Do you know your financial projections?
Having financial management with business income and expenses is a good way to determine how much your business will be worth within the next 3-5 years.
In the past, I use to just look at funds coming into my business and how much was going out. But I quickly had to learn that each expense had to be categorized on a weekly
or monthly basis. Knowing the increase amount of my expenses, the volume of monthly sales, and yearly vs monthly costs of subscriptions helped me to understand
the future profits of my business. This helped to calculate my future earnings and expected increase in sales based on industry growth. Lenders and investors want to see how
profitable your business will be as expenses continue to increase as demand increases.
How to calculate your projections:
Know how much you are spending to make and sell your product or service.
Research how much your sales are expected to increase within the next year. Look for over 3% increase based on demand or consumer trends.
Determine if your Cost of Goods Sold (COGS) is more than 25% of your budget and compare that to your sales volume.
Know what your profit margin is as it will help determine how much it cost to run your business compared to yearly profits. The higher the profit margin the better.
