Forecast Revenues and Costs

Stephen Lawrence and Frank Moyes

Graduate School of Business
University of Colorado
Boulder, CO 80309-0419
Financial Plan

 Income Statement
 Balance Sheet
 Cash Flow
 Summary
 Assumptions
 Operating Expenses
Year 1 Year 2 Year 3
Marketing 30 45 65
R&D
Administration
Total 60 90 140
Cost of Goods
Year 1 Year 2 Year 3
Direct 70 130 160
Indirect 30 70 90
Total 100 200 250
Income Statement
Year 1 Year 2 Year 3
Revenue 250 350 500
COG’s 100 200 250
Oper Expenses 60 90 140
 Fixed Assets (Plant)
Year 1 Year 2 Year 3
Assets 200 300 400
Depreciation 140 210 260
Fixed Assets 60 90 140
Working Capital
Year 1 Year 2 Year 3
Receivables 100 200 300
Inventory 50 75 125

Balance Sheet
Year 1 Year 2 Year 3
Receivables 100 200 300
Inventory 50 75 125
Fixed Assets 60 90 140
Revenue Drivers
 Number of customers, transactions or units
 Price per customer, transaction or unit
 Average revenue per customer or transaction
 Distribution channel discount
 Market penetration
 Response rate
 Churn rate
 Growth rate
 New services or product
Cost of Revenue Drivers
 Personnel costs (labor and/or salary)
 Materials costs
 Yields
 Website operating costs
 Systems costs
 Warehouse and shipping expenses
 Returns
 Outsourcing expenses
 Lease and/or rental expenses
 Cost reductions
 Depreciation large capital expenditures
Operating Expense Drivers

 Sales & Marketing

– Customer acquisition cost
– Personnel expenses
– Sales commissions
– Exhibitions
– Brand building
– Tech support
– Customer service
Operating Expense Drivers
 Research and Development
– Personnel expenses
– Beta testing
– Time to market
– Patent and copyright application
– Prototyping
– Subcontracting
 General and Administration
– Personnel expenses
– Recruiting expenses
– MIS expenses
– Office rent and utilities
Financial Dynamics

 Who does the financial projections?

 Investor questions
 Drivers
 Optimism vs. Pessimism
Financials Spreadsheet Template