How to Write a Business Plan

106 | HOW TO WRITE A BUSINESS PLAN

By definition, service businesses

sell services or labor and do not sell

merchandise. Occasionally they may

bill a client for a service they purchase

outside the firm or bill for a service

that has some incidental costs. The

cost of sales portion of a service

business’s total costs will be low. For

example, a consulting firm may incur

outside typing, photocopying, and

report binding expenses that will

vary somewhat with every sale. Most

expenses, such as salaries and rent, will

be fixed costs and won’t appear on this

chart. Service businesses should follow

the example below of the consulting

business.

Annual Average Cost of Sales Chart:

Consulting Firm

item

Forecast

Sales

Revenue

Cost

per

Sale

Total

Cost of

Sales

Publications,

phone, travel $ 100,000 20% $ 20,000

Contract

services

(typing, etc.) 50,000 75% 37,500

Studies,

Consultations 527,000 0% 0

TOTAL $ 677,000 $ 57,500

Total Average Cost of Sales = 8.5%

($57,500 ÷ $677,000)

CAUTiON

include piece-rate and commission

costs. Note that some businesses pay workers

on a piece-rate or commission basis. All your

costs that vary with each sale should be in cost

of sales instead of fixed expenses.

When you’ve completed your cost of

sales calculations, you are ready to prepare

your Profit and Loss Forecast.

Complete Your Profit and Loss Forecast

Follow the line-by-line instructions below

to complete your form.

CD-ROM

Note for computer users: A

formatted copy of the Profit and Loss Forecast

is provided on the CD-ROM at the back of

this book in Microsoft Excel format under the

filename ProfitForecast.xls.

1. Sales Revenue. You have completed this
   estimate already. Simply enter the total
   sales revenue dollars for each month
   for two years from the Sales Revenue
   Forecast you completed in Chapter 3.

CAUTiON

Here’s another chance to revise the

sales revenue numbers in case you think they

need work. However, be sure you really believe

that you can generate all the revenues you