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Income Statement
The income statement is where you make a case for your business'
potential to generate cash. This document is where you record
revenue, expenses, capital, and cost of goods. The outcome of the
combination of these elements demonstrates how much money your
business made or will make, or lost or will lose, during the
year. An income statement and a cash flow statement differ in that
an income statement does not include details of when revenue was
collected or expenses paid.
An income statement for a business plan should be broken out by
month the first year. The second year can be broken down
quarterly, and annually for each year after. Analyze the results
of the income statement briefly and include this analysis in your
business plan. If your business already exists, include income
statements for previous years.
Tips
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As with all financial documents, have your income statement prepared or at least reviewed by a reputable accountant.
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Avoid insufficiently documented assumptions about your
company's growth. In other words, if you say
you expect your firm to grow by 30% in the first year and
50% in the second, you need to document why those numbers
are attainable. It can be because similar companies have had this growth path; because the industry is growing at this rate (cite the source for this data); or because of projections from a specific market researcher, industry association, or other source.
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Include effects of seasonality and business cycles in all
projections. For example, if you are in the gift
business, you would need to show the Christmas buying season
or the Wedding season. If you're a consultant, you might
experience higher sales late in the year when companies are
trying to use up their annual funds, or at the beginning of
the year after budgets are approved.
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Do not include "projections" that include dates and events already
in the past. Old projections are more tolerable if your
projections were more right than wrong.
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Avoid large income or expense categories that are lumped together
without backup information about the components.
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