Artifacts #
What this step produces.
Pro Forma P&L #
A projected statement of revenue, costs and profit for future periods. It shows whether the business is expected to earn a profit and when.
Pro Forma Cash Flow #
A projected statement of cash coming in and going out in each period. It shows whether the business will have enough money to pay its bills.
Pro Forma Balance Sheet #
A projected snapshot of what the business will own and owe at future dates, and the owners' equity. It checks that the financial plan is consistent.
Break-even Analysis #
Finds the sales volume at which revenue equals total costs, so the business stops losing money. It shows how much must be sold to survive.
Techniques #
Techniques used in this step.
Scenario Analysis #
Building several versions of the forecast, usually pessimistic, base and optimistic, and comparing the results. It shows the range of possible outcomes instead of a single number.
Multi-Tier Cost Modeling #
Calculating costs separately for several levels of scale, such as small, medium and large. It shows how expenses grow as the business grows.
Operating Leverage #
Shows how much profit changes when sales change, depending on the share of fixed costs. A high share means bigger gains in growth but bigger losses in decline.
Percentage-of-Sales Forecasting Model #
Forecasts many cost and balance items as a fixed share of sales, based on past ratios. It is a quick way to derive a full financial plan from the sales forecast.
Revenue Growth Rate Estimation #
Estimating how fast revenue will grow from period to period, using market data, comparable companies and the company's own results. The growth rate drives the whole forecast.
Cash Runway and Burn Rate #
Burn rate is the monthly net cash spend; runway is how long the cash on hand will last at that pace. They show when the next funding must be secured.
