ChApter 6 | YOUR PROFIT AND LOSS FORECAST | 107
forecast. Make sure you don’t do it backwards
by writing down enough sales revenue to
show the profits you want. Otherwise, you’ll
have to explain to your backers each month
why things aren’t as good as you said they
would be.- Cost of Sales. Enter your monthly dollar
cost of sales. To get these figures,
multiply your monthly sales revenue
forecast by the average cost of sales
percentage. Returning to our dress shop
example, Antoinette would multiply her
monthly sales figure estimate by 60%
(or 0.6). For example, if March sales are
forecast at $30,000, the cost of sales for
March would be $18,000 (0. 6 × $30,000
= $18,000).
CD-ROM
If you are using the Profit & Loss
Forecast form on the CD-ROM, you can enter
the Cost of Sales percentage in Column B in
the spreadsheet (where it is marked “(%here)”
in red). Then enter the relevant Sales Revenue
in Column C. The spreadsheet program will
automatically calculate your Gross Profits.
Note, if a series of #### symbols appear in a
box in a spreadsheet that means that you need
to widen the column in order to display the
numbers.CAUTiON
if you made separate forecasts of
sales revenue, cost of sales, and gross profit
for each product line, then add together allthe gross profit numbers and enter them on a
summary form line 3. You will have prepared
separate forms for each product line for
the first three lines (sales revenue, cost of
sales, and gross profit) and a summary sheet
showing total gross profit, operating expenses,
and profit.- Gross Profit. Subtract cost of sales (line 2)
from sales revenue (line 1) to get gross
profit. It’s the amount of money that
remains after you’ve paid your direct
costs of the products sold. This money
is available to pay the business’s fixed
expenses and your profits. If gross
profit is larger than fixed expenses
for that month, you will have a profit.
But if gross profit is smaller than fixed
expenses, you will have a loss that
month.
For example, looking at the dress shop
example for March, Antoinette arrives
at gross profit by subtracting the cost
of sales of $18,000 from the forecast
sales revenue of $30,000 and entering
the result of $12,000. She’ll do the same
thing for each subsequent month. - Fixed Expenses. The categories listed on
the form are the most common fixed
expenses, but feel free to add or modify
items to suit your business. All fixed
expense items reduce your profit so that
you pay less business income tax.
4a. Wages/Salaries. Most small businesses
keep some employees on a fixed weekly
or monthly work schedule regardless
of how business fluctuates. Many