| Cash Flow Projections, also called Pro | | | | are launching a new product with no |
| Forma's, predict the income and expenses for | | | | historical data. But you can still make an |
| your business in the future. Expenses are | | | | educated guess. Big corporations always do |
| probably pretty straightforward, based upon | | | | pro forma's when launching a new business or |
| historical expenses and the projects and | | | | a new product, based upon historical data of |
| marketing campaigns you plan to run in the | | | | their business and other similar businesses, |
| future. The struggle for most small business | | | | their business and marketing plan, and, |
| owners is in predicting income -- but with | | | | frankly, educated guess. You can do this too. |
| these tools, you should be able to create | | | | |
| projections that will be useful to your | | | | Review your marketing and sales funnel or |
| business. | | | | your sales process. If you get a certain |
| | | | number of visitors to your website or store, |
| Your cash flow projections should be made on | | | | place a certain number of phone calls, or |
| a month to month basis, but you may also want | | | | schedule a certain number of free |
| to prepare quarter-by-quarter reports. I find | | | | consultations, what is the typical percentage |
| for my business, the month-to-month income | | | | of those people who convert to be on your |
| and expenses fluctuate greatly, but | | | | list, or convert to buy your product or |
| quarterly, trends are obvious. | | | | service? How much is the average sale? How |
| | | | long does it usually take to get the money? |
| 1. Expenses | | | | If you are not sure, make an educated guess, |
| | | | based upon what is typical in your industry. |
| First, get expenses out of your way. Using | | | | Guessing is okay, because you will be testing |
| both your historical expense figures and your | | | | and refining your guesses each week at your |
| business & marketing plan (specifying | | | | weekly Money Meeting. |
| expenses for the future), determine your | | | | |
| average monthly overhead, and how that | | | | Based upon how many visitors or calls or |
| overhead is spread out over months. For | | | | meetings you are having this week, how many |
| example, some overhead is the same from month | | | | of those usually convert, and how long it |
| to month, like your internet access bill, | | | | usually takes to get the money, you can then |
| your virtual assistant retainer, or your | | | | make an educated guess on how much income you |
| rent. Even overhead that fluctuates from | | | | will have next week, next month, and next |
| month to month, like long distance and office | | | | quarter. |
| supplies, has a monthly average. | | | | |
| | | | Similarly, based upon your marketing and |
| Other overhead only occurs occasionally, like | | | | promotion plans, how many visitors or calls |
| your Holiday card mailing, trade shows, and | | | | or meetings do you predict you will have next |
| insurance bills. For those expenses, record | | | | week or next month, resulting in sales the |
| when the payments will become due in a | | | | month or two after that, etc. |
| particular month, since you will need to set | | | | |
| aside funds ahead of time to pay for those | | | | You may want to create two or three scenarios |
| larger-than-normal bills. You may want to set | | | | -- a worst case, an average, and a best case |
| aside money for these bills every month in a | | | | -- especially if you do not have good |
| separate account, so when the bill arrives | | | | historical data for your business. |
| you already have the cash on hand. For | | | | |
| instance, if you have a $2000 once-a-year | | | | 3. Test Your Guess |
| payment, set aside $166.67 each month in your | | | | |
| business savings account to pay the bill. | | | | The secret in using these educated guess |
| | | | numbers is that they must be adjusted |
| Once you have your expense reports done you | | | | constantly, based upon new information. Each |
| can determine your true monthly overhead, | | | | week, look at your Promotion & Sales Report |
| factoring in the monthly amount that needs to | | | | and your Cash Flow Projections, to see if you |
| be set aside to pay for occasional expenses. | | | | are on track for what you had planned. Not |
| This is your break-even point -- if your | | | | only can you make adjustments to your |
| business is still young and not yet | | | | Projections based upon real information, but |
| profitable, this may be what you are shooting | | | | you can decide to increase your promotion, |
| for each month, at a minimum. | | | | make more phone calls, or change your sales |
| | | | page on your website, when the downturn first |
| 2. Income | | | | starts to occur. By keeping on top of your |
| | | | data every week, you will never be surprised |
| Now you must attempt to predict your income. | | | | at the end of the month. |
| Yes, your business may be brand new or you | | | | |