Do you have a plan to make money?

Operating Profit Model

You need a “pro forma income statement.” I know what you’re thinking: “A pro forma income statement? Wow! Why didn’t I think of that?”

It’s a form that allows you to change your estimates of what you will need to spend and how it relates to how much profit you will see. It’s like “lego” land in that you can see various options and change the layout as needed.

Taking it into the business world, how will having a big marketing budget affect income? Spend more in marketing and income drops, BUT, hopeful more units will be sold.

This is a model to lets you see how different options will work. Sort of like “lego” land where you can alter the layout different ways and see what you like best.

This pro-forma is what investors understand and will want to read. Unfortunately, few entrepreneurs understand the importance of realistic forecasting, and offer up ridiculously over-blown projections.

The Operating Profit Model Template is a valuable tool to analyze the total impact of various productions and cost variables on total profit. On one hand, it allows you to evaluate and compare various strategies. On the other hand, it allows you to change parameters and assumptions, and see the dynamic results. Specifically, it allows users to vary price, units, and costs, and to compare outcomes.

Don’t worry if you are uncomfortable developing some of the parameters. It, at least, forces you to establish assumptions. These are expected to be revised as you see real results. However, you then have real data to change the parameters and maximize your efforts and forecasts.

Units are frequently the driving variable. The Operating Profit Model Template allows understanding the impact of various volumes. Units also frequently affect cost, sourcing, and how much you will have available for marketing. In general, you input units to drive the model.

Naturally, you can’t know for sure what those numbers are going to be. By using our unique template process, your projections will be realistic, doable, and, therefore, refreshing in the eyes of investors. Try it for yourself, but feel free to call for some complimentary guidance.

The form requires specific numbers – as much as you can figure — that help you put together your list of monies going out and monies coming in.

• What are your sales volume goals in units, dollars, hours or whatever.
• What is your average selling price?
• What does it cost to produce one unit?
• What are your marketing costs?
• What are your labor and administrative costs?
• What will your profit be?

The Operating Profit Model Worksheet is a valuable tool to help you figure out how your business will actually make money, and it can be tailored to each individual situation.

It is flexible and allows you to input various financial scenarios so you can evaluate the results. It’s also a critical tool in understanding and developing your plan as you acquire the actual information so you are working with more realistic numbers.

Free Operating Profit Model Template

This is a very simple model to help you compute sales and profits. It is designed to encourage changing the parameters to view the impact of different strategies. In particular, you can vary costs, volume, and prices, and analyze the different impacts. The percentages for margins can also be varied to show different outcomes.