In some business models, like restaurants, revenue determines expenses. For example, a restaurant owner may find that labor and food costs should each be 30% of total revenue for the business model to work. As you run your business over time, you'll see certain patterns and limitations (e.g. cafes only have a certain number of seats) -- patterns in revenue to determine expenses.

Please review and analyze the Financial Statement Model and explain each component in Dark Blue Such as % Growth per month, Revenue, Expenses, Operating Cash Flow,etc. Please review the Sample Financial Statement as a reference.

\fThis spreadsheet provides two sample financial models. Entrepreneurs use financial models to project revenue and expenses to ultimately determine the best paths to profitability. More complex models factor in marketing expenses to project rate-of-growth and scale. SAMPLE FINANCIAL MODEL Website Consultancy CORE BUSINESS ASSUMPTIONS Average website sale price Duration of each website build (months) New project contracts sold per quarter Project Cost Assumptions Project manager internal bill rate (contractor) Project manager average hours per website Designer internal bill rate (contractor) Design hours per website Programmer internal bill rate (contractor) Programmer hours per website Cost to produce a website REVENUE New contracts signed 15,000 3 4 $75 24 $50 20 $75 50 $6,550 TOTAL REVENUE Jan 4 20,000 EXPENSES Programmer Designer Project manager Bookkeeper Legal Accountant Insurance (workman's comp, renter's, etc.) Misc. Owner income TOTAL EXPENSES 5,000 1,333 2,400 300 2,000 1,000 500 1,000 6,000 19,533 OPERATING CASH FLOW 467 A website consultancy generates profits by charging 2-3x what it costs to produce a website. For the sake of this model, consider that websites take about three months to produce (which is over-simplified for the sake of the model -- all websites and clients are different). Notice when you reduce from four projects per quarter to three (cell B7), profits become dangerously low, so this model tells you how many website contracts per quarter you need to sell to create a healthy consulting business. Businesses are never as clean as their models - some months you'll close three new contracts at once and then you'll go many months with none. This model illustrates one possible scenario around expenses, cost, and cash flow, reminding you to save funds on good months so you can cover expenses in months when there are no checks coming in. Feb 0 20,000 Mar 0 20,000 April 4 20,000 May 0 20,000 June 0 20,000 July 4 20,000 Aug 0 20,000 Sept 0 20,000 5,000 1,333 2,400 300 0 0 500 1,000 6,000 16,533 5,000 1,333 2,400 300 0 0 500 1,000 6,000 16,533 5,000 1,333 2,400 300 0 1,000 500 1,000 6,000 17,533 5,000 1,333 2,400 300 0 0 500 1,000 6,000 16,533 5,000 1,333 2,400 300 0 0 500 1,000 6,000 16,533 5,000 1,333 2,400 300 0 0 500 1,000 6,000 16,533 5,000 1,333 2,400 300 0 0 500 1,000 6,000 16,533 5,000 1,333 2,400 300 0 0 500 1,000 6,000 16,533 3,467 3,467 2,467 3,467 3,467 3,467 3,467 3,467 costs to produce a about three months all websites and per quarter to three how many website ng business. ou'll close three new s model illustrates minding you to save en there are no Oct 4 20,000 Nov 0 20,000 Dec 0 20,000 5,000 1,333 2,400 300 0 1,000 500 1,000 6,000 17,533 5,000 1,333 2,400 300 0 0 500 1,000 6,000 16,533 5,000 1,333 2,400 300 0 0 500 1,000 6,000 16,533 2,467 3,467 3,467 TOTAL YEAR 1 240,000 60,000 16,000 28,800 3,600 2,000 3,000 6,000 12,000 72,000 203,400 36,600 SAMPLE FINANCIAL MODEL Neighborhood caf CORE BUSINESS ASSUMPTIONS % Growth per month Average check per person Customers served per day Days per month Food costs as % of total revenue Labor as % of total revenue REVENUE Customers per month 0.05% $16 125 31 30% 30% In some business mode restaurant owner may fi business model to work limitations (e.g. cafes on expenses. TOTAL REVENUE Jan 3,875 62,000 Feb 3,877 62,031 Mar 3,879 62,062 EXPENSES Labor costs Food costs Rent & utilities Bookkeeper Legal Accountant Insurance (workman's comp, renter's, etc) Marketing/website maintenance Misc. Owner income TOTAL EXPENSES 18,600 18,600 5,000 300 2,000 1,000 500 1,000 2,000 8,000 57,000 18,609 18,609 5,000 300 18,619 18,619 5,000 300 500 1,000 2,000 8,000 54,019 500 1,000 2,000 8,000 54,037 OPERATING CASH FLOW 5,000 8,012 8,025 n some business models, like restaurants, revenue determines expenses. For example, a estaurant owner may find that labor and food costs should each be 30% of total revenue for the usiness model to work. As you run your business over time, you'll see certain patterns and mitations (e.g. cafes only have a certain number of seats) -- patterns in revenue to determine xpenses. April 3,881 62,093 May 3,883 62,124 June 3,885 62,155 July 3,887 62,186 Aug 3,889 62,217 Sept 3,891 62,248 Oct 3,892 62,280 Nov 3,894 62,311 18,628 18,628 5,000 300 1,000 1,000 500 1,000 2,000 8,000 56,056 18,637 18,637 5,000 300 18,647 18,647 5,000 300 18,665 18,665 5,000 300 18,675 18,675 5,000 300 500 1,000 2,000 8,000 54,093 500 1,000 2,000 8,000 54,130 500 1,000 2,000 8,000 54,149 18,684 18,684 5,000 300 1,000 1,000 500 1,000 2,000 8,000 56,168 18,693 18,693 5,000 300 500 1,000 2,000 8,000 54,074 18,656 18,656 5,000 300 1,000 1,000 500 1,000 2,000 8,000 56,112 6,037 8,050 8,062 6,074 8,087 8,099 6,112 500 1,000 2,000 8,000 54,186 8,124 Dec 3,896 62,342 18,703 18,703 5,000 300 500 1,000 2,000 8,000 54,205 8,137 TOTAL YEAR 1 46,628 746,049 223,815 223,815 60,000 3,600 5,000 4,000 6,000 12,000 24,000 96,000 658,230 87,820