Page 267 - merged.pdf

CHAPTER 8 MASTERING YOUR MONEY

In doing any kind of projections, certain assumptions must
be made. It is important to make as conservative assumptions
as possible, based on your experience about the business.
This is why it is so important to understand a particular industry
(or a partner who does) before starting a business in it. Here
are assumptions I have made:
• After taking over the retail space in January, it will take

two months of renovations before business can start in
March. So, sales revenue will only be generated in March.
• Half the staff will be hired in February (before the opening)
for preparation work.
• Sales revenue is recorded nett of sales tax (i.e. 7% GST).
In other words, exclusive of 7% tax.
• Cost of goods sold will be 40% of sales revenue

By doing such a projection, you will have specific sales targets
to hit every month and have a specific budget to spend within.
You can also see that you will be able to breakeven on a
month-to-month basis in April (after 4 months) and breakeven
for the year by June. If everything goes according to plan,
you should have an accumulated profit of $16,880 by June.

Projected Cash Flow Movement (6- Months)
However as I have mentioned previously, the Projected Income
Statement tells you very little about the cash that will be moving
in and out of the business. To get a clear picture on your cash
flow, you will have to do a cash flow projection that looks
something like this:

258 SECRETS OF BUILDING MULTI-MILLION DOLLAR BUSINESSES