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An exercise to help you get some numbers together - and find out what you need to borrow, work out your costs, and see whether you'll make any profit!
Using a calculator
© pxfuel

The key thing here is to consider the fact that you will be very likely to need to borrow money to make your company a reality. If you’re risk-averse or not sure if you can justify this, then you may like to go over the previous sections.

By now you should be confident that you can make your company work. Again – if not, take your time – we’ll emphasise the importance of iterating again during the next few steps on prototyping. You might like to try this exercise anyway so you can get an idea about how much money you will need to make a good go of your plan the first time round. Who knows – maybe you can fund it yourself.

You can download your copy of the Cashflow forecast sheet from the link here or from the bottom of this Step.

To begin, read the notes on the first page of the document and the source website which take you through step by step. Much of it is calculated and filled in for you automatically. If you’re not sure what a cell means, they have text tips which explain them for you.

Use the information you’ve collected to put in prices and sales predictions. You might estimate these for now, but in time you want to put in realistic numbers. And be realistic – there’s nothing to gain from massaging the figures to end up in profit at the end of year one. You are very likely to end up in the red, but adjust your sales to predict a second year and see how it changes your income. How long will it take to pay off your loan and start making profit?

example of business costs

Feel free to create a fictitious example for someone with a part-time job, and see how changing their income through employment affects their business cash flow.

Don’t worry about making a mess – you can always download a new copy and start again. Try and end up with a final example you’re happy with.

Over to you

  • Have you spoken to anyone about your costs?
  • What figures have you been quoted?
  • What is your biggest expenditure?

Feel free to share observations about the questions above with your fellow learners.

© University of York
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