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?