sales equals total sales minus returns. It doesn’t include interest or income from sales of assets.
Interest and Dividends
Most businesses have a little reserve fund they keep in an interest-bearing bank or money market account. Income from this fund, as well as from any other interest-paying or dividend-paying securities they own, shows up on the income statement just below the sales figure.
If you finally decide that the branch office out on County Line Road isn’t ever going to turn a decent profit, and you sell the land, building, and fixtures, the income from that sale will show up on your income statement as “other income.” Other income may include sales of unused or obsolete equipment or any income-generating activity that’s not part of your main line of business.
Costs come in all varieties—that’s no secret. You’ll record variable costs, such as the cost of goods sold, as well as fixed costs—rent, insurance, maintenance, and so forth. You’ll also record costs that are a little trickier, the prime example being depreciation.
Cost of Goods Sold
Cost of goods sold, or COGS, includes expenses associated directly with generating the product or service you’re selling. If you buy smartphone components and assemble them, your COGS will include the price of the chips, screen, and other parts, as well as the wages of those doing the assembly. You’ll also include supervisor salaries and utilities for your factory. If you’re a solo professional service provider, on the other hand, your COGS may amount to little more than whatever salary you pay yourself and whatever technology you may use for your business.
Sales, General, and Administrative Costs
You have some expenses that aren’t closely tied to sales volume, including salaries for office personnel, salespeople compensation, rent, insurance, and the like. These are split out from the sales-sensitive COGS figure and included on a separate line.
Depreciation is one of the most baffling pieces of accounting wizardwork. It’s a paper loss, a way of subtracting over time the cost of a piece of equipment or a building that lasts many years even though it may get paid for immediately.
Depreciation isn’t an expense that involves cash coming out of your pocket. Yet it’s a real expense in an accounting sense, and most income statements will have an entry for depreciation coming off the top of pretax earnings. It refers to an ongoing decrease in asset value.
If you have capital items that you are depreciating, such as an office in your home or a large piece of machinery, your accountant will be able to set up a schedule for depreciation. Each year, you’ll take a portion of the purchase price of that item off your earnings statement. Although it hurts profits, depreciation can reduce future taxes.
Paying the interest on loans is another expense that gets a line all to itself and comes out of earnings just before taxes are subtracted. This line doesn’t include payments against the principal. Because these payments result in a reduction of liabilities—which we’ll talk about in a few pages in connection with your balance sheet—they’re not regarded as expenses on the income statement.
The best thing about taxes is that they’re figured last, on the profits that are left after every other thing has been taken out. Tax rates vary widely according to where your company is located, how and whether state and local taxes are figured, and your special tax situation. Use previous years as a guidepost for future returns. If you are just opening your business, work carefully with your accountant to set up a system whereby you can pay the necessary taxes at regular intervals.
EBIT stands for earnings before interest and taxes. It is an indicator of a company’s profitability, calculated as revenue minus expenses, excluding tax and interest.
Important Plan Note
Don’t confuse sales with receipts. Your sales figure represents sales booked during the period, not necessarily money received. If your customers buy now and pay later, there may be a significant difference between sales and cash receipts.
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How to Prepare a Financial Plan for Startup Business (w/ example)
Free Financial Statements Template
- December 7, 2023
13 Min Read
If someone were to ask you about your business financials, could you give them a detailed answer?
Let’s say they ask—how do you allocate your operating expenses? What is your cash flow situation like? What is your exit strategy? And a series of similar other questions.
Instead of mumbling what to answer or shooting in the dark, as a founder, you must prepare yourself to answer this line of questioning—and creating a financial plan for your startup is the best way to do it.
A business plan’s financial plan section is no easy task—we get that.
But, you know what—this in-depth guide and financial plan example can make forecasting as simple as counting on your fingertips.
Ready to get started? Let’s begin by discussing startup financial planning.
What is Startup Financial Planning?
Startup financial planning, in simple terms, is a process of planning the financial aspects of a new business. It’s an integral part of a business plan and comprises its three major components: balance sheet, income statement, and cash-flow statement.
Apart from these statements, your financial section may also include revenue and sales forecasts, assets & liabilities, break-even analysis, and more. Your first financial plan may not be very detailed, but you can tweak and update it as your company grows.
- Realistic assumptions, thorough research, and a clear understanding of the market are the key to reliable financial projections.
- Cash flow projection, balance sheet, and income statement are three major components of a financial plan.
- Preparing a financial plan is easier and faster when you use a financial planning tool.
- Exploring “what-if” scenarios is an ideal method to understand the potential risks and opportunities involved in the business operations.
Why is Financial Planning Important to Your Startup?
Poor financial planning is one of the biggest reasons why most startups fail. In fact, a recent CNBC study reported that running out of cash was the reason behind 44% of startup failures in 2022.
A well-prepared financial plan provides a clear financial direction for your business, helps you set realistic financial objectives, create accurate forecasts, and shows your business is committed to its financial objectives.
It’s a key element of your business plan for winning potential investors. In fact, YC considered recent financial statements and projections to be critical elements of their Series A due diligence checklist .
Your financial plan demonstrates how your business manages expenses and generates revenue and helps them understand where your business stands today and in 5 years.
Makes sense why financial planning is important to your startup, doesn’t it? Let’s cut to the chase and discuss the key components of a startup’s financial plan.
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Key Components of a Startup Financial Plan
Whether creating a financial plan from scratch for a business venture or just modifying it for an existing one, here are the key components to consider including in your startup’s financial planning process.
An Income statement , also known as a profit-and-loss statement(P&L), shows your company’s income and expenditures. It also demonstrates how your business experienced any profit or loss over a given time.
Consider it as a snapshot of your business that shows the feasibility of your business idea. An income statement can be generated considering three scenarios: worst, expected, and best.
Your income or P&L statement must list the following:
- Cost of goods or cost of sale
- Gross margin
- Operating expenses
- Revenue streams
- EBITDA (Earnings before interest, tax, depreciation , & amortization )
Established businesses can prepare annual income statements, whereas new businesses and startups should consider preparing monthly statements.
Cash flow Statement
A cash flow statement is one of the most critical financial statements for startups that summarize your business’s cash in-and-out flows over a given time.
This section provides details on the cash position of your business and its ability to meet monetary commitments on a timely basis.
Your cash flow projection consists of the following three components:
✅ Cash revenue projection: Here, you must enter each month’s estimated or expected sales figures.
✅ Cash disbursements: List expenditures that you expect to pay in cash for each month over one year.
✅ Cash flow reconciliation: Cash flow reconciliation is a process used to ensure the accuracy of cash flow projections. The adjusted amount is the cash flow balance carried over to the next month.
Furthermore, a company’s cash flow projections can be crucial while assessing liquidity, its ability to generate positive cash flows and pay off debts, and invest in growth initiatives.
Your balance sheet is a financial statement that reports your company’s assets, liabilities, and shareholder equity at a given time.
Consider it as a snapshot of what your business owns and owes, as well as the amount invested by the shareholders.
This statement consists of three parts: assets , liabilities, and the balance calculated by the difference between the first two. The final numbers on this sheet reflect the business owner’s equity or value.
Balance sheets follow the following accounting equation with assets on one side and liabilities plus Owner’s equity on the other:
Here is what’s the core purpose of having a balance-sheet:
- Indicates the capital need of the business
- It helps to identify the allocation of resources
- It calculates the requirement of seed money you put up, and
- How much finance is required?
Since it helps investors understand the condition of your business on a given date, it’s a financial statement you can’t miss out on.
Break-even analysis is a startup or small business accounting practice used to determine when a company, product, or service will become profitable.
For instance, a break-even analysis could help you understand how many candles you need to sell to cover your warehousing and manufacturing costs and start making profits.
Remember, anything you sell beyond the break-even point will result in profit.
You must be aware of your fixed and variable costs to accurately determine your startup’s break-even point.
- Fixed costs: fixed expenses that stay the same no matter what.
- Variable costs: expenses that fluctuate over time depending on production or sales.
A break-even point helps you smartly price your goods or services, cover fixed costs, catch missing expenses, and set sales targets while helping investors gain confidence in your business. No brainer—why it’s a key component of your startup’s financial plan.
Having covered all the key elements of a financial plan, let’s discuss how you can create a financial plan for your startup.
How to Create a Financial Section of a Startup Business Plan?
1. determine your financial needs.
You can’t start financial planning without understanding your financial requirements, can you? Get your notepad or simply open a notion doc; it’s time for some critical thinking.
Start by assessing your current situation by—calculating your income, expenses , assets, and liabilities, what the startup costs are, how much you have against them, and how much financing you need.
Assessing your current financial situation and health will help determine how much capital you need for your startup and help plan fundraising activities and outreach.
Furthermore, determining financial needs helps prioritize operational activities and expenses, effectively allocate resources, and increase the viability and sustainability of a business in the long run.
Having learned to determine financial needs, let’s head straight to setting financial goals.
2. Define Your Financial Goals
Setting realistic financial goals is fundamental in preparing an effective financial plan. So, it would help to outline your long-term strategies and goals at the beginning of your financial planning process.
Let’s understand it this way—if you are a SaaS startup pursuing VC financing rounds, you may ask investors about what matters to them the most and prepare your financial plan accordingly.
However, a coffee shop owner seeking a business loan may need to create a plan that appeals to banks, not investors. At the same time, an internal financial plan designed to offer financial direction and resource allocation may not be the same as previous examples, seeing its different use case.
Feeling overwhelmed? Just define your financial goals—you’ll be fine.
You can start by identifying your business KPIs (key performance indicators); it would be an ideal starting point.
3. Choose the Right Financial Planning Tool
Let’s face it—preparing a financial plan using Excel is no joke. One would only use this method if they had all the time in the world.
Having the right financial planning software will simplify and speed up the process and guide you through creating accurate financial forecasts.
Many financial planning software and tools claim to be the ideal solution, but it’s you who will identify and choose a tool that is best for your financial planning needs.
Create a Financial Plan with Upmetrics in no time
Enter your Financial Assumptions, and we’ll calculate your monthly/quarterly and yearly financial projections.
4. Make Assumptions Before Projecting Financials
Once you have a financial planning tool, you can move forward to the next step— making financial assumptions for your plan based on your company’s current performance and past financial records.
You’re just making predictions about your company’s financial future, so there’s no need to overthink or complicate the process.
You can gather your business’ historical financial data, market trends, and other relevant documents to help create a base for accurate financial projections.
After you have developed rough assumptions and a good understanding of your business finances, you can move forward to the next step—projecting financials.
5. Prepare Realistic Financial Projections
It’s a no-brainer—financial forecasting is the most critical yet challenging aspect of financial planning. However, it’s effortless if you’re using a financial planning software.
Upmetrics’ forecasting feature can help you project financials for up to 7 years. However, new startups usually consider planning for the next five years. Although it can be contradictory considering your financial goals and investor specifications.
Following are the two key aspects of your financial projections:
In simple terms, revenue projections help investors determine how much revenue your business plans to generate in years to come.
It generally involves conducting market research, determining pricing strategy , and cash flow analysis—which we’ve already discussed in the previous steps.
The following are the key components of an accurate revenue projection report:
- Market analysis
- Sales forecast
- Pricing strategy
- Growth assumptions
- Seasonal variations
This is a critical section for pre-revenue startups, so ensure your projections accurately align with your startup’s financial model and revenue goals.
Both revenue and expense projections are correlated to each other. As revenue forecasts projected revenue assumptions, expense projections will estimate expenses associated with operating your business.
Accurately estimating your expenses will help in effective cash flow analysis and proper resource allocation.
These are the most common costs to consider while projecting expenses:
- Fixed costs
- Variable costs
- Employee costs or payroll expenses
- Operational expenses
- Marketing and advertising expenses
- Emergency fund
Remember, realistic assumptions, thorough research, and a clear understanding of your market are the key to reliable financial projections.
6. Consider “What if” Scenarios
After you project your financials, it’s time to test your assumptions with what-if analysis, also known as sensitivity analysis.
Using what-if analysis with different scenarios while projecting your financials will increase transparency and help investors better understand your startup’s future with its best, expected, and worst-case scenarios.
Exploring “what-if” scenarios is the best way to better understand the potential risks and opportunities involved in business operations. This proactive exercise will help you make strategic decisions and necessary adjustments to your financial plan.
7. Build a Visual Report
If you’ve closely followed the steps leading to this, you know how to research for financial projections, create a financial plan, and test assumptions using “what-if” scenarios.
Now, we’ll prepare visual reports to present your numbers in a visually appealing and easily digestible format.
Don’t worry—it’s no extra effort. You’ve already made a visual report while creating your financial plan and forecasting financials.
Check the dashboard to see the visual presentation of your projections and reports, and use the necessary financial data, diagrams, and graphs in the final draft of your financial plan.
Here’s what Upmetrics’ dashboard looks like:
8. Monitor and Adjust Your Financial Plan
Even though it’s not a primary step in creating a good financial plan, it’s quite essential to regularly monitor and adjust your financial plan to ensure the assumptions you made are still relevant, and you are heading in the right direction.
There are multiple ways to monitor your financial plan.
For instance, you can compare your assumptions with actual results to ensure accurate projections based on metrics like new customers acquired and acquisition costs, net profit, and gross margin.
Consider making necessary adjustments if your assumptions are not resonating with actual numbers.
Also, keep an eye on whether the changes you’ve identified are having the desired effect by monitoring their implementation.
And that was the last step in our financial planning guide. However, it’s not the end. Have a look at this financial plan example.
Startup Financial Plan Example
Having learned about financial planning, let’s quickly discuss a coffee shop startup financial plan example prepared using Upmetrics.
- The sales forecast is conservative and assumes a 5% increase in Year 2 and a 10% in Year 3.
- The analysis accounts for economic seasonality – wherein some months revenues peak (such as holidays ) and wanes in slower months.
- The analysis assumes the owner will not withdraw any salary till the 3rd year; at any time it is assumed that the owner’s withdrawal is available at his discretion.
- Sales are cash basis – nonaccrual accounting
- Moderate ramp- up in staff over the 5 years forecast
- Barista salary in the forecast is $36,000 in 2023.
- In general, most cafes have an 85% gross profit margin
- In general, most cafes have a 3% net profit margin
Projected Balance Sheet
Projected Cash-Flow Statement
Projected Profit & Loss Statement
Break Even Analysis
Start Preparing Your Financial Plan
We covered everything about financial planning in this guide, didn’t we? Although it doesn’t fulfill our objective to the fullest—we want you to finish your financial plan.
Sounds like a tough job? We have an easy way out for you—Upmetrics’ financial forecasting feature. Simply enter your financial assumptions, and let it do the rest.
So what are you waiting for? Try Upmetrics and create your financial plan in a snap.
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Frequently Asked Questions
How often should i update my financial projections.
Well, there is no particular rule about it. However, reviewing and updating your financial plan once a year is considered an ideal practice as it ensures that the financial aspirations you started and the projections you made are still relevant.
How do I estimate startup costs accurately?
You can estimate your startup costs by identifying and factoring various one-time, recurring, and hidden expenses. However, using a financial forecasting tool like Upmetrics will ensure accurate costs while speeding up the process.
What financial ratios should startups pay attention to?
Here’s a list of financial ratios every startup owner should keep an eye on:
- Net profit margin
- Current ratio
- Quick ratio
- Working capital
- Return on equity
- Debt-to-equity ratio
- Return on assets
- Debt-to-asset ratio
What are the 3 different scenarios in scenario analysis?
As discussed earlier, Scenario analysis is the process of ascertaining and analyzing possible events that can occur in the future. Startups or businesses often consider analyzing these three scenarios:
- base-case (expected) scenario
- Worst-case scenario
- best case scenario.
About the Author
Ajay is a SaaS writer and personal finance blogger who has been active in the space for over three years, writing about startups, business planning, budgeting, credit cards, and other topics related to personal finance. If not writing, he’s probably having a power nap. Read more
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Business Income Statement: Examples and Analysis
Income Statement: Examples and Analysis
As we’ve discussed in the previous lessons , knowing how to read an income statement is a critical skill to have, no matter how big or small your ecommerce business is. Not only does it help you assess your company’s financial progress, it helps you predict and plan accordingly for future opportunities.
Who analyses the income statement?
Everyone from business leaders, owners, analysts to investors use the income statement to gain a full picture of the company’s operational outcome. A good analysis of your income statement can reveal a great deal about your business.
How does an income statement analysis help?
You can find answers to questions such as whether or not your sales are improving and if the total expenses are taking a toll on your ability to generate more revenue. It also helps you decide where and when you need to cut spending and redirect resources
In this lesson we’ll be covering two of the most important methods of income statement analysis with examples, which will enable you to gain insights about your business and make well-informed decisions.
Types of Analysis
There are two common methods used to analyze any company’s income statements: Vertical analysis and Horizontal analysis. First let’s walk you through the vertical analysis approach.
This is a method of analysis where you go through the income statement, top to bottom and see how every line item has turned out, compared to the revenue. The figures will be stated as a percentage of the revenue (ie;sales).
In other words, each line item is stated as a percentage of the base figure given in the income statement and not in terms of the exact amount of money.
It can be described as a process of analyzing the relationship between each line item and how it contributes to the revenue and retained earnings in terms of percentage, share and size.
Common size income statement
Presenting all the line items in an income statement as percentages of revenue (net sales) is also referred to as a common-size income statement. It is a technique that’s commonly adopted in financial statement analysis by managers and analysts to better visualize the relative proportion of each item and its effect on the business performance.
Furthermore, it helps you determine how each account affects the company’s overall profitability in terms of their relationship to each other. This also gives investors a clear picture of the proportion of expense to revenue and how they help generate net income.
A common size income statement is generally how horizontal analysis is done in most companies when they evaluate the business performance over multiple time periods.
Why is it popular?
Vertical analysis is easily applicable for financial statements across different time periods (months and years), companies and even industries. This is because instead of focusing on the actual amount, we’d be focusing on the relative proportions, which is much more relevant. This way you can easily spot which metrics are showing improvement and which ones are falling short.
Horizontal analysis compares the changes in each line item across different periods (year-over-year or month-over-month). This is unlike vertical analysis where each line item is given as a percentage of the base figure (revenue) during the current period. It is used in comparing monetary amounts as well as percentages however, the analysis takes place over multiple reporting periods which is the key difference.
It is generally the go-to method of analysis that helps you spot patterns and ask the right questions such as: Which line items are helping the profits margins grow? Why did the cost rise or fall?
Simply put, horizontal analysis offers an emphasis on consistency. It makes sure that the company’s growth or decline can be tracked over lengthy periods, compared to competitors.
This is why horizontal analysis is commonly favored by investors and analysts, because it offers a picture of the company’s growth patterns and trends, which are easy to spot when you consider the change in figures across multiple years.
Should you use both?
Leveraging both vertical and horizontal analysis can offer you a much more in-depth and accurate view of your business, which provides you all the information you need to make an educated decision. If your business has been running for several years, then combining horizontal as well as vertical analysis when you read your income statement is a great way to go about it.
Examples of Both Methods:
The following is a monthly income statement of a fictional company. Let’s call it ABC:
Now let’s show you how this statement would be when we do a vertical analysis. Remember, all the listed items will be represented as a percentage of the revenue.
Notice how in this example, we took every key metric as a percentage of the revenue, which is $50,000 for the month. For eg:the cost of goods , which is $20,000 makes up 40% of the revenue, which we deducted. The same applies for all the expenses and the remaining profit as well. At the end, we can surmise that the business has been able to make a profit of 20% during the month.
Let’s take the previously given example along with statements from a few other months to do a horizontal analysis.We will be tracking the revenue growth (or decline) across this time period.
Income statements for the months June, July and August are given. Note that June is taken as a base month.
Now this is how a horizontal analysis of the above income statement would look like:
Some inferences you can make from the horizontal analysis depicted above:
- Notice that June has been taken as a base month. All the line items of July are represented in relation to the values for June. Likewise all the percentages assigned to line items in August are based on the previous month, ie; July.
- The 1% drop in the revenue rate for August compared to July is not a fall in the amount of profit that the company is making. Rather, it represents a slight decline in the rate of growth compared to revenue figures in July. However, this is a mute point when you also consider the expenses that have been cut short.
- The business has been able to cut down on its utilities spending significantly. The strategies that allowed such a positive change must be looked into even further.
This is just an example of the conclusions that can be drawn by analyzing your business’ income statement using the horizontal method.
Tips for analysis:
Reviewing an income statement can be a hassle for beginners. If you’re experiencing some apprehension over where to start, don’t worry. Here are some tips to help:
Make sure the math adds up
Errors are quite common, even in published financial statements. At the end of the day, you’re going to be dealing with a lot of numbers so it’s important that you make sure that all the calculations are sound.
Focus on the bottom line
At a very basic level, every company strives to maintain a positive number at the bottom line. This means earnings exceed expenses, which means the business can pay its employees and sustain itself.
However, if for some reason your bottom line is a negative figure, then you might have your work cut out for you. You’ll have to find out why and how the expenses surpassed revenue. Once you do you’ll have to decide on a strategy to change that.
Should net losses be a cause for alarm?
Note that a net loss once in a while is not a big deal and doesn’t always mean disaster. Start-up costs can sometimes keep your company from turning a profit in the initial stages. However, if your business is facing consecutive net losses, then you’ll have trouble paying off your expenses which is a problem. So always try to keep net losses from becoming a trend.
Look for sustainable sources of income
The income statement helps you differentiate between stable sources of income that you can rely on as well as random income. For eg: you’ll be able to discern between revenue you made on cashback offers that you acquired through using a special payment portal or platform and the actual sales revenue.
In other words, you’re able to find out which of your sales were tied to special events and occasions that you got to cash in on and which of them are regular reliable sources. When it comes to sustainability, you will be looking for repeated sources of income.
Check your expenses
Make sure that all the listed expenses are logical. The most common expenses you find for any business is rent, supplies, utilities etc. Check and see if there are missing figures or accounts that don’t add up. The income statement is where you can easily spot redundant payables.
Look for huge expenses.
Let’s say you run a service business. Naturally, you’d see a large number for salaries. However, if you’re a minimally staffed company and your salary margins display a significant amount, you might have to look into it and find out if someone is being overpaid and whether it is worth it.
Compare numbers over the years.
When you’re conducting horizontal analysis, focus on the rates of growth and decline. Look for common trends and patterns. It is not the amount you should be concerned with as much as the percentages. These will reflect the real changes that have occurred in your business.
Knowing how to effectively analyze your income statement is an essential skill that you must have. It helps you gain a good idea about your business and what direction it is heading in.
Vertical analysis can help you assess the relationship between multiple variables in your business and how they contribute to the outcome, which is more suitable when you’re looking for ways to maximize your revenue.
In addition to this, horizontal analysis is a method that helps you track your growth and progress over a period of time by taking a much more wider view. It also helps you identify what’s working and enables you to spot trends and patterns that can inform your strategy.
Both methods can be combined to give you valuable in-depth insights about your business so that you can make winning decisions that are grounded in objective analysis.
Revenue to EBITDA
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Business Plan Financial Projections
- Written By Dave Lavinsky
Financial projections are an important part of your business plan. The projections give investors and lenders an idea of how well your business is likely to do in the future. Financial projections include both income statements and balance sheets.
Financial projections are important for a number of reasons. First, they give investors and lenders an idea of how well your business is likely to do in the future. This can help you secure the funding you need to get your business off the ground. Financial projections also help you track your progress over time. You can use them to make sure your business is on track to meet its goals. Finally, financial projections can help you spot potential problems early on, so you can take corrective action.
What Are Business Plan Financial Projections?
Financial projections are an estimate of your company’s future financial performance through financial forecasting. They are typically used by businesses to secure funding, but can also be useful for internal decision-making and planning purposes. There are three main financial statements that you will need to include in your business plan financial projections:
1. Income Statement Projection
The income statement projection is a forecast of your company’s future revenues and expenses. It should include line items for each type of income and expense, as well as a total at the end.
There are a few key items you will need to include in your projection:
- Revenue: Your revenue projection should break down your expected sales by product or service, as well as by month. It is important to be realistic in your projections, so make sure to account for any seasonal variations in your business.
- Expenses: Your expense projection should include a breakdown of your expected costs by category, such as marketing, salaries, and rent. Again, it is important to be realistic in your estimates.
- Net Income: The net income projection is the difference between your revenue and expenses. This number tells you how much profit your company is expected to make.
Sample Income Statement
2. cash flow statement & projection.
The cash flow statement and projection are a forecast of your company’s future cash inflows and outflows. It is important to include a cash flow projection in your business plan, as it will give investors and lenders an idea of your company’s ability to generate cash.
There are a few key items you will need to include in your cash flow projection:
- The cash flow statement shows a breakdown of your expected cash inflows and outflows by month. It is important to be realistic in your projections, so make sure to account for any seasonal variations in your business.
- Cash inflows should include items such as sales revenue, interest income, and capital gains. Cash outflows should include items such as salaries, rent, and marketing expenses.
- It is important to track your company’s cash flow over time to ensure that it is healthy. A healthy cash flow is necessary for a successful business.
Sample Cash Flow Statements
3. balance sheet projection.
The balance sheet projection is a forecast of your company’s future financial position. It should include line items for each type of asset and liability, as well as a total at the end.
A projection should include a breakdown of your company’s assets and liabilities by category. It is important to be realistic in your projections, so make sure to account for any seasonal variations in your business.
It is important to track your company’s financial position over time to ensure that it is healthy. A healthy balance is necessary for a successful business.
Sample Balance Sheet
How to create financial projections.
Creating financial projections for your business plan can be a daunting task, but it’s important to put together accurate and realistic financial projections in order to give your business the best chance for success.
When you create financial projections, it is important to be realistic about the costs your business will incur, using historical financial data can help with this. You will need to make assumptions about the cost of goods sold, operational costs, and capital expenditures.
It is important to track your company’s expenses over time to ensure that it is staying within its budget. A healthy bottom line is necessary for a successful business.
Capital Expenditures, Funding, Tax, and Balance Sheet Items
You will also need to make assumptions about capital expenditures, funding, tax, and balance sheet items. These assumptions will help you to create a realistic financial picture of your business.
When projecting your company’s capital expenditures, you will need to make a number of assumptions about the type of equipment or property your business will purchase. You will also need to estimate the cost of the purchase.
When projecting your company’s funding needs, you will need to make a number of assumptions about where the money will come from. This might include assumptions about bank loans, venture capital, or angel investors.
When projecting your company’s tax liability, you will need to make a number of assumptions about the tax rates that will apply to your business. You will also need to estimate the amount of taxes your company will owe.
Balance Sheet Items
When projecting your company’s balance, you will need to make a number of assumptions about the type and amount of debt your business will have. You will also need to estimate the value of your company’s assets and liabilities.
Financial Projection Scenarios
Write two financial scenarios when creating your financial projections, a best-case scenario, and a worst-case scenario. Use your list of assumptions to come up with realistic numbers for each scenario.
Presuming that you have already generated a list of assumptions, the creation of best and worst-case scenarios should be relatively simple. For each assumption, generate a high and low estimate. For example, if you are assuming that your company will have $100,000 in revenue, your high estimate might be $120,000 and your low estimate might be $80,000.
Once you have generated high and low estimates for all of your assumptions, you can create two scenarios: a best case scenario and a worst-case scenario. Simply plug the high estimates into your financial projections for the best-case scenario and the low estimates into your financial projections for the worst-case scenario.
Conduct a Ratio Analysis
A ratio analysis is a useful tool that can be used to evaluate a company’s financial health. Ratios can be used to compare a company’s performance to its industry average or to its own historical performance.
There are a number of different ratios that can be used in ratio analysis. Some of the more popular ones include the following:
- Gross margin ratio
- Operating margin ratio
- Return on assets (ROA)
- Return on equity (ROE)
To conduct a ratio analysis, you will need financial statements for your company and for its competitors. You will also need industry average ratios. These can be found in industry reports or on financial websites.
Once you have the necessary information, you can calculate the ratios for your company and compare them to the industry averages or to your own historical performance. If your company’s ratios are significantly different from the industry averages, it might be indicative of a problem.
When creating your financial projections, it is important to be realistic. Your projections should be based on your list of assumptions and should reflect your best estimate of what your company’s future financial performance will be. This includes projected operating income, a projected income statement, and a profit and loss statement.
Your goal should be to create a realistic set of financial projections that can be used to guide your company’s future decision-making.
One of the most important aspects of your financial projections is your sales forecast. Your sales forecast should be based on your list of assumptions and should reflect your best estimate of what your company’s future sales will be.
Your sales forecast should be realistic and achievable. Do not try to “game” the system by creating an overly optimistic or pessimistic forecast. Your goal should be to create a realistic sales forecast that can be used to guide your company’s future decision-making.
Creating a sales forecast is not an exact science, but there are a number of methods that can be used to generate realistic estimates. Some common methods include market analysis, competitor analysis, and customer surveys.
Create Multi-Year Financial Projections
When creating financial projections, it is important to generate projections for multiple years. This will give you a better sense of how your company’s financial performance is likely to change over time.
It is also important to remember that your financial projections are just that: projections. They are based on a number of assumptions and are not guaranteed to be accurate. As such, you should review and update your projections on a regular basis to ensure that they remain relevant.
Creating financial projections is an important part of any business plan. However, it’s important to remember that these projections are just estimates. They are not guarantees of future success.
Business Plan Financial Projections FAQs
What is a business plan financial projection.
A business plan financial projection is a forecast of your company's future financial performance. It should include line items for each type of asset and liability, as well as a total at the end.
What are annual income statements?
The Annual income statement is a financial document and a financial model that summarize a company's revenues and expenses over the course of a fiscal year. They provide a snapshot of a company's financial health and performance and can be used to track trends and make comparisons with other businesses.
What are the necessary financial statements?
The necessary financial statements for a business plan are an income statement, cash flow statement, and balance sheet.
How do I create financial projections?
You can create financial projections by making a list of assumptions, creating two scenarios (best case and worst case), conducting a ratio analysis, and being realistic.
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How To Create Financial Projections for Your Business
Learn how to anticipate your business’s financial performance
- Understanding Financial Projections & Forecasting
Why Forecasting Is Critical for Your Business
Key financial statements for forecasting, how to create your financial projections, frequently asked questions (faqs).
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Just like a weather forecast lets you know that wearing closed-toe shoes will be important for that afternoon downpour later, a good financial forecast allows you to better anticipate financial highs and lows for your business.
Neglecting to compile financial projections for your business may signal to investors that you’re unprepared for the future, which may cause you to lose out on funding opportunities.
Read on to learn more about financial projections, how to compile and use them in a business plan, and why they can be crucial for every business owner.
- Financial forecasting is a projection of your business's future revenues and expenses based on comparative data analysis, industry research, and more.
- Financial projections are a valuable tool for entrepreneurs as they offer insight into a business's ability to generate profit, increase cash flow, and repay debts, which can be attractive to investors.
- Some of the key components to include in a financial projection include a sales projection, break-even analysis, and pro forma balance sheet and income statement.
- A financial projection can not only attract investors, but helps business owners anticipate fixed costs, find a break-even point, and prepare for the unexpected.
Understanding Financial Projections and Forecasting
Financial forecasting is an educated estimate of future revenues and expenses that involves comparative analysis to get a snapshot of what could happen in your business’s future.
This process helps in making predictions about future business performance based on current financial information, industry trends, and economic conditions. Financial forecasting also helps businesses make decisions about investments, financing sources, inventory management, cost control strategies, and even whether to move into another market.
Developing both short- and mid-term projections is usually necessary to help you determine immediate production and personnel needs as well as future resource requirements for raw materials, equipment, and machinery.
Financial projections are a valuable tool for entrepreneurs as they offer insight into a business's ability to generate profit, increase cash flow, and repay debts. They can also be used to make informed decisions about the business’s plans. Creating an accurate, adaptive financial projection for your business offers many benefits, including:
- Attracting investors and convincing them to fund your business
- Anticipating problems before they arise
- Visualizing your small-business objectives and budgets
- Demonstrating how you will repay small-business loans
- Planning for more significant business expenses
- Showing business growth potential
- Helping with proper pricing and production planning
Financial forecasting is essentially predicting the revenue and expenses for a business venture. Whether your business is new or established, forecasting can play a vital role in helping you plan for the future and budget your funds.
Creating financial projections may be a necessary exercise for many businesses, particularly those that do not have sufficient cash flow or need to rely on customer credit to maintain operations. Compiling financial information, knowing your market, and understanding what your potential investors are looking for can enable you to make intelligent decisions about your assets and resources.
The income statement, balance sheet, and statement of cash flow are three key financial reports needed for forecasting that can also provide analysts with crucial information about a business's financial health. Here is a closer look at each.
An income statement, also known as a profit and loss statement or P&L, is a financial document that provides an overview of an organization's revenues, expenses, and net income.
The balance sheet is a snapshot of the business's assets and liabilities at a certain point in time. Sometimes referred to as the “financial portrait” of a business, the balance sheet provides an overview of how much money the business has, what it owes, and its net worth.
The assets side of the balance sheet includes what the business owns as well as future ownership items. The other side of the sheet includes liabilities and equity, which represent what it owes or what others owe to the business.
A balance sheet that shows hypothetical calculations and future financial projections is also referred to as a “pro forma” balance sheet.
Cash Flow Statement
A cash flow statement monitors the business’s inflows and outflows—both cash and non-cash. Cash flow is the business’s projected earnings before interest, taxes, depreciation, and amortization ( EBITDA ) minus capital investments.
Here's how to compile your financial projections and fit the results into the three above statements.
A financial projections spreadsheet for your business should include these metrics and figures:
- Sales forecast
- Balance sheet
- Operating expenses
- Payroll expenses (if applicable)
- Amortization and depreciation
- Cash flow statement
- Income statement
- Cost of goods sold (COGS)
- Break-even analysis
Here are key steps to account for creating your financial projections.
The first step for a financial forecast starts with projecting your business’s sales, which are typically derived from past revenue as well as industry research. These projections allow businesses to understand what their risks are and how much they will need in terms of staffing, resources, and funding.
Sales forecasts also enable businesses to decide on important levels such as product variety, price points, and inventory capacity.
Income Statement Calculations
A projected income statement shows how much you expect in revenue and profit—as well as your estimated expenses and losses—over a specific time in the future. Like a standard income statement, elements on a projection include revenue, COGS, and expenses that you’ll calculate to determine figures such as the business’s gross profit margin and net income.
If you’re developing a hypothetical, or pro forma, income statement, you can use historical data from previous years’ income statements. You can also do a comparative analysis of two different income statement periods to come up with your figures.
Anticipate Fixed Costs
Fixed business costs are expenses that do not change based on the number of products sold. The best way to anticipate fixed business costs is to research your industry and prepare a budget using actual numbers from competitors in the industry. Anticipating fixed costs ensures your business doesn’t overpay for its needs and balances out its variable costs. A few examples of fixed business costs include:
- Rent or mortgage payments
- Operating expenses (also called selling, general and administrative expenses or SG&A)
- Utility bills
- Insurance premiums
Unfortunately, it might not be possible to predict accurately how much your fixed costs will change in a year due to variables such as inflation, property, and interest rates. It’s best to slightly overestimate fixed costs just in case you need to account for these potential fluctuations.
Find Your Break-Even Point
The break-even point (BEP) is the number at which a business has the same expenses as its revenue. In other words, it occurs when your operations generate enough revenue to cover all of your business’s costs and expenses. The BEP will differ depending on the type of business, market conditions, and other factors.
To find this number, you need to determine two things: your fixed costs and variable costs. Once you have these figures, you can find your BEP using this formula:
Break-even point = fixed expenses ➗ 1 – (variable expenses ➗ sales)
The BEP is an essential consideration for any projection because it is the point at which total revenue from a project equals total cost. This makes it the point of either profit or loss.
Plan for the Unexpected
It is necessary to have the proper financial safeguards in place to prepare for any unanticipated costs. A sudden vehicle repair, a leaky roof, or broken equipment can quickly derail your budget if you aren't prepared. Cash management is a financial management plan that ensures a business has enough cash on hand to maintain operations and meet short-term obligations.
To maintain cash reserves, you can apply for overdraft protection or an overdraft line of credit. Overdraft protection can be set up by a bank or credit card business and provides short-term loans if the account balance falls below zero. On the other hand, a line of credit is an agreement with a lending institution in which they provide you with an unsecured loan at any time until your balance reaches zero again.
How do you make financial projections for startups?
Financial projections for startups can be hard to complete. Historical financial data may not be available. Find someone with financial projections experience to give insight on risks and outcomes.
Consider business forecasting, too, which incorporates assumptions about the exponential growth of your business.
Startups can also benefit from using EBITDA to get a better look at potential cash flow.
What are the benefits associated with forecasting business finances?
Forecasting can be beneficial for businesses in many ways, including:
- Providing better understanding of your business cash flow
- Easing the process of planning and budgeting for the future based on income
- Improving decision-making
- Providing valuable insight into what's in their future
- Making decisions on how to best allocate resources for success
How many years should your financial forecast be?
Your financial forecast should either be projected over a specific time period or projected into perpetuity. There are various methods for determining how long a financial forecasting projection should go out, but many businesses use one to five years as a standard timeframe.
U.S. Small Business Administration. " Market Research and Competitive Analysis ."
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Sample Coffee Shop Business Plan
Writing a business plan is a crucial step in starting a coffee shop. Not only does it provide structure and guidance for the future, but it also helps to create funding opportunities and attract potential investors. For aspiring coffee shop business owners, having access to a sample coffee shop business plan can be especially helpful in providing direction and gaining insight into how to draft their own coffee shop business plan.
Download our Ultimate Coffee Shop Business Plan Template
Having a thorough business plan in place is critical for any successful coffee shop venture. It will serve as the foundation for your operations, setting out the goals and objectives that will help guide your decisions and actions. A well-written business plan can give you clarity on realistic financial projections and help you secure financing from lenders or investors. A coffee shop business plan example can be a great resource to draw upon when creating your own plan, making sure that all the key components are included in your document.
The coffee shop business plan sample below will give you an idea of what one should look like. It is not as comprehensive and successful in raising capital for your coffee shop as Growthink’s Ultimate Coffee Shop Business Plan Template , but it can help you write a coffee shop business plan of your own.
Example – BeanBrews Corner
Table of contents, executive summary, company overview, industry analysis, customer analysis, competitive analysis, marketing plan, operations plan, management team, financial plan.
At BeanBrews Corner, we’re proud to introduce our community-focused coffee shop located in the heart of the city’s bustling downtown area. Our mission is to serve high-quality, artisanal coffee and a selection of gourmet pastries and sandwiches, catering to both the early morning rush and the leisurely afternoon crowd. Our establishment is not just about serving great coffee; it’s a place where patrons can feel at home, whether they’re grabbing a quick takeaway or settling in for a few hours of work or relaxation. With our prime location and commitment to excellence in every cup, BeanBrews Corner aims to become a beloved staple in our local community, offering a warm, welcoming atmosphere that coffee lovers will cherish.
Our journey at BeanBrews Corner has been marked by several key success factors and accomplishments. Our focus on high-quality ingredients, coupled with our staff’s expertise in coffee brewing, has allowed us to offer a distinctive selection of coffee blends and drinks that stand out in the market. Our location has also played a crucial role in our success, providing us with high foot traffic and visibility. To date, we’ve successfully fostered a loyal customer base through our exceptional service and inviting atmosphere. Additionally, our engagement with the local community through events and partnerships has strengthened our brand presence and contributed significantly to our growth.
The coffee shop industry is experiencing a period of robust growth, driven by increasing consumer demand for specialty coffee and a rising culture of coffee appreciation. This industry is characterized by its high competitiveness and the importance of location, product quality, and brand differentiation. There is a significant trend toward sustainability and ethical sourcing of coffee beans, as well as an increasing preference for unique and customizable coffee experiences. Given these trends, BeanBrews Corner is positioned to thrive by focusing on quality, sustainability, and creating a unique customer experience that resonates with the values and preferences of today’s coffee enthusiasts.
Our target customers range from busy professionals seeking a quick coffee fix to students and remote workers looking for a cozy place to spend several hours. We also cater to coffee aficionados who appreciate the art of coffee making and seek unique blends and brewing techniques. Recognizing the diverse needs of our clientele, we’ve designed our product offerings and store layout to create a welcoming environment for everyone. Our approach to customer service is tailored to make every visit memorable, ensuring that BeanBrews Corner becomes a preferred destination for a wide range of coffee lovers in our community.
Java Joe’s: A chain with a wide selection of coffee and quick service. The Grind: Known for its cozy atmosphere and strong community engagement. Café Artisan: Focuses on high-end, specialty coffee offerings.
Our competitive advantages lie in our commitment to quality, our prime location, and our strong community ties. Unlike our competitors, we balance the convenience of quick service with the experience of enjoying artisanal coffee in a welcoming environment, making us a go-to spot for a broad customer base.
Our product line includes a wide variety of artisanal coffees, gourmet pastries, and sandwiches, with a focus on quality and uniqueness. Our pricing strategy is competitive, aimed at offering value for premium products. To promote BeanBrews Corner, we leverage social media, local events, and word-of-mouth, emphasizing our community involvement and unique offerings. We plan to introduce loyalty programs and seasonal promotions to encourage repeat business and attract new customers.
At BeanBrews Corner, our daily operations are centered around ensuring excellence in every aspect of our service. This includes meticulous inventory management, strict quality control, outstanding customer service, maintaining cleanliness and hygiene, efficient order fulfillment, effective financial management, strategic staff management, proactive marketing and promotion efforts, attentive feedback collection, and responsible energy and resource management. Our operational milestones include achieving consistent customer satisfaction, expanding our product offerings, and implementing sustainable practices across all operations.
Our management team at BeanBrews Corner brings together individuals with a passion for coffee and a wealth of experience in the hospitality industry. Led by our founder, a seasoned barista and entrepreneur, our team includes experts in operations, marketing, and customer service. Together, we share a commitment to creating an unrivaled coffee experience for our customers, fostering a positive work environment for our staff, and contributing to our community’s vibrancy. Our collective expertise and dedication are the driving forces behind our success and growth.
Welcome to BeanBrews Corner, a fresh and vibrant coffee shop nestled in the heart of Charlotte, NC. As a local coffee shop, we pride ourselves on filling a much-needed gap in the area—a high-quality, local coffee experience. Our passion for coffee, combined with a commitment to our community, drives us to serve not just a drink, but an experience.
At BeanBrews Corner, our menu boasts a wide range of offerings designed to cater to diverse tastes and preferences. Our coffee beverages stand out for their quality and variety, ensuring every coffee lover finds their perfect cup with us. For those who prefer a different kind of warm comfort, our tea selection offers both classic favorites and unique blends. But we don’t stop at drinks; our pastries and bakery items are the perfect companions to our beverages, made fresh daily. For those looking for something more substantial, we offer a selection of sandwiches and snacks, ideal for a quick lunch or a leisurely afternoon treat. And for those special occasions or simply to indulge, our specialty drinks provide a unique BeanBrews Corner experience.
Our location in Charlotte, NC, is no accident. We chose this vibrant city to be close to our customers, understanding their needs and being part of the community we serve. It’s not just about serving coffee; it’s about creating a space where people can gather, share, and connect.
BeanBrews Corner’s potential for success is rooted deeply in several key factors. Our founder brings invaluable experience, having previously run a successful coffee shop. This experience guides our vision and operations, ensuring we understand the intricacies of creating a beloved coffee destination. Furthermore, our commitment to quality sets us apart; we confidently claim to make better coffee than our competition, supported by our extensive variety of coffee and tea options. This combination of experience, quality, and variety positions us uniquely in the market, ready to become a favorite among the coffee-loving community of Charlotte.
Since our founding on January 6, 2024, we’ve made significant strides as a Limited Liability Company. Our journey began with the essentials: developing a company name that resonates with our vision, designing a logo that reflects our brand, and securing a great location that meets the needs of our customers and our business. These accomplishments are just the beginning of our story—one that we are excited to continue writing with our community in Charlotte.
The Coffee Shop industry in the United States is currently a thriving market, with an estimated size of over $45 billion. This figure reflects the growing popularity of coffee culture and the increasing demand for specialty coffee beverages among consumers. With a steady increase in coffee consumption over the years, the industry is expected to continue its growth trend in the coming years.
One of the key trends in the Coffee Shop industry is the shift towards customization and personalization. Consumers are looking for unique and personalized experiences when it comes to their coffee choices, driving the demand for specialty coffee shops like BeanBrews Corner. With a focus on providing high-quality, customizable coffee options, BeanBrews Corner is well-positioned to capitalize on this trend and attract a loyal customer base in Charlotte, NC.
Furthermore, the increasing preference for convenient, on-the-go coffee options has also been a driving force in the industry. With more consumers opting for quick and efficient coffee solutions, BeanBrews Corner can leverage this trend by offering fast service and grab-and-go options for busy customers. By aligning its offerings with the current market trends, BeanBrews Corner can establish itself as a competitive player in the Coffee Shop industry in Charlotte, NC.
Below is a description of our target customers and their core needs.
BeanBrews Corner will target a diverse range of customers, with local residents forming the core of its clientele. These individuals, seeking convenience along with quality coffee and a comfortable space to relax or work in, will find BeanBrews Corner especially appealing. The shop will tailor its offerings to meet the preferences and needs of this group, ensuring a steady flow of patrons from the surrounding neighborhoods.
Commuters and professionals working in or near Charlotte will also constitute a significant customer segment for BeanBrews Corner. The shop will provide a quick and efficient service for those in need of a morning coffee fix or a casual meeting spot. By offering Wi-Fi and work-friendly spaces, BeanBrews Corner will cater to the demands of this busy demographic, establishing itself as a go-to spot for both convenience and quality.
Moreover, BeanBrews Corner will also attract students and young adults looking for a cozy place to study, socialize, or enjoy artisan coffee. This segment values atmosphere as much as the quality of the coffee, and thus, the shop will create a welcoming and vibrant environment. Special promotions and events aimed at this demographic will further ensure their loyalty and frequent visits.
BeanBrews Corner provides high-quality coffee that meets the expectations of residents with a discerning taste. Customers can savor an array of expertly crafted beverages, ensuring that their desire for premium coffee is fully satisfied. This commitment to excellence sets the foundation for a loyal customer base that values superior taste and quality.
In addition to serving top-tier coffee, BeanBrews Corner creates a welcoming atmosphere where individuals and groups can gather, work, or relax. The shop offers comfortable seating and complimentary Wi-Fi, catering to the needs of remote workers, students, and casual meet-ups. This environment encourages customers to spend time enjoying their coffee, fostering a sense of community and belonging.
BeanBrews Corner understands the importance of convenience for its customers. The coffee shop provides options for quick service, including online ordering and a mobile app for fast pick-ups. This ensures that even the busiest customers can enjoy their favorite beverages without significant delays, meeting the modern need for efficiency and time management.
BeanBrews Corner’s competitors include the following companies:
Summit Coffee – SouthPark:
Summit Coffee – SouthPark offers a wide variety of coffee blends and specialty drinks, as well as a selection of baked goods and light bites. Their price points cater to the mid-range consumer, providing a balance between affordability and premium quality. The revenue generated by Summit Coffee – SouthPark signifies a strong presence in the Charlotte market, with growth reflecting a loyal customer base and effective marketing strategies.
Summit Coffee – SouthPark operates primarily in the SouthPark area, serving a diverse clientele that includes young professionals, families, and students. Their key strength lies in their commitment to sustainability and community involvement, which resonates well with their customer segment. However, their location, while advantageous for reaching a specific demographic, may limit their geographical reach compared to competitors with multiple outlets.
Mugs Coffee is known for its cozy atmosphere and a broad selection of coffee and tea options, alongside a variety of sandwiches, pastries, and vegan options. They position themselves at a competitive price point, appealing to budget-conscious consumers without compromising on quality. The revenue of Mugs Coffee suggests a steady flow of regular customers and a positive reception in the local market.
With its location in a bustling neighborhood, Mugs Coffee attracts a mix of students, freelancers, and local residents looking for a comfortable place to work or relax. One of their key strengths is the welcoming environment and free Wi-Fi, making it a popular spot for work and study. A potential weakness for Mugs Coffee is the limited seating capacity, which can deter larger groups or peak-hour customers.
Thousand Hills Coffee:
Thousand Hills Coffee prides itself on its direct trade coffee, offering a premium range of single-origin coffees and artisanal blends. Their price points are on the higher end, targeting coffee connoisseurs and those willing to pay a premium for ethically sourced beans. The revenue trends for Thousand Hills Coffee indicate a niche but growing market share, benefiting from the increasing consumer interest in sustainable and ethical consumption.
Thousand Hills Coffee serves the greater Charlotte area, with a particular focus on the upscale market segment, including professionals and ethically conscious consumers. Their key strength is their commitment to quality and ethical sourcing, which distinguishes them from competitors. However, their premium pricing and niche focus could limit their appeal to a broader audience, potentially impacting their market reach.
At BeanBrews Corner, our commitment to quality sets us apart in the vibrant Charlotte coffee scene. We pride ourselves on making better coffee than our competition, a claim rooted in our meticulous selection of beans and our perfected brewing techniques. Our baristas are artisans, trained in the craft of coffee making, ensuring each cup exceeds our customers’ expectations. This dedication to quality is not just a promise but a reality that can be tasted in every sip. Our customers come back not just for the coffee, but for the assurance of excellence that comes with every visit.
Furthermore, our variety is unmatched. We offer an extensive range of coffee and tea varieties, catering to the diverse preferences of our community. Whether a customer seeks the comfort of a classic espresso or the adventure of trying a new, exotic blend, we have something to satisfy every palate. This extensive selection allows us to provide a unique experience for each customer, making BeanBrews Corner a destination for both coffee aficionados and casual drinkers alike. Our variety extends beyond beverages; our cozy, welcoming space is designed to suit a range of needs, from a quiet spot for studying to a comfortable venue for social gatherings.
In addition to our superior coffee and wide variety, our location offers an added advantage. Situated in a convenient spot in Charlotte, we are easily accessible to both locals and visitors, making us a popular choice for anyone in search of quality coffee in a comfortable setting. This strategic location, combined with our commitment to excellence and variety, positions BeanBrews Corner as a leading coffee shop in the area, inviting more customers to discover the unique experience we offer.
Our marketing plan, included below, details our products/services, pricing and promotions plan.
Products and Services
At BeanBrews Corner, customers can indulge in a variety of meticulously crafted coffee beverages. The coffee menu encompasses everything from the classic espresso to more contemporary concoctions, ensuring there’s something for every coffee enthusiast. With an average price point of $3 for a basic coffee to around $5 for more intricate beverages, patrons can enjoy high-quality coffee without breaking the bank.
Aside from coffee, BeanBrews Corner offers a broad selection of teas to cater to non-coffee drinkers or those simply in the mood for something different. From traditional black and green teas to herbal and fruit-infused blends, the tea selection is designed to satisfy a wide range of palates. Prices for tea beverages are generally in the range of $2 to $4, making it an affordable option for tea lovers.
Complementing the beverage options, BeanBrews Corner also boasts an assortment of pastries and bakery items. Whether customers are in the mood for a sweet treat or a savory snack, the bakery section offers fresh, daily-made options including croissants, muffins, and scones, with prices averaging between $2 and $5. These bakery items are perfect for pairing with a cup of coffee or tea.
For those seeking a more substantial meal, the coffee shop also serves a variety of sandwiches and snacks. From gourmet sandwiches to wraps and salads, there’s something to satisfy any appetite. These menu items are ideal for lunch breaks or a quick, healthy snack, with prices ranging from $5 to $8, offering both value and quality.
Last but not least, BeanBrews Corner prides itself on its specialty drinks menu, which includes a range of unique and seasonal beverages. These specialty drinks are a testament to the creativity and passion of the baristas, showcasing flavors and combinations that can’t be found elsewhere. With an average price of $4 to $6, these specialty drinks offer a unique experience for those looking to try something new and exciting.
In summary, BeanBrews Corner caters to a wide range of tastes and preferences with its extensive menu of coffee and tea beverages, pastries, sandwiches, and specialty drinks. With its focus on quality, affordability, and variety, it’s the perfect spot for anyone looking to enjoy a delicious beverage or snack in a welcoming atmosphere.
BeanBrews Corner embraces a comprehensive promotional strategy to attract a vibrant customer base. At the heart of its efforts lies a robust online marketing campaign. The coffee shop leverages social media platforms such as Instagram, Facebook, and Twitter to engage with potential customers. By posting captivating content, including high-quality images of their coffee and pastries, BeanBrews Corner will build a strong online presence. Moreover, the shop will utilize targeted ads to reach coffee enthusiasts within Charlotte, NC, ensuring that their marketing efforts resonate with the local community.
In addition to online marketing, BeanBrews Corner will implement several other promotional tactics. The coffee shop will initiate a loyalty program to encourage repeat business. Customers will accumulate points with every purchase, which they can redeem for discounts or free items. This program not only incentivizes frequent visits but also fosters a sense of belonging among customers.
Furthermore, BeanBrews Corner will harness the power of local partnerships. By collaborating with nearby businesses and community organizations, the shop will gain exposure to a broader audience. These partnerships could include coffee pop-ups at local events or offering exclusive discounts to employees of partner organizations. Such collaborations will bolster BeanBrews Corner’s visibility and reputation within the community.
Email marketing will also play a crucial role in BeanBrews Corner’s promotional efforts. By collecting email addresses both in-store and online, the shop will send out regular newsletters. These newsletters will feature new products, special promotions, and upcoming events, keeping customers informed and engaged.
To cap off its promotional strategy, BeanBrews Corner will host a grand opening event. This event will not only serve as a celebration of the shop’s launch but also as an opportunity to showcase its offerings to the community. Live music, free samples, and special deals will attract a large crowd, generating buzz and excitement around the brand.
In summary, BeanBrews Corner employs a multifaceted promotional strategy encompassing online marketing, loyalty programs, local partnerships, email marketing, and a grand opening event. By executing these tactics, BeanBrews Corner will attract and retain a loyal customer base, establishing itself as a cherished destination for coffee lovers in Charlotte, NC.
Our Operations Plan details:
- The key day-to-day processes that our business performs to serve our customers
- The key business milestones that our company expects to accomplish as we grow
Key Operational Processes
To ensure the success of BeanBrews Corner, there are several key day-to-day operational processes that we will perform.
- Inventory Management: We continuously monitor our stock levels to ensure we have all necessary ingredients and supplies, such as coffee beans, milk, and paper cups. This enables us to serve our customers without delay.
- Quality Control: Daily checks are performed on our coffee machines and grinders to maintain the highest quality of coffee. We also taste our coffee throughout the day to ensure consistency in flavor.
- Customer Service: Our staff engages with customers in a friendly and helpful manner, taking orders accurately and providing recommendations when asked. We ensure a welcoming atmosphere for all customers.
- Cleanliness and Hygiene: Regular cleaning schedules are maintained throughout the day to ensure the shop, including the kitchen and seating areas, is clean and hygienic. This also includes sanitizing surfaces and equipment regularly.
- Order Fulfillment: We efficiently manage the queue and prepare orders promptly while ensuring that every coffee served meets our quality standards. This minimizes wait times and improves customer satisfaction.
- Financial Management: Daily sales are tracked, and expenses are monitored to manage the shop’s budget effectively. This includes performing cash handling duties and preparing deposits.
- Staff Management: We schedule staff shifts to ensure adequate coverage during peak hours and manage the workload effectively. Staff training sessions are also conducted regularly to improve service quality.
- Marketing and Promotion: We engage with our customers on social media platforms to promote our daily specials and upcoming events. This helps in building a community around our brand and attracting new customers.
- Feedback Collection: We encourage customers to provide feedback on their experience and suggestions for improvement. This information is used to make necessary adjustments to our service and offerings.
- Energy and Resource Management: We implement measures to reduce energy consumption and waste, such as using energy-efficient appliances and recycling, to ensure our operations are sustainable.
BeanBrews Corner expects to complete the following milestones in the coming months in order to ensure its success:
- Securing a Prime Location : Identify and secure a lease for a location that is visible, accessible, and situated in a high-traffic area within Charlotte, NC, to ensure a steady flow of potential customers.
- Obtaining Permits and Licenses : Successfully navigate the local regulatory environment to obtain all necessary permits and licenses required to legally operate a coffee shop in Charlotte, NC. This includes health department permits, business licenses, and any other local requirements.
- Building Out the Coffee Shop : Complete the interior design, purchase, and installation of all necessary equipment and furniture to create a welcoming and efficient space for customers. This also includes ensuring the space meets all health and safety standards.
- Hiring and Training Staff : Recruit, hire, and thoroughly train a team of baristas and support staff who are passionate about coffee and customer service. This team will be crucial in creating a positive customer experience and building a loyal customer base.
- Marketing and Promotional Activities : Implement a strategic marketing plan that includes a grand opening event, social media campaigns, and local community engagement to generate buzz and attract customers to the shop.
- Launch Our Coffee Shop : Officially open BeanBrews Corner to the public, ensuring that all operational, staffing, and marketing elements are in place for a successful launch.
- Establishing Supplier Relationships : Secure relationships with high-quality coffee bean suppliers, local bakeries, and other necessary vendors to ensure a consistent and premium product offering.
- Implementing a Customer Loyalty Program : Develop and launch a loyalty program or system to encourage repeat business and build a dedicated customer base.
- Monitoring and Adapting Operations : Regularly review operational efficiency, customer feedback, and financial performance to identify areas for improvement and adapt strategies accordingly.
- Get to $15,000/Month in Revenue : Reach the critical financial milestone of generating $15,000 in monthly revenue, which indicates a growing customer base and operational success. This will involve continuously optimizing the menu, pricing strategies, and marketing efforts to increase sales.
BeanBrews Corner management team, which includes the following members, has the experience and expertise to successfully execute on our business plan:
Benjamin Taylor, CEO
With an impressive track record in the coffee shop industry, Benjamin Taylor brings a wealth of experience to his role as CEO of BeanBrews Corner. His previous success in running a coffee shop demonstrates his deep understanding of the business, from operations to customer satisfaction. Benjamin’s leadership skills, combined with his passion for coffee and commitment to excellence, make him uniquely qualified to lead BeanBrews Corner towards lasting success. His experience not only in managing day-to-day operations but also in strategic planning and execution, places BeanBrews Corner in capable hands.
To achieve our growth goals, BeanBrews Corner requires a strategic investment in marketing, product development, and further establishment of our community presence. This investment will support our expansion plans, including enhancing our existing location, extending our product range, and implementing innovative marketing strategies to attract a broader customer base. Our financial strategy is designed to ensure sustainable growth while maintaining our commitment to quality and community engagement.
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