By Carly W at July 06 2019 03:14:08
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.
Why do you need to know these percentages? As your sales increases or decreases, your material cost, labor cost, and variable expenses will track accordingly. They will track very close to the same % as your current business. As an example, let's say your current sales is averaging 贄ꯠ per month and your material cost is averaging ฤꯠ per month. That's 20% of your sales (ฤꯠ ÷ 贄ꯠ = 20%). So, what would your material cost be if your sales were averaging 赨ꯠ per month? It would still be 20% but it would be 20% of 赨ꯠ or ุꯠ. So with these percentages, you can project your material, labor and variable expenses. See how it works?