HOW TO FORECAST EXPENSES?
Forecasting expenses during the startup stage is really more art than science. Many entrepreneurs complain that building forecasts with any degree of accuracy takes a lot of time–time that could be spent selling rather than planning. But in order to run the business, and to present the business to any third party, you have to have a set of thoughtful forecasts. More important, proper financial forecasts will help you develop operational and staffing plans that will help make your business a success.
You must forecast every expense of the business including:
- Startup Expenses. All the costs of getting your business up and running go into the start-up expenses category.
- Fixed Costs. All the overhead costs of the business:
- Utility bills
- Phone bills/communication costs
- Legal/insurance/licensing fees
- Advertising & marketing
- Variable Costs. All of the costs that vary with the business.
- Cost of goods sold
- Materials and supplies
- Direct Labor Costs
- Customer service
- Direct sales
- Direct marketing