Preparing a Projected Profit & Loss Statement
This financial tool helps spell out your revenues and expenses for a particular period of time, and the resulting profit or loss from operations. Like your sales forecast, you should develop a monthly P&L for the projected first year of operations, as well as quarterly projections for the first three years.
In developing your P&L projections, remember that your revenues are your business inflows, while your expenses are your outflows.
For many businesses, your revenues will be your projected sales. However, there are often other streams of revenue, such as memberships (if you sell them), advertising or slotting fees (if you charge them), and any other sources of income for the business.
Your costs will include all your expenses, including rent (or mortgage payments), utilities (electric, phone, etc.), cost of manufacturing (including raw materials and production), employee compensation (salary and perks), and other miscellaneous expenses (such as permits, licenses, memberships or affiliations, etc.).
The rest is simple math. In each month, if your projected revenues are greater than your expenses, you’ll be operating at a profit; if not, then at a loss.
The key here is to again be as realistic as possible. It’s expected that in the first months — even up to the first year — as business may be operating at a loss because of start-up costs.
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