By Frausto Smith at September 12 2020 15:38:21
You may not have thought much about your competition or outsourcing some of your work, but things like that will impact your ability to make a profit. And you will find this especially so in the beginning phases of your business. Even you are just opening a lemonade stand in the front yard, you will still need to know what Susie is selling her lemonade for on the next street over!
The expected revenues and expenses for at least a year should be projected in the cash flow section of the Financial Plan. It's better to make conservative predictions rather than be too optimistic when it comes to cash flows. As part of this section, a break_even analysis is essential. This is the "amount of units sold or sales dollars necessary to recover all expenses associated with generating these sales." (NxLevel for Entrepreneurs, 2005) The formula for calculating the break_even quantity is Total Fixed Costs/(Price _ Average Variable Costs).