By Corona at October 03 2019 00:43:13
Another consideration. Should the business plan be a document that is focused on selling an idea for a product or service? For many years I worked in a company that did not want anything in a business plan that could be construed as showing a bias towards or against a project. The mantra was to only present facts in the business plan. The Operations Research Department was there to review the analysis as being unbiased. To handle the "what if" scenarios or sensitivity analysis we prepared a supplemental analysis documents which were mostly financial oriented. Personally, I like a factual approach and use the presentation of the final document to point out the conservative aspects of the content.
With this information you can actually predict not only what your sales will be, but you can see how much your fixed and variable expenses will be, what your labor cost will be, your material cost, and your profit. 1. So let's first look at what exactly are fixed expenses? They are exactly what they say they are; they are fixed. This simply means these are expenses that are ongoing whether you have a lot of sales or Ŕ" sales. They are expenses like utilities, taxes, rent, salaries other than the wages used in the making of the actual product or doing a service, business fees, telephone, etc. See how these expenses would continue on even if you have 0 sales? Any expenses that fall into this category are fixed expenses. Far too many small business owners never divide their expenses into fixed and variable. As a matter of fact, if you could have a business that had Ŕ" fixed expenses; this would be the best of all worlds, why? If you had Ŕ" sales, you would have Ŕ" expenses. So the closer you could get to this the better you would be.