In the preceding chapters,
I have defined my goals and
them to be both attainable and
measurable. Measuring is
easier when the units used can be counted.
instance, I use dollars.
Since the time I have
started to plan my business and express my
goals, I have gained much
knowledge about the real market, the real
costs of starting a business
and the potential sales I can expect
from my customers. I have
summarized this information in several
worksheets and financial
schedules in the Marketing and Finance
chapters, but this
information helped me convince my banker and
others that my project made
sense. I now am at the stage of testing
these figures against my
goals. This test will tell me if I can
reach my goals and, if not,
whether I can modify my forecasts to
Using the financial
forecast, drawn up earlier, I will take only
the annual totals and draw up
a profit and loss statement. This
statement will not bother
about collections or payment schedules,
but it will totalize my expected sales and expenses to end up
showing my profit or (loss) from my first year of
operations. This apparent duplication of effort hides three main purposes:
Will my profit
or (loss) permit me to provide for my personal
Will I be
able to pay back some of the money I borrowed?
I reaching my business goals?
The first thing I must do is to draw up my statement, using
information already written down in the sales forecast.
exception is that I will not include my personal needs in the
expenses to show a profit
or (loss) before these needs.
Note: As a rule, I must never change expenses, as they have the
nasty habit of turning out to be more than expected. I will
not modify them to remain conservative. This way, I will
avoid unhappy surprises.
If the answer to a), b) and
c) is yes, then I am in good shape and
with confidence to the next step.
If the answer is no to either one or all three, I must
reconsider my goals.
In the light of the knowledge
I have now, were my goals realistic?
Only I can
answer this question.
Here are some suggestions to modify the results of my
- I can increase the
sales forecast, but I must do this only if I
am sure I can meet the new target.
- I must never modify expenses, as explained earlier.
- I can postpone my goals by one year
- I can renegotiate my
loans to spread reimbursement on a longer
period of time.
- I can examine my needs
and reduce them, if possible.
- I can rent more equipment or machinery with service
this may prove to be cheaper than owning.
- I can look for cheaper premises. For this I might have
compromise on the location of my business. Or I can start
business at home, if feasible, it will be cheaper.
- I can hire employees
part-time, instead of full-time.
If the last three
suggestions seem to contradict the axiom of never
modifying expenses, I must remember that
I am in the planning stage of my
business and, at this stage, I can still change certain
things. Once I start, I will not have
this flexibility any more. This is the whole purpose of this exercise, to make me aware of
possible mistakes and give me the chance
to correct them before I start, not after, when it will be too late.
The preceding exercise
is strictly for my own benefit. With the
will get and the modifications I will make, I can
only increase my chances of success. I must remember that this is
still a dry run, I will know more about the accuracy of my
forecasts, when I have been running my business for a few months. I will
have to monitor my progress very closely, to make changes,
if and when necessary, in order to remain on track. I am almost
there, only a few steps remain, before I can start my business. I
will concern myself with the inside organization of my type of
business, which permits are required and what regulations govern my
operations, what type of insurance will protect me and my assets,
how will I go about announcing to my
customers that my business is there to serve them and what types of
accounting books will I need to control my progress.