A credible financial plan will compare projected finances of the venture to that of similar existing businesses. The plan can be used as the basis for a detailed operating budget and to set objectives that must be achieved if the business is to be successful.
In essence, when you create financial assumptions for a business, you make the best assumptions possible about:
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Revenue: Based on your market analysis and your marketing and sales strategy, estimate reasonable sales volume and revenue growth for the company over time.
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Costs: There are three main types of costs to consider and include.
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Start-up costs: These are expenses that must be incurred before the business starts operating, such as real estate or equipment purchases.
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Fixed expenses: These are expenses that do not change, or vary, based on the amount of sales, such as insurance or professional services.
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Variable expenses: These are expenses that fluctuate directly with the volume of business, such as labor or raw materials.
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