How To Project Startup Revenues & Expenses (Financial Projections) in a Business Plan
How to calculate revenue projections
Projected revenue = projected income – projected expenses
You can use the steps listed below to calculate your revenue projections:
1. Estimate how much youre going to sell
The first step is to project how much of your goods or services you’ll sell in the allotted time. You might need to have a thorough understanding of the market in which your company competes to accomplish this.
For instance, it might be useful to understand how toys sell differently during different seasons and how well they are currently selling overall if your business sells toys. For instance, if you sold 60,000 toys last year and anticipate selling 25% more this year. That means you anticipate selling 75,000 toys in the upcoming year.
2. Calculate projected income
Your estimated total sales multiplied by the price you charge for each good or service you sell will give you your projected income: Projected income = Estimated Sales * Price of Each Good or Service
Once you have determined how much you expect to sell, you must determine the price of each good or service. Using the same example, if you are aware that each toy costs $4, you can multiply the cost of your product by the anticipated sales volume. Your anticipated income in this example is $300,000 because 4 x 75,000 equals $300,000.
3. Calculate projected expenses
You can determine your projected expenses once you’ve determined your projected income. To do this, you must determine the cost of producing your company’s goods or services.
Using the same example, if your business sells toys, you would need to calculate the cost of production for each toy and multiply that by your anticipated sales. Then you would need to determine how much you pay your employees and any additional costs your business may incur (rent, utilities, raw materials, etc.). ). Then add all of those numbers together.
For example, each toy costs $0. 20 to make. That figure equals $15,000 when multiplied by your anticipated sales of 75,000. You pay your employees $70,000 a year in wages, leaving you with an additional $4,000 in other miscellaneous expenses. These numbers add up to 15,000 + 70,000 + 4,000, which equals $89,000 in anticipated costs.
4. Subtract projected expenses from projected income
The final step is to simply deduct your expenses from your income once you have your projected income and expenses.
Your toy company’s revenue projections would be 300,000 – 89,000, or $211,000, if it anticipates $300,000 in revenue and $89,000 in expenses.
What are revenue projections?
Revenue forecasts provide an estimate of how much money a business will make over a specific time period. For instance, if a business wanted to forecast its revenue for the upcoming month, it could create a revenue projections report that included information on how much they had spent and sold during the previous month.
How to calculate revenue projections using spreadsheets
Here is how to calculate revenue projections using spreadsheets:
1. Calculate projected sales, income and expenses
Utilizing the first three steps outlined in the section above, estimate your sales, income, and expenses in order to determine your projected revenue.
2. Set up spreadsheet labels
It’s crucial to make labels for your calculations before entering numbers into a spreadsheet. Creating labels in the first row of your spreadsheet is a quick way to accomplish this.
You could make the labels for the revenue projections example as follows:
2. Assign the numbers you know
You can assign your projected income and expenses to the spreadsheet’s labeled cells once you’ve calculated them. For instance, enter the anticipated income in cell B1, “Income,” the anticipated sales volume in cell D1, “Estimated sales,” and the anticipated expenses in cell C1, “Expenses.” “.
You could enter one to represent your first year in business under cell A1, “Year,” and then proceed down the row chronologically for each succeeding year.
3. Create your formulas
You can create the formulas to calculate the other numbers once you have added your known numbers to the spreadsheet:
Enter “=B2-C2” without the quotation marks in cell F2 under “Projected Revenue” for the first year. This will subtract the numbers you entered under “Income” and “Expenses” in that row, and the result will be entered in the corresponding cell.
For instance, the formula would be as follows in year one if your income was $60,000 and your expenses were $5,000:
$60,000 – $5,000 = $55,000 in projected revenue.
Simply enter the appropriate cell numbers into the formula for the ensuing years. For year four, for instance, the formula would be “=B5-C5” in cell F5, moving down the row.
You will need data for at least the first two years of business in order to calculate the sales change percentage.
Once you’ve got those, enter “=(D3-D2)/D2 * 100)” without the quotation marks in cell E2. In this formula, the second year’s estimated sales in cell D3 are subtracted from the previous year’s sales in cell D2, and the difference is divided by the previous year’s sales. This formula determines whether your estimated sales will increase or decrease. Simply put, multiplying by 100 makes the percentage easier to read and comprehend.
For instance, the formula would be as follows if your predicted sales for years one and two were 5,000 and 7,000, respectively:
(7,000 – 5,000)/5,000 * 100) = 40% increase in sales.
Simply adjust the cell numbers for any additional years you wish to calculate. For instance, the formula in cell E5 in year four would be “=(D5-D4)/D4 * 100” “.
How do you do revenue projections in Excel?
- Open an Excel sheet with your historical sales data.
- Choose information from the two columns with dates and net revenue information.
- Click on the Data tab and pick “Forecast Sheet.”
- Enter the date your forecast will end and click “Create.”
- Title and save your financial projection.
How do you calculate projected increase in revenue?
Revenue growth projection and calculation are crucial metrics for assessing the health of your company. The most recent period you are considering (month, quarter, or year) is subtracted from the preceding period, and the result is divided by the same preceding period to determine your current revenue growth.