The Statement of Financial Performance is an element of the Financial Plan, part of writing a business plan. This is a crucial part of the Business Plan, especially for a small business.
The Performance Forecast or Budget will give you a picture or snapshot of your business over any given time. It focusses on the income and the expenses and thus the profit or loss. This statement can vary in appearance depending on the type of business, but should include the following information:
- Sales
- Cost of Goods Sold
- Gross Profit Margin (Sales Cost of Goods Sold) this is an important factor when pricing your products.
- Operating Expenses all other costs associated with running a business, such as wages, utility bills, administration etc.
- Net Profit (Gross Profit Operating Expenses)
Note: This will need to be broken down Monthly for a period of one year.
First off you need to put together a forecast of Finance Performance (monthly operating budget).
1. One Year
Put together a Statement of Financial Performance Forecast for your first year of trading.
Here you will be forecasting your sales, cost of goods sold, expenses etc. Remember, as mentioned earlier you will need to include the assumptions on which you have based your figures. This could be information from research, quotes, pricing policies etc.
2. Three Year
Put together a Statement of Financial Performance Forecast for your first three years of trading. These do not need to be split monthly, but will be on an annual basis. So, once you have done your first year forecast, total these figures and use that as a basis for your year 2 and 3 forecast.
Dont forget you will need to put further assumptions in for the second and third year.
An easy way to gauge your second and third year figures is to decide how much your business will grow from year to year. For example, do you expect to grow by 10% in the second year? This percentage increase will generally account for things such as inflation and perhaps even wage rises.
If so, calculate your second years figures based on a 10% increase in the first years figures.
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