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Free pro forma template for Engineering

hey if you're looking to create a set of financial projections for an existing business where you have historical financial data and you want to use that to create a Baseline and then forecast or project off of that base then you've come to the right place because we have built a really powerful Financial projection template built specifically for existing businesses and I'm going to walk you through how to use this the first thing I'm going to do is just kind of run through it real quick and show you everything that's here so you get an idea of what this template will produce for you and then I'll kind of go back and walk through it on a more detailed level for you in a step-by-step manner so before I dive into that too much my name is Adam huxema I'm the co-founder of projection hub and over the last decade we've helped over 50 000 entrepreneurs create Financial projections for all sorts of different Industries and businesses typically for potential investors or lenders or simply just for internal planning and so today I'm going to walk through this existing business template okay so I'm starting on the at a glance tab so this is kind of the end of the process once you fill everything out you'll get this nice profit and loss at a glance it kind of summarizes your income statement here you've got your breakdown of year one expenses some key ratios and some graphs and charts there that you'll be able to use you'll get a five-year income statement summary five-year cash flow summary five-year balance sheet summary and then you get the income statement forecast broken down by month for each of the five years as well as a cash flow and balance sheet summary broken down by by month for each of the five years the other thing you're going to get that we have added into this template is a business evaluation tab and so if you are if you have an existing business and perhaps you're looking to sell your existing business and you want to get a rough idea of what the business might be worth um typically part of that process is going to be creating a set of projections and so what we've done is just built this evaluation tool calculator into our existing business projection template and so what you'll be able to do is use three different methods a book value just kind of cash flow value and a multiple of earnings these are three different valuation methods and the projections will kind of automatically fill in into the calculator as well as there'll be a few of these assumptions these light blue cells that you'll have to enter in yourself and then it will produce three different valuations and also average the three and kind of give you an average business valuation as well which again this is not to be kind of the uh you know certified appraisal or anything like that this is uh to give you a rough idea of what the business might be worth um so that is there as well now um in order to be able to produce all this though we have some work to do on the input side and so I'm going to start walking through in a more detailed level the different input assumptions that you'll need to to walk through all right so I'm starting here on our input assumptions Tab and the first thing you need to know is every cell that's highlighted in blue is an assumption that you can change without breaking anything in the model so you want to put in your company name the projection start year so this is the year that you want the five-year projections to start and then what is the current month and then based on that current month the model is going to automatically set the kind of the balance sheet the last date of the balance sheet so I want you to enter in assumptions for kind of your starting balance sheet as of today as of the start of the projections what does the balance sheet look like and so ask for it accounts receivable and again if you have if you're an existing business you should hopefully have a balance sheet so you just go to your balance sheet and grab your accounts receivable the estimated days sales outstanding this is uh how many days you expect it to take you to collect this account's receivable that your customers owe you so we've said 30 days an inventory balance and then a projected inventory carried as a percentage of sale so this can get a little tricky um if if you uh if you hold five months worth of inventory for example saying 500 percent is it would essentially be five months of inventory that you'd have on hand if you hold you know two weeks of inventory on hand then you would do fifty percent fifty percent of a month right so that's how you'd want to enter in that assumption and then accounts payable is what you owe others and you can find that on your balance sheet as well and this is how many days it's going to take you to pay off that accounts payable you can also put in your initial cash balance and then the paid in capital so this is the the money that has been invested into the business over the life of the business and so you should be able to find this on your balance sheet as well um down in the equity section of your balance sheet but this is what has been invested by you or other investors into the business over time right next you'll want to enter in all of your existing fixed assets so this could be building equipment Furniture if you're a restaurant could be glassware it could be intangible assets as well all these you'll want to enter in the net Book value the value that's on the uh on the balance sheet and then enter in a salvage cost this is what you think the uh the the successes would be worth um at the end of their useful life and then you enter in the number of years you think this uh these assets will continue to be used all right so then that's your existing assets but this is also a projection right this is a forecast and so we have the ability for you to add in a projected future purchases so new equipment you can enter in a date estimated purchase date in the future that you expect to order this equipment or purchase the equipment a price Salvage cost and a life expectancy you can also enter in current loans so loans if you have a current balance you enter in the interest rate and the number of months remaining to pay on that as well as future loans the ones you think you might get in the future you can enter that as well and then any investment that you think you might get in the future maybe you'll make in the future can enter that in here as well all right let's move to the input Revenue tab and there is a good bit of detail here that I'm going to walk you through but it's quite powerful once we get it set up all right so to start with what we're going to do is we're going to set up the different Revenue categories you can have up to four different Revenue categories and really the only reason the real use for the revenue categories is on the reports it's going to on the income statement report here it's going to put your different Revenue line items into one of these four categories okay so you might have like 10 different Revenue maybe you have 10 different products but all of it's going to get put into this one product Revenue line item on the income statement instead of having 10 different lines on the income statement so it's really just a consolidation so you put in the four categories that you you'd want to have all of your Revenue kind of Consolidated under from there you can add in the specific Revenue line items and so you could actually have you know 10 or 20 or 30 different Revenue line items as long as they're all categorized as you know product Revenue Service Revenue right revenue and so on and then you can enter in up to five years of historical Revenue numbers okay so if you have historical revenue and you want to enter in up to five years you can do that here and then also since on the first first tab here we set the current month as April 2023 that means that we have three months of actual results for 2023 already January through March and so what you can do is enter in the actual revenue for the first three months of the year all right so that's entering in the historical Revenue numbers now we need to project a couple things first we need to predict or project forecast uh what how 2023 how the current year is going to end and so we have some different options so it says select your prediction method so we can do a few different things we can annualize the current year so if you select annualize current year it's going to take your first three months of the year and assume that you stay on that exact same pace for the rest of the year so if you stayed at that same Pace how much revenue would you have so that's what it would do out of the box if you did annualize current year but you have the ability to then increase or decrease from that number so let's say well we want to annualize the current year but we think we're going to grow another 25 so so the predicted revenue for 2023 is going to be taking the what you've done in the first three months and increasing it by annualizing it and then increasing it by 25 okay all right so the next option is you can you can average the current year in previous years just one previous year two or three or four or five so you can average previous years to kind of set your Baseline and then increase or decrease from there and then the last thing I'll show you is that you can just enter a manual entry so if you select manual entry from this drop down now it's going to say okay we had 1167 worth of other Revenue here so far in the first three months but we selected manual entry and so what we're going to actually do is just manually enter that says here if you select a manually entry just enter your predicted current year Revenue here so we just think we're going to do 6000 for the year of 2023 so just enter that in and you'll see the predicted revenue is just exactly that 6 000. okay so that is setting your base Revenue kind of for that first year and then from there you have the ability to set these percentage increases or decreases for each year thereafter so for 2024 if you put in five percent 0.5 it's just going to increase 2024 revenue is going to be 2023 Revenue increased by five percent can increase by 20 percent again you can also do manual entry so if if you want to do a manual entry just enter in a number larger than uh than I believe 500 percent I believe is where we have that limit um so if we just said if we entered in like 8 000 here it's going to know that you're not going to grow it it's going to at least assume you're not going to grow at eight thousand percent and so uh it's just going to assume that's a manual entry that that's meant to be a manual entry and it'll set your Revenue at 8 000. and I should mention too that you can put a negative so let's just see what that looks like if we put in a negative percentage it will actually decrease by that percentage of the future here okay and so that's really the the process you do the same thing for each of the following years here and that's it on the revenue so that's how you'll forecast Revenue now on the input expenses we'll have to follow a similar path zoom in here a little bit okay so on the input expenses the first thing is there's this effective income tax right now a lot of times this is just going to be zero so I'm actually going to set the default to zero here because if you're a sole proprietor or LLC or partnership that income's just going to flow through to your personal tax returns if you are a corporation then you may pay corporate income tax and that's what you'd want to enter in here um but since most of our clients are small businesses we're gonna we're gonna assume that zero okay so for the expenses we're going to do a similar process where we set up the categories so we can set up our cost of goods sold categories here so we've got direct materials and that is a type that's inventory direct labor is labor then we've just got other direct costs here set as other then we have other operating expense categories and again these are like the overarching categories so you have the ability to have up to 15 categories so for example how you might use this let's say you have a category for marketing and then within marketing down here so here is where you can enter in your specific expenses and so for marketing you might have billboard ads Facebook ads Google ads all those could have their own line item but they'd all just be categorized we'd pick the marketing category here and then on the financials they'd be Consolidated into that marketing category okay so to show you a couple things here one out of the box you can see how you know there's a handful of blue roads to enter in specific expenses but you've got these little plus buttons over here so if you hit one of these it will automatically add additional rows is you can just you can add more rows if you have more expenses than the initial blue rows out of the box all right so then you'll enter in your you know different expenses from the income statement or tax return and categorize those you can enter in the historical historical numbers you don't have to enter in all the historical numbers if you're really only going to use like last year let's say you're just going to use 2022's numbers to project off of don't worry about entering in all of these other years historical the only reason you'd want to enter in more than one year would be if in the select prediction method here you're wanting to average like average the last five years well then you'd need data for the last five years right so just keep that in mind so that you don't have to do more data entry than you really need to okay so this is really a similar process as with the revenue you'll enter in your expenses for the first few three months of the year here and then you can annualize the current year or average a current year all this is to set up that Baseline of what is your 2023 expense going to be and you can do manual entry and just set a dollar amount as well okay so once we have our 2023 predicted expense we can that we can do a little bit more uh complexity here than with the revenue so you can for expenses you have two options you could select a percent increase so that's similar to our Revenue prediction method we could say okay the expense in 2023 was 12 600. and we think it's in 20 uh 2024 it's going to increase by a percentage and so we'll set that percentage to six percent and so the 2024 predicted expense will be taking 2023 and adding six percent to it but let's say some of your expenses might not uh just increase or decrease by a percentage but there may be more tied to revenue so a common example of that would be a credit card fee a credit card fee credit card processing fee is going to scale with your Revenue it's going to be you know maybe it's between two and three percent of your Revenue um and so what you would want to do in that case instead of saying percent increase in the prediction method you'd say percent of Revenue and then in this drop down you'll be able to select percent of what type of Revenue so maybe you only accept credit cards for the products but the services you you know people send you a check or something like that so you only want it to be you know a percentage of product Revenue or you can pick total revenue so you just say this expense is going to be a percentage of total revenue and it's a credit card fee we're going to say it's three percent not 300. three percent um and it will forecast that so so yeah that that's a little more complexity but some nice flexibility in the way that you could kind of forecast the growth or reduction of expenses um for you know each individual expense line item you can really do this kind of granular um either percent of Revenue or percent increase or decrease and with expenses you might want to decrease some of these expenses and so again you can put a negative percentage here you can put a negative and it will decrease those expenses so you'll do that for 20 24 25 26 27. and that will that will do it on your main operating expenses now there's one more section of expenses I want to show you we have a salaries prediction tool down here so you might put wage expenses up here as one of these line items and that's fine you can do that if you want to get more granular you want to put in the individual positions their salaries taxes benefits what month the position is starting and ending you can do that level of detail the main thing I just want to point out is if you do it here make sure you don't also add those wage expense up here right don't double count and we're going to zero these out because we're going to assume that maybe you are already adding wage expense up here okay so that brings me back to the business valuation calculator here I just want to point out a couple things so what this will know there's a couple nodes here so the calculator is pulling an asset liability and intangible assets from month one of the forecasted balance sheet so remember an input assumptions tab we entered in a bunch of details about our current balance sheet that is what this tool is going to use to be able to pull in your assets your liabilities number your unchangeable asset number but this is grayed out so you can see it's pulling from the balance sheet up here um you can overwrite this so let's say you don't want it to pull from that you just you want to use this business valuation calculator kind of as a standalone thing you've got a balance sheet for the business you just want to enter in asset liability and intangible asset numbers you can override that and do that and that will work on the discounted cash flow evaluation method it is pulling in the projected cash flow after you enter in all your projections it's going to produce a five-year cash flow projection um you know you'll see these cash flow numbers here like here's our net cash inflow of 529 000 here in year one and we'll see that that is pulled in right here so we'll do that for each of the five years let me speak briefly about the future growth rate assumptions here so this is an assumption that you'll need to make you know if you're looking to sell your business your buyer may also have an opinion about what the growth rate should be in the long term you know typically I would say if you look at like what the GDP of a of a country or just a general economic growth um is you know roughly three percent over the last 50 years or something like that um that is roughly uh you know a number that you could probably assume your business is going to grow in perpetuity at the percentage that the economy grows in general and so that's a number you could use for your for your valuation um and then the discount rate assumption is another assumption that makes a big difference in the valuation depending on what you use for both of these numbers and so again this is probably a negotiation between buyer and seller about what number to use I put in 10 as a default because most of our clients are small businesses a lot of times what people will use is the weighted average cost of capital for the discount rate which means how much does it cost to borrow or raise equity for the business and if you are getting an SBA loan even if over the last 50 years you're getting an SBA loan I don't know if SBA has been around that long over the last couple decades if you've been getting an SBA loan a 10 interest rate on SBA loan is probably a little higher than it's been we've been in a lower interest rate environment but 10 is probably a safe number a relatively conservative number the uh yeah so to use that for a discount rate for a small business probably makes some sense or there's some justification why you could argue that would be a number to use um and again we're not a certified appraisal company and so you'll you'll you'll get to argue that with a certified appraiser um about what number to use for growth and discount rates but based on that we'll produce a discounted cash flow valuation method and then on the multiple earnings um the income statement numbers are being pulled from year one of the income summary tab so these are actually your first year of projected income okay so if we come back over here we'll see the first year 2023 was a partial year so some of this was projected right so we see 475 000 in sales that's what it's pulling in as the numbers to use for their earnings so this will allow us to produce an ebitda I mean before it interests taxes depreciation and amortization and then you need to apply a multiple so every industry and business type will have different multiples once they have earnings they'll multiply that multiply the earnings by some multiple industry multiple to come up with a valuation and again this is a negotiation point between buyer and seller you can Google you know if you are a if you have a plumbing company uh serving residential and Commercial clients you can look up business valuation multiple for um residential and commercial plumbing business and you'll probably find different numbers you'll find some high range mid-range low range I recommend putting in you know find three different sources put in all three take an average that you can back up based on some sort of you know enter your URL for the source of where you found the valuation here it's kind of the idea and that will produce a value based on multiple earnings and then we just average the three the book value the discount cash flow value and the multiple earnings business value to come up with average business valuation and that is how this last tab here works and that's really it so that brings us back to that glance where we started if you have any questions about this template please feel free to reach out to support projectionhub.com feel free to go grab the template in the description of the video below and uh again if you have any questions along the way leave a comment in the comment section or reach out to us directly we'll be happy to help all right thanks