## Sales and Marketing Cost Model

Sales & marketing costs are a necessary part of operating a business. Expenses associated with sales and marketing such customer acquisition costs and the costs to service customers throughout the customer life-cycle, need to be included in the income statement of the financial projections template, and this model allows those cost to be estimated in detail and summarized.

## Research and Development Cost Model

R&D costs are a necessary part of developing new products for a business. Expenses associated with R&D such as staff costs, need to be included in the income statement of the financial projections template, and this model allows those cost to be estimated in detail and summarized.

## Non Profit Organization Break Even

A non profit organization can use the break even point formula to calculate the level of income required to generate a zero profit.

## Estimate New Capital

New equity capital is included in the cash flow statement of the projection as a positive figure as it represents cash flowing into the business from investors. For example, if in year two the plan inject new capital of 5,000 to finance the purchase of new machinery, the figure of 5,000 should be included in the cash flow statement on the proceeds from the issue of new share capital line.

## Cash Flow vs Profit

A business needs to understand that there is a difference between profit and cash. Eventually a business needs to be able to make a profit, however, providing it is properly financed and has adequate cash flow a business can survive for a considerable period of time without profits.

## Cash Conversion Cycle Calculation

All businesses have a cash conversion cycle, it is the time in days between paying for inventory and receiving the cash from the sale of that inventory from customers. The cash conversion cycle formula can be used to calculate the number of days.

## Improving Profitability in Financial Projections

First draft financial projections often need adjusting to try and improve the profitability of the business. One technique is to concentrate on making small percentage amendments to 4 key income statement areas.

## Pricing for Profit in Financial Projections

A business can use the pricing for profit formula to evaluate the unit sales volume change needed to maintain the same gross profit before and after amending its selling prices.

## Gross and Net Profit Margin

The gross profit and net profit margins are used as measures of profitability. The gross margin indicates whether the products produced and sold by the business are profitable, whereas the net margin indicates the profitability of the entire business taking into account all expenses.

## Effect of Sales Discount on Financial Projections

Offering a sales discount to customers reduces the selling price and gross margin percentage of a product. Unless there is a corresponding increase in the level of unit sales and revenue of the business then the gross margin of the business will be reduced.

## Operating Expense Formula

Customized operating expense formulas can be used in lines 7 to 9 of the Financial Projections Template to link operating expenses to another template cell value such as revenue, this allows amendments to be made to the estimated operating expenses for each of the five years without having to manually enter each amount.

## Revenue Projection Formula

Customized revenue projection formulas can be used in line three of the Financial Projections Template to allow amendments to be made to the estimated revenue for each of the five years without having to manually enter each amount.