The profit and loss statement on your business plan is also known as the income statement. This is a vital piece of the business plan as a whole and lets potential investors see exactly what you expect your business to profit or lose.

Using your profit and loss statement you can spell out exactly what it is you expect your revenues and expenses to be for a certain amount of time. By calculating these numbers you can make a determination whether or not your business will experience a profit or a loss for the resulting time period.

This is important for the potential investors to see as they will then have a better understanding of what it takes to make your business operate and it allows them to form a better opinion of whether or not they want to invest in your venture. Here is what should be included in your business plan’s profit and loss statement:

• Projected Sales: For many businesses, especially start-ups the sales will be projected. Be realistic here but show what you think your sales will be in terms of units sold, the price paid for the units on a retail level, the net price paid, and finally the gross revenue.

• Cost of Goods Sold: Include everything that is included in making the units available for sale. Items to include are manufacturing costs, shipping costs, packaging costs, and the like.

• Controllable Expenses: This will include any and all business related expenses that can fluctuate and are incurred in order to keep the business running. Items to include here are salaries, benefits, cost of any company vehicles, cost of company utilities, advertising and marketing costs, office supplies, and any repair or maintenance.

• Fixed Expenses: These are the expenses that are the same every month and do not fluctuate like the controllable expenses. Items to include are rent, loan payments, insurance, licenses, and any other fixed expenses.

Once you have all your items listed above you will subtract the total of all your expenses, or liabilities, from your total gross income and the resulting number will be your estimated net profit or loss before taxes.

Then be sure to include all of your taxes such as sales tax, property tax, excise tax, etc. Take your total taxes and subtract that number from your estimated net profit or loss and you will have your estimated net profit or loss after taxes.

It is of course better in the eyes of a potential investor if you have an estimate profit versus a loss, but be cautious with your projections as you don’t want to come off too unrealistic. Investors are generally savvy people and will expect that you use your best judgment in the preparation of your financials.

In fact it may be to your advantage to be more on the conservative side when it comes to any kind of projections. In the business world it is always a good thing to beat expectations, but not always so good when you miss, especially if you miss by a lot.

Before you can began rolling on the fast track with your new business, it takes planning. Don’t skip any of the original 10 step business plan we’ve listed below. Some things are absolute necessities in advance of your opening date for business.

Let’s make it easy and simple. Listed below is a 10 step plan you need to undertake well in advance of your new business opening date. This is only the beginning list but you’ll discover and add more in coming days and weeks.

Your own business expertise and experiences will obviously come into play as you work on your complete business plan. For now, let’s get underway and begin to work through the following list of important business decisions…

1. Decide on Service and/or Product you plan to market/sell.

2. Select Accounting Firm or CPA if required

3. Hire Competent LEGAL COUNSEL

4. LOCATION is an important key to your success

5. Know your FINANCES, Money Source, before making any investments

6. Determine Employee Requirements – background; education; professional; etc.

7. Recruit a Mastermind Team

8. Is a new building required before you can open for business?

9. What licenses are required, certifications, etc.?

10. What is your opening Date for business?

Shooting from the “hip” or without a plan is a disaster waiting to happen. Even the smartest entrepreneurs are NOT willing to take such risks. Are you going “solo” or is this a franchise with a long-term history of success? 90% Vs 10% success rates may give you a reason to make the investment for a franchised business.

Weigh the odds. Research the history, do your due diligence. Don’t let anyone rush you into making a decision because someone else wants the same territory and is waiting with money in hand, ready to roll and cut you off at the pass. Don’t believe it without proof and then only if you are sure this is your choice.

Everyone dreams of owning their own business. Making BIG dollars, driving fine cars with all the goodies, BIG houses in beautiful places to vacation at will, club memberships at the finest golf courses, places for fine dining and meeting the upper crust of society.

Where’s the problem? For most of us, it takes 25 to 30 years of hard work without any guarantees that we’ll ever reach the pinnacle of success. Far too many businesses bite the dust than hit the big time. Taxes, employees, thieves, bankrupt customers are the main culprits of business disasters.

Not a pretty picture but awareness is extremely important. The more YOU know what can happen the better prepared you’ll be. Watch out for any employee with too much “power” in your business who likes to take charge.

Many services you need to run your business are better outsourced than handled internally. Hire reputable people in all areas whether in house or outsourced. Pride yourself on building a company with competent staff, well paid, good benefits simply because it’s your key to a successful business long-term.

You want to write a business plan for your product but you don’t know where to start. Inside you’ll learn how to make a simple one sheet business plan.

Go get a piece of paper and a pen or better yet, print this article out.

1. What is Your Product or Service

This is your business idea or the product you want to sell. You can sell cakes, mow lawns, sell crocheted hats, or pillowcase dresses, it doesn’t matter what it is, just write your ideas down.

How does your product or service differ from what is already out there?

Assignment:

Go to a store and find a product. How many choices do you have? Which one do you choose? Why?

Some choose because of personal experience with the product, some choose based on packaging or on an advertisement. Others choose based on how it will make them look to their friends or it inflates their ego making them feel good about themselves.

Service products like mowing lawns are different. You need to do what you advertise, do it well, do it on time, and be reliable. Go the extra mile – maybe you can offer one free mowing if the account is paid-in-full for the month.

2. Name Your Business

The name of your business and/or product should be unique, memorable, and easy to pronounce. For example, in America we pronounce Adidas as Uh-deed-ahs while in Germany where the company is pronounces it Ah-dee-das.

Read 15 more well-known brand names that get mispronounced on Business Insider – businessinsider.com/mispronounce-difficult-to-say-brands-2014-9.

Jason Miles, Author of Craft Business Power and co-owner of Liberty Jane Clothing suggests naming your company a proper name instead of some cute insiders only name.

Can you guess the product of the business names below?

Liberty Jane Clothing vs. Momwithahook

In the first example (Liberty Jane Clothing) you know right away that the product is clothing. The name suggests that Liberty Jane may have something to do with the designs.

In the second example (Momwithahook) it is questionable what the product is. Does this mom sell fishing equipment, hooks, pirate themed merchandise? This is my username online as I enjoy crocheting, use a crochet hook, and am a Mom.

Not knowing this about me and not knowing about the hobby crochet you might be clueless about what exactly I’m offering. A better option might be Sara’s Crochet Patterns. You know who I am and what product I sell.

Assignment:

Take some time to come up with a variety of business names. Make sure it describes what you do and your product without confusing or misleading your customer. Use Jason’s suggestion of adding a proper name, it doesn’t need to be yours but it will help.

3. Target Market or Your Customer

Who wants or needs your product or service? It’s important to get this right so you don’t waste time and money.

Considering your product or service – mowing lawns – who is your customer?

– the elderly

– those incapable of doing it themselves

– busy people

– vacation homes

– houses on the market

Assignment:

Take a sheet of paper and divide into four sections. Label the sections Type, Where, What, and Willing.

Now add the type of people who use your product or service, where you will find them, what is most important to them, and whether they are willing to pay someone for it.

4. Getting the Word Out or Marketing

How will your customers know that you mow lawns? Will you create a website? Will you ask friends and family members? Will flyers be a good way to let people know what you are doing?

Assignment:

Brainstorm ways to market your product. For the mowing lawns example, what would be the most beneficial means of getting the word out?

– Churches

– Clubs

– Schools

– Neighbors

– Friends

– Craigslist

5. How Much Will You Charge or Pricing

In any business profiting is the goal. You need to price your product or service competitively and profitably.

Consider the costs of running your business and shipping if you are selling a product online.

Assignment:

Find out the cost per unit made. To do this you will need to do the following:

– hourly overhead costs

– hourly wage

– total hourly wage = hourly overhead costs + hourly wage

– how long does it take you to produce one item (use toggl.com to time yourself)

– total materials cost (everything that goes into to making your product)

– add an extra 10% for unexpected costs

– total price = time to produce one item + material costs x 10% unexpected costs

Read more on pricing your products on TheDesignTrust.co.UK. You might also find this calculator handy: craftscalculator[dot]com.

Assignment:

Time yourself making your product or completing your service. How long did it take? Determine the cost per unit made for your product. For a service based business, how long does it take to complete the project? Add some extra cushion to this for the unexpected.

6. Determine Your Profit

This is the fun part. To get your profit subtract your expenses from your income.

profit = income (sale price) – expenses (materials cost)

Assignment:

Sit down and find the profit for each product or service you plan to sell.

7. Delivering Your Product or Service (Distribution)

This step could also be done between step 3 and 4. Once you know your target market (who will buy your product) and where they are you need a plan for getting your product to them.

Do you sell locally? Will you deliver? What shipping company will you choose?

Products

Choose a shipping company that is reliable and cost-effective. Start small at first by utilizing the United States Post Office or your Postal Carrier.

Decide whether you will ship internationally. Who will pay the customs fee?

Services

How will your service be rendered? Will you go to your customer or will your customer go to you?

Assignment:

Research various shipping options for your product. Try shipping your item to a friend. How did it arrive? Was it damaged? How long did it take?

Sometimes the cheapest way isn’t always the best way.

Conclusion

You should now have a well thought out business plan. This isn’t acceptable for bank loans but it will guide you in starting your own little side business.

And now I’d like to invite you to read more on business and blogging for small business.