A Simple Model To Answer The Question: Do You Have A Plan To Make Money?

I’ve designed a way for you to really, really, and I mean, really, know if your business operation, as you now have it, can be the profitable success you and I want it to be. It’s called Bert’s financial forecasting form or simply, for the sake of this blog, the “model.” And the beautiful part of this model is that, should you want to view a variety of scenarios, like balancing pricing, marketing and volume, the model automatically updates your expenses and profit.

After my 30-plus years of working with entrepreneurs and startup business owners, I know that the most daunting part is the financials, and expected profits. It’s technical, involves figures that need to add up, and it’s part of the business that’s boring, causing even the mightiest of us to tremble.

This model is meant to reduce the 90% failure rate of many new businesses. Many business owners have great ideas and enthusiasm, but sometimes take a blind eye to the profit and expenses part. They know they have to, but they procrastinate, ignore it, and that’s the problem. This model makes that part easy to work with and understand.

The idea for it came when a colleague began a financial workshop with this simple, hand-written sign.

Sales – Costs = Profits

He explained the sign’s simple message, and stressed that the success of a startup is, at the end of the day, how much money you have.

An Example

I have a client, and she runs a home-based writing business. She came to me saying, “Bert, I want to do this business from home, make my own hours, and do the work I want to do. But how do I know how much work to go after so I can pay my bills?”
All I needed was a few questions answered, such as, “how many hours can you devote to your business?” And by knowing this, I was able to calculate how much money she can make based on her availability and rates; I also reminded her that we only have so many hours in a day and so many weeks in the year and can only charge so much per hour. One generally cannot work more than 40-50 hours per week.
Once my clients see this model in action, they are instantly relieved, not only by its simplicity, but they know that if their business changes and grows, the model changes and grows with them.

Plus, as a new business starts up, the business owner needs to be thinking about money, and where it’s coming whether through investors, profits, loans, or some combination. This model also doubles as a financial statement for loan officers and investors should outside capital be needed.

By using this simple form, you can quickly establish a number of base projections for your business, which are also realistic and professional in the eyes of investors.

Questions To Be Answered:

• What are your sales goals?
• What is your average selling price?
• What does it cost to produce one unit?
• What are your marketing costs?
• What are your labor and administrative costs?
• How much money would you like to bring home annually?

Another key advantage is that this model can be created within two business days. No need to be sitting on the edge of your seat while these numbers get calculated. Talk about instant gratification.

To summarize, this financial forecasting form is your secret weapon. It works for any company, it’s easy to understand, super easy to tweak, and will let you sleep easy. You will know that you’ve looked your business potential right in the eye, and have done everything to ensure that your business will be that 10% that make it, and do so very, very profitably.

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Photo credit: Tax Credits via Visual Hunt / CC BY