Entrepreneur’s Journey to Get Funded — Part 2: Profit

This a Part 2 of the Series. Here I will explain the Second Step that an Entrepreneur MUST take after analyzing the Market so that he/she has a bulletproof fundraising event.

Develop a 5-Year Profit & Loss Statment

Photo by George Pagan III on Unsplash

As an Entrepreneur, you need to estimate a monthly 5-year profit/loss account. This is a prerequisite of your cash flow statement and also the basis of your financial model.

Here are the things you need to do

1. Revenue Assumptions: Based on the Market analysis you completed in Part1, you need to estimate how many units product are you going to sell. Your product can be physical machinery, subscriptions, licenses as well as consultancy hours.
2. Cost Assumptions: The Entrepreneur has to also estimate the cost. How much is the unit cost? Is it going to change if the company scales? Is the cost defensible or competition is going to increase/decrease it? How much is allocated for promotional discounts, fixed costs, salaries, office space, rent, electricity, and SG&A type cost? How is it going to change over time for 5 years?
3. EBITDA: EBITDA is basically Earning Before Interest, Taxes, Depreciation, and Amortization. This is basically what a VC will look at. This number is also important to compare…