How in holy hell do I do the financial part of the business plan?

[WhatHo]

I have all the necessary figures but I have absolutely no idea how to get them into some kind of order and to show projected profit. They are currently on a piece of paper saying things like: 'postage, £10 per parcel plus 5% fuel excess'.

I know I can do it on Xcel spreadsheet but how do I go about it? The spreadsheet has to have equations, right?

Where do I even start???

It's just a list

12 columns for the year - 1 per month

Heading (1) projected income pm e.g number of items you expect to sell x price per item

Heading (2) projected outgoings pm

wages
postage
purchases
fuel etc

deduct 2from 1 - that will give you your forecast profit.

If you need to do cash flow as well, then it's the same thing but you need to put things in the month you pay .(i.e hand over the cash), rather than the month you incur the expense.

e.g postage I guess you pay at the time but you might have credit from some suppliers and pay a month in arrears, or your customers might pay you in arrears.

If all your sales and purchases are on a cash basis then cashflow is the same as profit

It's eCommerce, a farm produce site so will have sec-pay or similar on the site and it will bill the customer when I send the meat box.

Some local deliveries will be done by me, but obviously I simply won't know how many. Do I just basically make it up?

And where do I include the start-up costs like building the website?

And thank you for your help!

Maybe see if your local adult education offer business or start up courses? Sounds like you are starting totally from scratch, so could be a good investment.

Yes! You make it up - that's why most business plans aren't worth the paper they're written on!

If you do it properly you will have done extensive market research so you know more or less what you are going to sell, but it will always be a guesstimate.

Again, ideally you would do best, ok and worst case scenario forecasts.

For cashflow, the start up costs go in the month you pay for them.

For profit forecasts you can do it two ways. Either put it all at the start or spread the cost over the useful life of the asset. e.g. if you expect the website to be fine for 3 years without any further work, divide the cost by 36 and put 1/36 in each month for the first 3 years

Personally I'd show it as a start-up cost at the beginning so you can see how long it will be before you make a true profit.

There are some good templates on the Prince's Trust web-site

Thanks rwepi that's great. I feel reassured that it is just educated guessing.

Quint it's definitely an idea, but I'm loathe to spend money until I know whether the bsuiness is going to be viable, by doing a business plan. It's all a bit chicken and egg

The first reply was spot on. I would add that cash flow forecasting is an absolutely critical thing to do and to get right.

Using the same format (income then all the outgoings) put the amounts in the exact day that the cash comes in or leaves.

Why is it critical? If for example you pay your wages on day 15 of the month, you need to make sure you have enough cash in the business to pay those wages by that date.

At the bottom of each column, add up the income/outgoings for the day, and add it to the amount you had from the previous day. Eg total tenner cash at end of previous day, income 15 outgoings 20 would mean that end of day 2 you have (15-20+10) 5 cash.

Future periods would be your estimate (called a forecast) and if you see any days where it's a negative, you need to act. The cash flow forecast give you the ability to act now, so that you don't get trapped into running out of money.

Previous periods would be actuals. After a few weeks/months you should be able to see a trend, which will inform your forecasts. eg if you consistently see income spikes on a Saturday, you can build that into your forecast.

Sorry this is so long. Cash flow issues (running out of money) are the biggest cause of startups failing. Profit is important, but cash is king :)