Projected Profit and Loss Statement

April 13, 2006

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A projected profit and loss statement is a financial document that reflects the amount of profit or loss you expect your business to generate in future periods. This is an essential document that either you or your accountant should put together. It will be a useful tracking tool for objectively determining whether your business is likely to make a profit and be successful or generate losses and eventually fail.

Your projected profit and loss statement will list revenues (from sales or services provided), your cost for goods or services provided, operating expenses (such as wages, rent, advertising), and net income or loss.

You'll find a sample income statement template in the Business Tools area. Remember that a projected profit and loss statement includes your best estimates of future results rather than historical information.

Depending on whether you are preparing a projected profit and loss statement for an existing business or a startup enterprise, you may have some difficulty coming up with reliable estimates. For instance, if you have an existing business, you'll have a lot easier time coming up with projections because your historical financial information will give you a pretty good idea of what your business can do in the future. On the other hand, if you're just starting up your business, you're going to have to do some outside research.

We recommend that you hit your local library, chamber of commerce, and any industry associations for information on demographics such as population, average age, and median income of the target market you're hoping to attract. This will help you to determine whether there is a market for your product or service and also give you an idea of any future growth trends. Dun & Bradstreet and other financial information purveyors can provide information regarding industry averages.

You'll also want to check out your local competition and the services they offer in order to realistically determine the share of new customers you can expect to gain with your new business. Finally, and probably most importantly, you'll want to talk to your prospective vendors and suppliers. These businesses are not only a good source of market information, but they also can provide you with accurate estimates of what your startup expenses may include.