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my name is Paul barosky and I am the owner of quality business plan and I am often asked by my clients and potential clients you know what goes into my financial statements how do i do my financial projections and why are my financial projections better than you know competitors or better than just your traditional standard SBA website information and so what I'm gonna do is it kind of explains here how we do my financials and why they're so good um you for my most humble of opinions so I've labeled this a financial forecasting a bedtime story with numbers and why I call it a bedtime story is that I'd like to have my financial statements tell a story about you know what the companies are going to do we're just gonna start how it's going to grow and you know in the end we're some benchmarks that the company needs to be financially and all the stuff can be done you know through some good financial projections and before I do that y'all get to sit through a 30-second infamous infomercials spiel about me and my company my name again is Paul barosky MBA doctoral candidate finishing up my doctorates degree website is quality business plan calm and I do business plans business consulting and also financial forecasting as well as web design resume writing and pretty much I do any kind of writing that a business is going to need whether it's a standard operation manual - you know heck emails and stuff like that so so I've got a quitting extensive resume and I also have published a couple books first book is the complete small business funding guide I'm fundraising to 2019 and then I've also published the r-rated guide to fasten your finance class time value money all right so what that said let's dive into how I construct my financials and why they are better than the average bear so when I do my financial I'll almost always start in this example right here from our restaurant I'll always start with identifying the main items you know main menu items or if it's pest control the main services that are going to be sold and once I do that then I come up with some averages you know what are the average what do you think an average day is sales are gonna be so I start with my average day sales and then I'll come up with my percent of sales costs you know so if you sell out one hamburger how much of that burger is you know you have to pay the supplier for you know and we don't put it into percentages because everything when you do your financials everything is a guessing game and you know if you have a rhyme and reason behind the guessing game fantastic if you're just throwing up numbers just throw out numbers because they look pretty oh that's not going to hold water with investor or with a loan office or or an underwriter this process right here starting with the average daily sales and average you know cost for sales it gives us a structure to build upon once I'm done with that I'll then do my labor you know how many men how many employees are you going to have I'm putting you the number of employees here how many managers are you gonna have and then whoever the business owner is you have to get you have to pay yourself too many times a business owner comes to in this and says look I'm not gonna take any salary for the first year well fantastic that's your prerogative but for your financial statements it better be in there because no investor and no bank loan officer is gonna buy that story this you're not gonna take any money out of the company it's not gonna happen put it in there get him getting get in front of the problem so make sure you and that's why I put it in grey right here this is the salary for the owner and then the manager underneath and then the number of employees and then I'll sum it up right here and then a start-up cost this is important now again this is not a you know in-depth breakdown of the startup cost this is just a it's just subsections you know for the front-of-house what is it gonna cost you know for your company for the back-of-house how much money are you gonna need for that information so you give yourself some budgets here and then later on in other tabs you can break out those and you can itemize the list and then once you have the itemized list then you just tie the sum into the structure right here office equipment almost all companies are going to need this and then make sure you talk about your licenses as well and then sum up your total startup cost right here the next segment that I do with my business plans is going to be the monthly fixed cost I'll fill out my monthly cost right here whether it's the rent electric utilities legal advertising and then I'll sum it up what the monthly costs are going to be miscellaneous information cost of capital won't worry about that right now and then your tax rate what if you tax rate and again for the most companies I put 20% all right and so once I get my structure here filled out and this is my information page this information page is going to now complete all of my other documents here I change this information here everything rolls over so for example my profit and loss for the month these revenues right here seventy-five thousand eight fifty two well that aligns right here this seventy three thousand seventy five thousand eight fifty to seventy five thousand eight fifty to four monthly sales so you see how I've got my average daily sales and I operate seven days a week then that rolls into monthly sales right here which I immediately pull over to my first month here and then I grow my revenues I have my cells growth right here I'm projecting a three percent sales growth per month for the next several months well now my revenues are going to grow off of that as well and my revenues are going to grow by three percent if I project my revenues to grow five percent why change this right here and then now my revenues are going to grow to whatever they wanted to be for the cost of goods right here well that's beautiful because I've got mice cost of goods right here twenty percent so my twenty percent is going to hold true right here so no matter what my revenues are my cost of goods are going to be twenty percent of this and then my monthly salary right here all my monthly expenses will we pull those over from our labor section and our monthly fixed costs xyn so that information would go right in here for the expenses so now we've got our daily sales you know summed up for the month we've got our cost of goods lined up with the percentage and then we've got our expenses on a monthly basis once we do that we can now figure out what our net income is going to be after we back out the taxes and so that's how the first month works and then my growth estimates you know then impacts my revenues then we use common sizing right here to estimate what the percentage of the salary and rent utilities are going to be based on sales and now we can project how much the the costs are going to grow now sometimes I'll use a common size for the cost and sometimes I'm just going to say you know what the salary is not gonna change the matter how much I'm a busy you're going to be and so it really depends on how the business owner wants a structured however you know everybody's a little bit different but a lot of the thick costs are gonna stay the same and I project that out once I do might my twelve months and I get my twelve months all the way across and again using my revenue growth three percent I'm able to project all my revenues and then my cost of my labors etc I then roll it might first my one-year profit and loss into my pro forma income statement right here and so you see how we've got the revenues of one point zero seven million here when we go over here and we've got it one point zero seven million here this is sums up so now everything is aligned and it's growing into our income statement and then again we do the same thing we project our revenues for the next five years its cost of goods are going to be the same percentage and then we estimate some growth cost for the expenses that's how you're gonna get a well aligned income statement based on daily sales so so that alignment for the five years starts with a daily sales monthly labor monthly fixed cost goes into the annual and then we project the annual for the next five years and in order to support all that information you know we could throw in some financial some finance ratios we can show a graph here showing what the revenues are doing revenues as compared to that income and we can show how when the revenues are growing than their incomes growing as well we've got return on equity calculated here returned assets which current ratios profit margins and then we can even get into the capital budgeting and show how much the value of the company is you know based on these cash flows based on investment is four hundred and eighty thousand dollars in these cash flows that we've got projected we can anticipate that this company if I write now is worth two point five billion dollars with an internal rate of return to seventy five percent so we can we can take all that information and we can do all kinds of wonderful come financial ratio estimates and kapha budget estimates and then we can do our break-even analysis and we can show you well if our annual revenues are this and our cost of sale or this then our gross margin is this and now we know what sales we need to be able to come up with in order to break even so all this information can be gained just by having your a strong a solid foundation from just one page of information so hopefully this information was helpful for me to show you why these financial statements that I've created and that I use in my business plans and also you know for financial modeling for my customers as well why they're so powerful and if you only need some help with some financial forecasting or financial modeling I please don't hesitate to give me a shout and again my website is quality business plan and my name is Paul Brosky I look forward to working with you thank you