The profit and loss statement on your business plan is also known as the income statement. This is a vital piece of the business plan as a whole and lets potential investors see exactly what you expect your business to profit or lose.
Using your profit and loss statement you can spell out exactly what it is you expect your revenues and expenses to be for a certain amount of time. By calculating these numbers you can make a determination whether or not your business will experience a profit or a loss for the resulting time period.
This is important for the potential investors to see as they will then have a better understanding of what it takes to make your business operate and it allows them to form a better opinion of whether or not they want to invest in your venture. Here is what should be included in your business plan’s profit and loss statement:
• Projected Sales: For many businesses, especially start-ups the sales will be projected. Be realistic here but show what you think your sales will be in terms of units sold, the price paid for the units on a retail level, the net price paid, and finally the gross revenue.
• Cost of Goods Sold: Include everything that is included in making the units available for sale. Items to include are manufacturing costs, shipping costs, packaging costs, and the like.
• Controllable Expenses: This will include any and all business related expenses that can fluctuate and are incurred in order to keep the business running. Items to include here are salaries, benefits, cost of any company vehicles, cost of company utilities, advertising and marketing costs, office supplies, and any repair or maintenance.
• Fixed Expenses: These are the expenses that are the same every month and do not fluctuate like the controllable expenses. Items to include are rent, loan payments, insurance, licenses, and any other fixed expenses.
Once you have all your items listed above you will subtract the total of all your expenses, or liabilities, from your total gross income and the resulting number will be your estimated net profit or loss before taxes.
Then be sure to include all of your taxes such as sales tax, property tax, excise tax, etc. Take your total taxes and subtract that number from your estimated net profit or loss and you will have your estimated net profit or loss after taxes.
It is of course better in the eyes of a potential investor if you have an estimate profit versus a loss, but be cautious with your projections as you don’t want to come off too unrealistic. Investors are generally savvy people and will expect that you use your best judgment in the preparation of your financials.
In fact it may be to your advantage to be more on the conservative side when it comes to any kind of projections. In the business world it is always a good thing to beat expectations, but not always so good when you miss, especially if you miss by a lot.
Source by Jason Kay