Financial projection for new business

A financial projection for a new business is a forecast of the company's financial performance over a specific period of time, typically 3-5 years. It's a crucial tool for entrepreneurs and small business owners to plan, manage, and grow their business. Here's a general outline of what a financial projection for a new business should include:

Income Statement (Profit & Loss)

1. Revenue: Estimate the total sales or revenue for each year, broken down by product or service.
2. Cost of Goods Sold (COGS): Calculate the direct costs associated with producing and selling your products or services.
3. Gross Profit: Calculate the difference between revenue and COGS.
4. Operating Expenses: Estimate the costs of running the business, such as salaries, rent, marketing, and insurance.
5. Operating Income: Calculate the difference between gross profit and operating expenses.
6. Non-Operating Income/Expenses: Include any non-recurring income or expenses, such as interest income or debt repayment.
7. Net Income: Calculate the company's net income, which is the bottom line of the income statement.

Balance Sheet

1. Assets: List the company's assets, such as cash, accounts receivable, inventory, property, and equipment.
2. Liabilities: List the company's liabilities, such as accounts payable, loans, and credit card debt.
3. Equity: Calculate the company's equity, which is the difference between assets and liabilities.

Cash Flow Statement

1. Cash Inflows: Estimate the cash coming into the business, such as sales, loans, and investments.
2. Cash Outflows: Estimate the cash going out of the business, such as expenses, debt repayment, and investments.
3. Net Change in Cash: Calculate the difference between cash inflows and outflows.

Key Financial Metrics

1. Revenue Growth Rate: Calculate the percentage increase in revenue from one year to the next.
2. Gross Margin: Calculate the percentage of revenue that is left after COGS.
3. Operating Margin: Calculate the percentage of operating income to revenue.
4. Return on Equity (ROE): Calculate the percentage return on equity, which is net income divided by equity.
5. Cash Flow Margin: Calculate the percentage of cash flow to revenue.

Assumptions and Risks

1. Identify the key assumptions made in the financial projection, such as revenue growth rates, cost structures, and market conditions.
2. Identify the potential risks and challenges that could impact the financial performance of the business.

Example Financial Projection for a New Business

Here's an example of a financial projection for a new business, a small e-commerce company selling handmade jewelry:

Year 1

• Revenue: $200,000
• COGS: $80,000
• Gross Profit: $120,000
• Operating Expenses: $60,000
• Operating Income: $60,000
• Non-Operating Income/Expenses: $0
• Net Income: $60,000
• Cash Flow: $100,000

Year 2

• Revenue: $250,000
• COGS: $100,000
• Gross Profit: $150,000
• Operating Expenses: $80,000
• Operating Income: $70,000
• Non-Operating Income/Expenses: $0
• Net Income: $70,000
• Cash Flow: $120,000

Year 3

• Revenue: $300,000
• COGS: $120,000
• Gross Profit: $180,000
• Operating Expenses: $100,000
• Operating Income: $80,000
• Non-Operating Income/Expenses: $0
• Net Income: $80,000
• Cash Flow: $140,000

This is just a simple example, and your financial projection should be tailored to your specific business and industry. It's essential to regularly review and update your financial projection to ensure it remains accurate and relevant.