Financial Plan Guidelines

After expending some time, cash, and brain cells, I have a guideline for financial plans:

Work it out from top to bottom

  • With any new idea, plan the financial plan first
  • Quantify in dollars the problem that your new idea solves
  • Look at cost of alternatives to solve the problem
  • Goods costs
  • What is your operating costs?
  • Set a selling price
  • Find the number of immediate customers (with most pain) in the first THREE months
  • What is the cost of customer acquisition? (related to creating awareness and attracting traffic to your business)
  • Cost of sales? (different from customer acquisition and due to closing a deal)
  • What is the revenue in the first THREE months?
  • Is it a recurring sale?
  • Find the cost of retaining a customer
  • Cost of growth for percentage of growth
  • How the cost of customer acquisition/retention changes with your growth?
  • Net profit and gross margin (minimum 50% for technology companies)

You should be able to infer from the financial plan

  • How much investment is needed?
  • When is the break even point?
  • How much more for a faster growth? In how long?
  • Is cost of sales decreasing?
  • Is cost of customer acquisition decreasing?
  • Is gross margin increasing?
 

Bernie

 

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