Three years of profit, planned on one page of assumptions

What's inside

• Assumptions. Every input on one page: starting monthly revenue, monthly growth in year one, growth in years two and three, cost of goods and marketing as a share of revenue, seven fixed monthly costs, a yearly cost increase, interest, depreciation and a tax rate.
• Projection. Revenue, cost of goods, gross profit and margin, operating expenses, operating profit, interest, depreciation, tax and net profit. Year one by month, then each of the three years.
• Break-even. The monthly revenue you need to cover fixed costs, and the first month you make an operating profit.
• Chart. Revenue and net profit by year.

Why year one is monthly

The SBA's business plan guidance says to include financial projections and, “for the first year, be even more specific and use quarterly — or even monthly — projections.” Monthly detail shows when cash will be tight, before you get there. (SBA: Write your business plan.)

Getting it right

• Start from what you can defend: past sales, signed customers, or a realistic pipeline.
• Make a cautious copy with lower growth and higher costs. If the business only works in the best case, you want to know now.
• Tax is worked out on each year's profit and never on a loss. The monthly figures are that tax spread evenly, for planning.
• The SBA suggests five years of projections. Extend this one if you're applying for an SBA-backed loan. Lenders usually also want a cash flow forecast and a balance sheet.

This is a planning tool, not financial advice. The sample assumptions are only examples.