projected development costs in business plan

• Business Planning

Business Plan Financial Projections

Written by Dave Lavinsky

Financial projections are forecasted analyses of your business’ future that include income statements, balance sheets and cash flow statements. We have found them to be an crucial part of your business plan for the following reasons:

• They can help prove or disprove the viability of your business idea. For example, if your initial projections show your company will never make a sizable profit, your venture might not be feasible. Or, in such a case, you might figure out ways to raise prices, enter new markets, or streamline operations to make it profitable. 
• Financial projections give investors and lenders an idea of how well your business is likely to do in the future. They can give lenders the confidence that you’ll be able to comfortably repay their loan with interest. And for equity investors, your projections can give them faith that you’ll earn them a solid return on investment. In both cases, your projections can help you secure the funding you need to launch or grow your business.
• Financial projections help you track your progress over time and ensure your business is on track to meet its goals. For example, if your financial projections show you should generate $500,000 in sales during the year, but you are not on track to accomplish that, you’ll know you need to take corrective action to achieve your goal.

Below you’ll learn more about the key components of financial projections and how to complete and include them in your business plan.

What Are Business Plan Financial Projections?

Financial projections are an estimate of your company’s future financial performance through financial forecasting. They are typically used by businesses to secure funding, but can also be useful for internal decision-making and planning purposes. There are three main financial statements that you will need to include in your business plan financial projections:

1. Income Statement Projection

The income statement projection is a forecast of your company’s future revenues and expenses. It should include line items for each type of income and expense, as well as a total at the end.

There are a few key items you will need to include in your projection:

• Revenue: Your revenue projection should break down your expected sales by product or service, as well as by month. It is important to be realistic in your projections, so make sure to account for any seasonal variations in your business.
• Expenses: Your expense projection should include a breakdown of your expected costs by category, such as marketing, salaries, and rent. Again, it is important to be realistic in your estimates.
• Net Income: The net income projection is the difference between your revenue and expenses. This number tells you how much profit your company is expected to make.

Sample Income Statement

2. cash flow statement & projection.

The cash flow statement and projection are a forecast of your company’s future cash inflows and outflows. It is important to include a cash flow projection in your business plan, as it will give investors and lenders an idea of your company’s ability to generate cash.

There are a few key items you will need to include in your cash flow projection:

• The cash flow statement shows a breakdown of your expected cash inflows and outflows by month. It is important to be realistic in your projections, so make sure to account for any seasonal variations in your business.
• Cash inflows should include items such as sales revenue, interest income, and capital gains. Cash outflows should include items such as salaries, rent, and marketing expenses.
• It is important to track your company’s cash flow over time to ensure that it is healthy. A healthy cash flow is necessary for a successful business.

Sample Cash Flow Statements

3. balance sheet projection.

The balance sheet projection is a forecast of your company’s future financial position. It should include line items for each type of asset and liability, as well as a total at the end.

A projection should include a breakdown of your company’s assets and liabilities by category. It is important to be realistic in your projections, so make sure to account for any seasonal variations in your business.

It is important to track your company’s financial position over time to ensure that it is healthy. A healthy balance is necessary for a successful business.

Sample Balance Sheet

How to create financial projections.

Creating financial projections for your business plan can be a daunting task, but it’s important to put together accurate and realistic financial projections in order to give your business the best chance for success.  

Cost Assumptions

When you create financial projections, it is important to be realistic about the costs your business will incur, using historical financial data can help with this. You will need to make assumptions about the cost of goods sold, operational costs, and capital expenditures.

It is important to track your company’s expenses over time to ensure that it is staying within its budget. A healthy bottom line is necessary for a successful business.

Capital Expenditures, Funding, Tax, and Balance Sheet Items

You will also need to make assumptions about capital expenditures, funding, tax, and balance sheet items. These assumptions will help you to create a realistic financial picture of your business.

Capital Expenditures

When projecting your company’s capital expenditures, you will need to make a number of assumptions about the type of equipment or property your business will purchase. You will also need to estimate the cost of the purchase.

When projecting your company’s funding needs, you will need to make a number of assumptions about where the money will come from. This might include assumptions about bank loans, venture capital, or angel investors.

When projecting your company’s tax liability, you will need to make a number of assumptions about the tax rates that will apply to your business. You will also need to estimate the amount of taxes your company will owe.

Balance Sheet Items

When projecting your company’s balance, you will need to make a number of assumptions about the type and amount of debt your business will have. You will also need to estimate the value of your company’s assets and liabilities.

Financial Projection Scenarios

Write two financial scenarios when creating your financial projections, a best-case scenario, and a worst-case scenario. Use your list of assumptions to come up with realistic numbers for each scenario.

Presuming that you have already generated a list of assumptions, the creation of best and worst-case scenarios should be relatively simple. For each assumption, generate a high and low estimate. For example, if you are assuming that your company will have $100,000 in revenue, your high estimate might be $120,000 and your low estimate might be $80,000.

Once you have generated high and low estimates for all of your assumptions, you can create two scenarios: a best case scenario and a worst-case scenario. Simply plug the high estimates into your financial projections for the best-case scenario and the low estimates into your financial projections for the worst-case scenario.

Conduct a Ratio Analysis

A ratio analysis is a useful tool that can be used to evaluate a company’s financial health. Ratios can be used to compare a company’s performance to its industry average or to its own historical performance.

There are a number of different ratios that can be used in ratio analysis. Some of the more popular ones include the following:

• Gross margin ratio
• Operating margin ratio
• Return on assets (ROA)
• Return on equity (ROE)

To conduct a ratio analysis, you will need financial statements for your company and for its competitors. You will also need industry average ratios. These can be found in industry reports or on financial websites.

Once you have the necessary information, you can calculate the ratios for your company and compare them to the industry averages or to your own historical performance. If your company’s ratios are significantly different from the industry averages, it might be indicative of a problem.

Be Realistic

When creating your financial projections, it is important to be realistic. Your projections should be based on your list of assumptions and should reflect your best estimate of what your company’s future financial performance will be. This includes projected operating income, a projected income statement, and a profit and loss statement.

Your goal should be to create a realistic set of financial projections that can be used to guide your company’s future decision-making.

Sales Forecast

One of the most important aspects of your financial projections is your sales forecast. Your sales forecast should be based on your list of assumptions and should reflect your best estimate of what your company’s future sales will be.

Your sales forecast should be realistic and achievable. Do not try to “game” the system by creating an overly optimistic or pessimistic forecast. Your goal should be to create a realistic sales forecast that can be used to guide your company’s future decision-making.

Creating a sales forecast is not an exact science, but there are a number of methods that can be used to generate realistic estimates. Some common methods include market analysis, competitor analysis, and customer surveys.

Create Multi-Year Financial Projections

When creating financial projections, it is important to generate projections for multiple years. This will give you a better sense of how your company’s financial performance is likely to change over time.

It is also important to remember that your financial projections are just that: projections. They are based on a number of assumptions and are not guaranteed to be accurate. As such, you should review and update your projections on a regular basis to ensure that they remain relevant.

Creating financial projections is an important part of any business plan. However, it’s important to remember that these projections are just estimates. They are not guarantees of future success.

Business Plan Financial Projections FAQs

What is a business plan financial projection.

A business plan financial projection is a forecast of your company's future financial performance. It should include line items for each type of asset and liability, as well as a total at the end.

What are annual income statements? 

The Annual income statement is a financial document and a financial model that summarize a company's revenues and expenses over the course of a fiscal year. They provide a snapshot of a company's financial health and performance and can be used to track trends and make comparisons with other businesses.

What are the necessary financial statements?

The necessary financial statements for a business plan are an income statement, cash flow statement, and balance sheet.

How do I create financial projections?

You can create financial projections by making a list of assumptions, creating two scenarios (best case and worst case), conducting a ratio analysis, and being realistic.

Development Cost Definition: Everything You Need to Know

A development cost definition will tell you it's the cost a company incurs while researching and developing a new product or service. 3 min read updated on February 01, 2023

A development cost definition will tell you it's the cost a company incurs while researching and developing a new product or service. General practice dictates the research and development costs should be immediately expensed when costs are incurred.

Research and development decreases a company's profits in the short-term but creates higher profits in the medium to long-term. Most analysts will agree that it is a positive sign when a company is devoting their resources to research and development.

Research and Development Accounting

Accounting for research and development projects involves all the activities that improve or create processes or products. It's important to remember to charge expenditures to the expense as incurred. Activities that are typically considered as research and development include:

• Research to bring about new knowledge
• Creation of product and process designs
• Testing processes and products
• Modifying processes and products
• Designing prototypes
• Testing prototypes
• Designing new tools

Companies may experience trouble with research and development expenditures because future benefits cannot be guaranteed. Also, it is difficult to attach an expenditure to an asset. Because of these uncertainties, companies have a requirement to charge expenditures directly to the expense from which it incurred.

What's Not Included in Research and Development Accounting?

Charging research and development expenditures to its expense is not entirely pervasive in the business world. The following exceptions apply:

• If any materials or assets have future uses, they must be recorded as assets. Use depreciation to gradually reduce the fixed assets' carrying amount. If there won't be any future use, charge the cost to the expense as incurred.
• If you acquire computer software throughout the course of the company's research and development efforts, charge the cost to the expense as incurred. If there will be future uses for the computer software, capitalize on its cost because it will depreciate over time.
• If you reach out to a third-party to conduct research, charge those invoices to the expense. These will be indirect costs. Allocate a reasonable amount of overhead to research and development.
• If you receive intangibles from a third-party and they have alternative uses, account for them as intangible assets. However, if you received the intangibles for a specific project and they don't have any future uses, charge them as incurred to the expense.
• Charge wages and salaries to the expense as incurred.

There have been instances where a third-party, or a sponsor, will fund the research and development plans for a business. The reasons for this vary but can include the transfer of intellectual property , licensing rights, equity, or profits. The sponsor may choose to pay the company conducting the research and development at a fixed rate or provide some form of reimbursement at a later date.

These arrangements are often developed as limited partnerships . This allows the related party to act as a partner for a designated amount of time. As such, the partner may secure even more funding through the sale of limited-partner interests or by extending any loans to the partnership that will be repaid through royalties in the future.

Accounting Issues to be Resolved

When a business entity partners with research and development arrangements, there are numerous accounting issues to address before moving forward with the work.

• If funds are lent or advanced to a third-party, and repayment is based on the economic benefits associated with the research and development, those amounts must be charged to the expense.
• Defer any nonrefundable advance payments for research and development. Mark them as an expense only when the products are delivered or the services are rendered.
• If the repayment of the funds to the funding party is dependent on the results of the research and development, consider the repayment as a contract to perform work.
• If the funding parties must be repaid no matter how the research and development turns out, be sure to recognize liability for the amount of the repayment and charge the cost of the research and development to the expense as incurred.
• If the third party issues a warrant as part of the funding arrangement, set aside a portion of your paid-in funds to serve as paid-in capital.

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• Building Your Business

How To Create Financial Projections for Your Business

Learn how to anticipate your business’s financial performance

• Understanding Financial Projections & Forecasting

Why Forecasting Is Critical for Your Business

Key financial statements for forecasting, how to create your financial projections, frequently asked questions (faqs).

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Just like a weather forecast lets you know that wearing closed-toe shoes will be important for that afternoon downpour later, a good financial forecast allows you to better anticipate financial highs and lows for your business.

Neglecting to compile financial projections for your business may signal to investors that you’re unprepared for the future, which may cause you to lose out on funding opportunities.

Read on to learn more about financial projections, how to compile and use them in a business plan, and why they can be crucial for every business owner.

Key Takeaways

• Financial forecasting is a projection of your business's future revenues and expenses based on comparative data analysis, industry research, and more.
• Financial projections are a valuable tool for entrepreneurs as they offer insight into a business's ability to generate profit, increase cash flow, and repay debts, which can be attractive to investors.
• Some of the key components to include in a financial projection include a sales projection, break-even analysis, and pro forma balance sheet and income statement.
• A financial projection can not only attract investors, but helps business owners anticipate fixed costs, find a break-even point, and prepare for the unexpected.

Understanding Financial Projections and Forecasting

Financial forecasting is an educated estimate of future revenues and expenses that involves comparative analysis to get a snapshot of what could happen in your business’s future.

This process helps in making predictions about future business performance based on current financial information, industry trends, and economic conditions. Financial forecasting also helps businesses make decisions about investments, financing sources, inventory management, cost control strategies, and even whether to move into another market.

Developing both short- and mid-term projections is usually necessary to help you determine immediate production and personnel needs as well as future resource requirements for raw materials, equipment, and machinery.

Financial projections are a valuable tool for entrepreneurs as they offer insight into a business's ability to generate profit, increase cash flow, and repay debts. They can also be used to make informed decisions about the business’s plans. Creating an accurate, adaptive financial projection for your business offers many benefits, including:

• Attracting investors and convincing them to fund your business
• Anticipating problems before they arise
• Visualizing your small-business objectives and budgets
• Demonstrating how you will repay small-business loans
• Planning for more significant business expenses
• Showing business growth potential
• Helping with proper pricing and production planning

Financial forecasting is essentially predicting the revenue and expenses for a business venture. Whether your business is new or established, forecasting can play a vital role in helping you plan for the future and budget your funds.

Creating financial projections may be a necessary exercise for many businesses, particularly those that do not have sufficient cash flow or need to rely on customer credit to maintain operations. Compiling financial information, knowing your market, and understanding what your potential investors are looking for can enable you to make intelligent decisions about your assets and resources.

The income statement, balance sheet, and statement of cash flow are three key financial reports needed for forecasting that can also provide analysts with crucial information about a business's financial health. Here is a closer look at each.

Income Statement

An income statement, also known as a profit and loss statement or P&L, is a financial document that provides an overview of an organization's revenues, expenses, and net income.

Balance Sheet

The balance sheet is a snapshot of the business's assets and liabilities at a certain point in time. Sometimes referred to as the “financial portrait” of a business, the balance sheet provides an overview of how much money the business has, what it owes, and its net worth.

The assets side of the balance sheet includes what the business owns as well as future ownership items. The other side of the sheet includes liabilities and equity, which represent what it owes or what others owe to the business.

A balance sheet that shows hypothetical calculations and future financial projections is also referred to as a “pro forma” balance sheet.

Cash Flow Statement

A cash flow statement monitors the business’s inflows and outflows—both cash and non-cash. Cash flow is the business’s projected earnings before interest, taxes, depreciation, and amortization ( EBITDA ) minus capital investments.

Here's how to compile your financial projections and fit the results into the three above statements.

A financial projections spreadsheet for your business should include these metrics and figures:

• Sales forecast
• Balance sheet
• Operating expenses
• Payroll expenses (if applicable)
• Amortization and depreciation
• Cash flow statement
• Income statement
• Cost of goods sold (COGS)
• Break-even analysis

Here are key steps to account for creating your financial projections.

Projecting Sales

The first step for a financial forecast starts with projecting your business’s sales, which are typically derived from past revenue as well as industry research. These projections allow businesses to understand what their risks are and how much they will need in terms of staffing, resources, and funding.

Sales forecasts also enable businesses to decide on important levels such as product variety, price points, and inventory capacity.

Income Statement Calculations

A projected income statement shows how much you expect in revenue and profit—as well as your estimated expenses and losses—over a specific time in the future. Like a standard income statement, elements on a projection include revenue, COGS, and expenses that you’ll calculate to determine figures such as the business’s gross profit margin and net income.

If you’re developing a hypothetical, or pro forma, income statement, you can use historical data from previous years’ income statements. You can also do a comparative analysis of two different income statement periods to come up with your figures.

Anticipate Fixed Costs

Fixed business costs are expenses that do not change based on the number of products sold. The best way to anticipate fixed business costs is to research your industry and prepare a budget using actual numbers from competitors in the industry. Anticipating fixed costs ensures your business doesn’t overpay for its needs and balances out its variable costs. A few examples of fixed business costs include:

• Rent or mortgage payments
• Operating expenses (also called selling, general and administrative expenses or SG&A)
• Utility bills
• Insurance premiums

Unfortunately, it might not be possible to predict accurately how much your fixed costs will change in a year due to variables such as inflation, property, and interest rates. It’s best to slightly overestimate fixed costs just in case you need to account for these potential fluctuations.

Find Your Break-Even Point

The break-even point (BEP) is the number at which a business has the same expenses as its revenue. In other words, it occurs when your operations generate enough revenue to cover all of your business’s costs and expenses. The BEP will differ depending on the type of business, market conditions, and other factors.

To find this number, you need to determine two things: your fixed costs and variable costs. Once you have these figures, you can find your BEP using this formula:

Break-even point = fixed expenses ➗ 1 – (variable expenses ➗ sales)

The BEP is an essential consideration for any projection because it is the point at which total revenue from a project equals total cost. This makes it the point of either profit or loss.

Plan for the Unexpected

It is necessary to have the proper financial safeguards in place to prepare for any unanticipated costs. A sudden vehicle repair, a leaky roof, or broken equipment can quickly derail your budget if you aren't prepared. Cash management is a financial management plan that ensures a business has enough cash on hand to maintain operations and meet short-term obligations.

To maintain cash reserves, you can apply for overdraft protection or an overdraft line of credit. Overdraft protection can be set up by a bank or credit card business and provides short-term loans if the account balance falls below zero. On the other hand, a line of credit is an agreement with a lending institution in which they provide you with an unsecured loan at any time until your balance reaches zero again.

How do you make financial projections for startups?

Financial projections for startups can be hard to complete. Historical financial data may not be available. Find someone with financial projections experience to give insight on risks and outcomes.

Consider business forecasting, too, which incorporates assumptions about the exponential growth of your business.

Startups can also benefit from using EBITDA to get a better look at potential cash flow.

What are the benefits associated with forecasting business finances?

Forecasting can be beneficial for businesses in many ways, including:

• Providing better understanding of your business cash flow
• Easing the process of planning and budgeting for the future based on income
• Improving decision-making
• Providing valuable insight into what's in their future
• Making decisions on how to best allocate resources for success

How many years should your financial forecast be?

Your financial forecast should either be projected over a specific time period or projected into perpetuity. There are various methods for determining how long a financial forecasting projection should go out, but many businesses use one to five years as a standard timeframe.

U.S. Small Business Administration. " Market Research and Competitive Analysis ."

Score. " Financial Projections Template ."

Development of business plans and projections

1. defining your business goals and objectives, 2. conducting market research and analysis, 3. developing a marketing plan, 4. creating a sales plan, 5. developing an operations plan, 6. developing a financial plan, 7. putting together your business plan, 8. reviewing and revising your business plan, 9. projecting your business growth.

As a business owner, you need to have a clear understanding of what you want to achieve with your business. This means setting clear goals and objectives . Without this level of clarity, it will be very difficult to develop an effective business plan and make informed decisions about how to grow your business.

There are a few things to keep in mind when setting goals and objectives for your business. First, you need to make sure that your goals are specific, measurable, achievable, relevant, and time-bound (SMART). Second, you need to ensure that your goals are aligned with your company's mission and values. Third, you need to create a system for tracking progress and measuring success.

3. Make it achievable: When setting goals, it is important to make sure that they are achievable. If a goal is too ambitious, it may be discouraging and could lead to demotivation. On the other hand, if a goal is too easy, it may not challenge you enough and could lead to complacency. It is important to strike a balance between these two extremes.

Creating SMART goals is an important first step in developing an effective business plan . However, it is also important to create a system for tracking progress and measuring success . Without this, it will be difficult to determine whether or not you are on track to achieve your goals .

Whatever system you use to track progress and measure success, it is important to make sure that it is aligned with your SMART goals. This will help you stay focused on what is important and ensure that your efforts are having a positive impact on your business .

The development of business plans and projections is a process that requires careful market research and analysis . The goal is to produce a document that accurately reflects the current state of the market and the potential for future growth . This process can be divided into four main steps:

1. Defining the scope of the research. This involves identifying the specific goals of the research, the target audience, and the timeframe within which the research will be conducted.

2. Conducting a literature review. This step involves reviewing existing data and research on the topic to gain a better understanding of the current state of the market.

3. Collecting primary data. This step involves collecting data directly from consumers through surveys, interviews, or focus groups.

4. Analyzing the data. This step involves analyzing the data collected in order to identify trends and patterns . This analysis will be used to develop hypotheses about the future direction of the market.

The development of business plans and projections is a critical process for any company looking to enter or expand into new markets . By carefully researching and analyzing the market, companies can develop realistic plans and projections that will help them to achieve their goals.

Conducting market research and analysis - Development of business plans and projections

When it comes to marketing, there is no one-size-fits-all solution. The best way to develop a marketing plan is to tailor it to your specific business and products. However, there are some essential elements that all marketing plans should include.

The first step is to define your target market . Who are you selling to? What are their needs and wants? What are their demographics? Once you have a good understanding of your target market , you can begin to develop a marketing strategy that will reach them.

Next, you need to set some goals. What do you want to achieve with your marketing efforts? Do you want to increase brand awareness? Drive traffic to your website? Generate leads? Convert leads into customers ? Once you have defined your goals, you can start to develop a plan of action.

Your marketing plan should include a mix of different marketing channels . The most effective marketing plans use a combination of online and offline channels . Some examples of online channels include SEO, content marketing, social media , and email marketing . Offline channels can include traditional advertising, PR, and events.

It's also important to consider your budget when developing your marketing plan . How much can you afford to spend on marketing each month? What are the most cost-effective channels for your business? Once you have a good understanding of your budget, you can start to allocate funds to different channels.

Once you have developed your plan, it's important to track your progress and measure your results. This will help you to see what's working and what's not. It will also allow you to make necessary adjustments to your strategy as you go along.

Developing a marketing plan can seem like a daunting task, but it's essential for any business that wants to succeed. By taking the time to define your target market, set goals, and create a budget, you can develop a plan that will help you achieve your desired results.

Sales plans are an essential part of any business. They provide a roadmap for achieving sales goals and help businesses track progress towards these goals. Sales plans also help businesses identify potential obstacles and devise strategies for overcoming them.

Creating a sales plan can be a daunting task, but it doesn't have to be. Here are a few tips to help you get started:

1. Define your goals.

The first step in creating a sales plan is to define your sales goals. What do you want to achieve? How much revenue do you want to generate? What markets do you want to target? Once you have a clear understanding of your goals, you can start to develop a plan to achieve them.

2. Research your market.

Before you can start selling, you need to understand your market. Who are your potential customers? What needs do they have that your product or service can address? What are their buying habits? Answering these questions will help you develop strategies for reaching your target market.

3. Develop your sales strategies.

Once you know who your target market is and what needs they have, you can start to develop sales strategies. What methods will you use to reach potential customers ? What kind of messaging will you use to sell your product or service ? How will you follow up with leads? Answering these questions will help you create a sales plan that is tailored to your business and your market.

4. set realistic sales targets .

Setting realistic sales targets is essential to the success of your sales plan. If your targets are too high, you will likely become discouraged and give up. If your targets are too low, you may not reach your full potential . Work with your team to set achievable goals that will stretch your business while still being attainable.

5. Track your progress.

As you implement your sales plan, it's important to track your progress. This will help you identify what's working and what's not. Adjust your strategies as needed to ensure that you are on track to reach your goals.

Creating a sales plan is an important step in the development of any business. By taking the time to define your goals, research your market, and develop sales strategies, you can increase your chances of success .

Creating a sales plan - Development of business plans and projections

Operations planning is the process of creating a plan that outlines an organization's production goals and how they will be achieved. The operations plan is an important component of the overall business plan and should be created before any other part of the plan is developed.

The operations plan should include a description of the current state of the organization's operations, as well as the desired future state . It should also include an analysis of the resources required to achieve the desired state, and a timeline for implementation.

The first step in developing an operations plan is to identify the organization's current state. This can be done by conducting a review of the current operations and processes. Once the current state is understood, the next step is to develop a vision for the future state. This can be done by identifying the goals and objectives that the organization wants to achieve.

After the current state and desired future state have been identified, the next step is to develop a plan for how to achieve the desired state. This plan should include a description of the resources required, a timeline for implementation, and a description of the risks and uncertainties associated with achieving the desired state.

Once the operations plan has been developed, it is important to review it regularly and update it as needed. This will ensure that the plan remains relevant and up-to-date as the organization's operations change.

When developing a business plan and projections, one of the most important sections is the financial plan. This is because the financial plan will outline the expected costs, revenue, and profitability of the business. Without a well-developed financial plan, it may be difficult to secure funding from investors or lenders.

There are a few key elements that should be included in a financial plan. First, there should be a sales forecast that outlines expected revenue for the business. This forecast should be based on market research and previous sales data, if available. Second, there should be a expense budget that outlines the expected costs for the business. These costs can include things like rent, utilities, payroll, and inventory. Third, there should be a profit and loss statement that shows the expected profitability of the business. This statement should take into account the revenue and expenses for the business . Finally, there should be a cash flow statement that shows how much cash the business is expected to generate and how it will be used.

The financial plan is an important part of any business plan and projections. It should be well-researched and carefully developed in order to give investors and lenders confidence in the business.

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The development of a business plan is an important step in the creation of any new business. A business plan is essentially a roadmap for how your business will operate, and can be used to secure funding, attract investors, and provide a guide for your business's growth.

There are a few key elements that should be included in any business plan , regardless of the industry or size of the business. First, your business plan should include an executive summary, which is a brief overview of your business and its key objectives. This summary should be followed by a more detailed description of your business, including its history, products or services, target market, and competitive advantage.

Next, your business plan should include a section on your company's financial projections. This is where you will outline your expected revenue and expenses for the next few years. This information will be critical for potential investors or lenders , as it will give them an idea of your company's financial health and viability.

Finally, your business plan should include a section on your marketing strategy. This is where you will detail how you plan to reach your target market and promote your products or services . This information will be essential for potential customers or clients, as it will give them an idea of what to expect from your company.

The development of a well-crafted business plan is an essential step in the creation of any successful business. By taking the time to carefully consider each element of your business, you can ensure that your company is on the right track for success.

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When you develop your business plan , you will need to include financial projections. financial projections show how much money you expect your business to make and lose over a period of time. They are an important part of your business plan because they help you to:

1. Determine whether your business is viable

2. Secure financing from lenders or investors

3. Make sound business decisions

Reviewing and revising your business plan on a regular basis helps to ensure that it remains accurate and up-to-date. As your business grows and changes, so too should your business plan.

There are a few key things to keep in mind when reviewing and revising your financial projections:

1. Make sure your assumptions are realistic. When making assumptions about things like sales, costs, and expenses, be sure to err on the side of caution. Its better to be conservative in your projections than to be overly optimistic.

2. Use historical data to inform your projections. If you have data from previous years, use it to help inform your projections for the coming year. This will help to ensure that your projections are realistic.

3. Review your projections regularly. At a minimum, you should review your financial projections quarterly. This will help you to catch any errors or discrepancies and make necessary adjustments.

4. Be prepared to make changes. As your business grows and changes, so too will your financial projections. Be prepared to make changes to your projections as needed.

5. Seek professional help. If you're not confident in your ability to create accurate financial projections , seek out the help of a professional accountant or financial advisor.

Reviewing and revising your business plan - Development of business plans and projections

One of the most important aspects of any business is understanding and projecting your growth. This is essential in order to make sound decisions about things like hiring, inventory, marketing, and expansion. Without a clear picture of where your business is headed, it's very difficult to make informed choices that will help you achieve your goals .

There are a number of different ways to approach projecting your business growth. The most important thing is to be as realistic as possible. Don't try to guess what might happen; base your projections on actual data and trends.

One common method is to look at historical sales data. If you have been in business for awhile, you probably have a pretty good idea of how sales have grown in the past. This can be a helpful starting point, but it's important to remember that the future is not necessarily going to play out the same way as the past. Still, looking at historical sales data can give you a good sense of the potential for growth.

Another approach is to look at industry trends. This can be helpful in understanding where your particular industry is headed and how that might impact your business. There are a number of different resources you can use to research industry trends.

Once you have a good understanding of how your business has grown in the past and where the industry is headed, you can start to make some educated guesses about the future. Again, it's important to be as realistic as possible. Don't try to guess what might happen; base your projections on actual data and trends.

Making accurate projections about your business growth is not always easy, but it's essential if you want to make sound decisions about the future of your business. By taking the time to do your research and being realistic about the potential for growth, you can ensure that you are making choices that will help your business succeed.

As always, space remains an unforgiving frontier, and the skies overhead will surely present obstacles and setbacks that must be overcome. But hard challenges demand fresh approaches, and I'm optimistic that Stratolaunch will yield transformative benefits - not only for scientists and space entrepreneurs, but for all of us. Paul Allen

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Write a business development plan

Now that you’re in the growth stage of your business, set things in motion with a business development plan.

A business development plan sets goals for growth and explains how you will achieve them. It can have a short-term or long-term focus. Review and revise your plan as often as you can. And keep building on it as your business evolves.

How to write a business development plan

Your business development plan is your roadmap to growth, so make it clear, specific and realistic.

What to include in a business development plan

• Opportunities for growth: Identify where growth will come from – whether it’s in creating new products, adding more services, breaking into new markets, or a combination of these.
• Funding plan: Determine how you’ll fund your business growth. How much capital do you already have? How much more do you need and how will you get it? Check out our guide on financing your business.
• Financial goals: Work out what revenue, costs and profits you’ll have if things stay the same. Use those numbers as a basis for setting new, more ambitious financial goals.
• Operational needs: Identify what things about your business will need to change in order to achieve growth. Will you need extra people, more equipment, or new suppliers?
• Sales and marketing activities: Figure out what sales and marketing efforts will effectively promote growth and how these efforts will change as the business gets bigger and better. Make sure your sales and marketing plan is sturdy enough to support your growing business.
• Team needs: You may need people to take on some of the tasks you’ve been doing. Think about what parts of running the business you enjoy most – and you’re good at – and what parts you might want to delegate to others. And give some thought to the culture you want to develop in your business as it grows. Check out our guide on hiring employees.

A sample business development plan

Avoid these common business development mistakes.

• Thinking short-term instead of long-term
• Underestimating how much money it will take to grow
• Not budgeting enough money to cover the costs of growth
• Focusing on too many growth opportunities: think quality, not quantity

Micro-planning can keep you focused

You may want to create some micro-plans for specific growth projects so their details don’t get overlooked. And you can build in some KPIs to measure your progress and successes. As your business grows, take note of your progress and make periodic adjustments to your business development plan to make sure it’s still relevant.

Support is out there

Remember you’re not the first to go through this. Seek out mentors, advisors or other business owners who can help you with your planning. Your accountant or bookkeeper may also be able to help or point you in the direction of the right people.

Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.

Growing your business

Are you ready to drop the hammer and take your business to the next level? Let’s look at how to grow.

Before you leap into growth, reflect on where you’ve come from. Find out the stage of business growth you’re at.

Understanding your business performance will help you grow. Check out common examples of small business KPIs.

Increasing sales revenue is one obvious way to help grow your business. But how do you sell more?

You can grow your business by selling more things to more people, or fewer things to fewer people. Let’s look at how.

You’re all set to grow your business. But there’s so much to keep track of. Xero’s got resources and solutions to help.

Download the guide to growing your business

Learn how to grow a business, from planning to expansion. Fill out the form to receive this guide as a PDF.

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How to Write a Business Plan: Step-by-Step Guide + Examples

Noah Parsons

24 min. read

Updated April 17, 2024

Writing a business plan doesn’t have to be complicated. 

In this step-by-step guide, you’ll learn how to write a business plan that’s detailed enough to impress bankers and potential investors, while giving you the tools to start, run, and grow a successful business.

• The basics of business planning

If you’re reading this guide, then you already know why you need a business plan . 

You understand that planning helps you: 

• Raise money
• Grow strategically
• Keep your business on the right track 

As you start to write your plan, it’s useful to zoom out and remember what a business plan is .

At its core, a business plan is an overview of the products and services you sell, and the customers that you sell to. It explains your business strategy: how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

Most business plans also include financial forecasts for the future. These set sales goals, budget for expenses, and predict profits and cash flow. 

A good business plan is much more than just a document that you write once and forget about. It’s also a guide that helps you outline and achieve your goals. 

After completing your plan, you can use it as a management tool to track your progress toward your goals. Updating and adjusting your forecasts and budgets as you go is one of the most important steps you can take to run a healthier, smarter business. 

We’ll dive into how to use your plan later in this article.

There are many different types of plans , but we’ll go over the most common type here, which includes everything you need for an investor-ready plan. However, if you’re just starting out and are looking for something simpler—I recommend starting with a one-page business plan . It’s faster and easier to create. 

It’s also the perfect place to start if you’re just figuring out your idea, or need a simple strategic plan to use inside your business.

Dig deeper : How to write a one-page business plan

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• What to include in your business plan

Executive summary

The executive summary is an overview of your business and your plans. It comes first in your plan and is ideally just one to two pages. Most people write it last because it’s a summary of the complete business plan.

Ideally, the executive summary can act as a stand-alone document that covers the highlights of your detailed plan. 

In fact, it’s common for investors to ask only for the executive summary when evaluating your business. If they like what they see in the executive summary, they’ll often follow up with a request for a complete plan, a pitch presentation , or more in-depth financial forecasts .

Your executive summary should include:

• A summary of the problem you are solving
• A description of your product or service
• An overview of your target market
• A brief description of your team
• A summary of your financials
• Your funding requirements (if you are raising money)

Dig Deeper: How to write an effective executive summary

Products and services description

This is where you describe exactly what you’re selling, and how it solves a problem for your target market. The best way to organize this part of your plan is to start by describing the problem that exists for your customers. After that, you can describe how you plan to solve that problem with your product or service. 

This is usually called a problem and solution statement .

To truly showcase the value of your products and services, you need to craft a compelling narrative around your offerings. How will your product or service transform your customers’ lives or jobs? A strong narrative will draw in your readers.

This is also the part of the business plan to discuss any competitive advantages you may have, like specific intellectual property or patents that protect your product. If you have any initial sales, contracts, or other evidence that your product or service is likely to sell, include that information as well. It will show that your idea has traction , which can help convince readers that your plan has a high chance of success.

Market analysis

Your target market is a description of the type of people that you plan to sell to. You might even have multiple target markets, depending on your business. 

A market analysis is the part of your plan where you bring together all of the information you know about your target market. Basically, it’s a thorough description of who your customers are and why they need what you’re selling. You’ll also include information about the growth of your market and your industry .

Try to be as specific as possible when you describe your market. 

Include information such as age, income level, and location—these are what’s called “demographics.” If you can, also describe your market’s interests and habits as they relate to your business—these are “psychographics.” 

Related: Target market examples

Essentially, you want to include any knowledge you have about your customers that is relevant to how your product or service is right for them. With a solid target market, it will be easier to create a sales and marketing plan that will reach your customers. That’s because you know who they are, what they like to do, and the best ways to reach them.

Next, provide any additional information you have about your market. 

What is the size of your market ? Is the market growing or shrinking? Ideally, you’ll want to demonstrate that your market is growing over time, and also explain how your business is positioned to take advantage of any expected changes in your industry.

Dig Deeper: Learn how to write a market analysis

Competitive analysis

Part of defining your business opportunity is determining what your competitive advantage is. To do this effectively, you need to know as much about your competitors as your target customers. 

Every business has some form of competition. If you don’t think you have competitors, then explore what alternatives there are in the market for your product or service. 

For example: In the early years of cars, their main competition was horses. For social media, the early competition was reading books, watching TV, and talking on the phone.

A good competitive analysis fully lays out the competitive landscape and then explains how your business is different. Maybe your products are better made, or cheaper, or your customer service is superior. Maybe your competitive advantage is your location – a wide variety of factors can ultimately give you an advantage.

Dig Deeper: How to write a competitive analysis for your business plan

Marketing and sales plan

The marketing and sales plan covers how you will position your product or service in the market, the marketing channels and messaging you will use, and your sales tactics. 

The best place to start with a marketing plan is with a positioning statement . 

This explains how your business fits into the overall market, and how you will explain the advantages of your product or service to customers. You’ll use the information from your competitive analysis to help you with your positioning. 

For example: You might position your company as the premium, most expensive but the highest quality option in the market. Or your positioning might focus on being locally owned and that shoppers support the local economy by buying your products.

Once you understand your positioning, you’ll bring this together with the information about your target market to create your marketing strategy . 

This is how you plan to communicate your message to potential customers. Depending on who your customers are and how they purchase products like yours, you might use many different strategies, from social media advertising to creating a podcast. Your marketing plan is all about how your customers discover who you are and why they should consider your products and services. 

While your marketing plan is about reaching your customers—your sales plan will describe the actual sales process once a customer has decided that they’re interested in what you have to offer. 

If your business requires salespeople and a long sales process, describe that in this section. If your customers can “self-serve” and just make purchases quickly on your website, describe that process. 

A good sales plan picks up where your marketing plan leaves off. The marketing plan brings customers in the door and the sales plan is how you close the deal.

Together, these specific plans paint a picture of how you will connect with your target audience, and how you will turn them into paying customers.

Dig deeper: What to include in your sales and marketing plan

Business operations

The operations section describes the necessary requirements for your business to run smoothly. It’s where you talk about how your business works and what day-to-day operations look like. 

Depending on how your business is structured, your operations plan may include elements of the business like:

• Supply chain management
• Manufacturing processes
• Equipment and technology
• Distribution

Some businesses distribute their products and reach their customers through large retailers like Amazon.com, Walmart, Target, and grocery store chains. 

These businesses should review how this part of their business works. The plan should discuss the logistics and costs of getting products onto store shelves and any potential hurdles the business may have to overcome.

If your business is much simpler than this, that’s OK. This section of your business plan can be either extremely short or more detailed, depending on the type of business you are building.

For businesses selling services, such as physical therapy or online software, you can use this section to describe the technology you’ll leverage, what goes into your service, and who you will partner with to deliver your services.

Dig Deeper: Learn how to write the operations chapter of your plan

Key milestones and metrics

Although it’s not required to complete your business plan, mapping out key business milestones and the metrics can be incredibly useful for measuring your success.

Good milestones clearly lay out the parameters of the task and set expectations for their execution. You’ll want to include:

• A description of each task
• The proposed due date
• Who is responsible for each task

If you have a budget, you can include projected costs to hit each milestone. You don’t need extensive project planning in this section—just list key milestones you want to hit and when you plan to hit them. This is your overall business roadmap. 

Possible milestones might be:

• Website launch date
• Store or office opening date
• First significant sales
• Break even date
• Business licenses and approvals

You should also discuss the key numbers you will track to determine your success. Some common metrics worth tracking include:

• Conversion rates
• Customer acquisition costs
• Profit per customer
• Repeat purchases

It’s perfectly fine to start with just a few metrics and grow the number you are tracking over time. You also may find that some metrics simply aren’t relevant to your business and can narrow down what you’re tracking.

Dig Deeper: How to use milestones in your business plan

Organization and management team

Investors don’t just look for great ideas—they want to find great teams. Use this chapter to describe your current team and who you need to hire . You should also provide a quick overview of your location and history if you’re already up and running.

Briefly highlight the relevant experiences of each key team member in the company. It’s important to make the case for why yours is the right team to turn an idea into a reality. 

Do they have the right industry experience and background? Have members of the team had entrepreneurial successes before? 

If you still need to hire key team members, that’s OK. Just note those gaps in this section.

Your company overview should also include a summary of your company’s current business structure . The most common business structures include:

• Sole proprietor
• Partnership

Be sure to provide an overview of how the business is owned as well. Does each business partner own an equal portion of the business? How is ownership divided? 

Potential lenders and investors will want to know the structure of the business before they will consider a loan or investment.

Dig Deeper: How to write about your company structure and team

Financial plan

Last, but certainly not least, is your financial plan chapter. 

Entrepreneurs often find this section the most daunting. But, business financials for most startups are less complicated than you think, and a business degree is certainly not required to build a solid financial forecast. 

A typical financial forecast in a business plan includes the following:

• Sales forecast : An estimate of the sales expected over a given period. You’ll break down your forecast into the key revenue streams that you expect to have.
• Expense budget : Your planned spending such as personnel costs , marketing expenses, and taxes.
• Profit & Loss : Brings together your sales and expenses and helps you calculate planned profits.
• Cash Flow : Shows how cash moves into and out of your business. It can predict how much cash you’ll have on hand at any given point in the future.
• Balance Sheet : A list of the assets, liabilities, and equity in your company. In short, it provides an overview of the financial health of your business. 

A strong business plan will include a description of assumptions about the future, and potential risks that could impact the financial plan. Including those will be especially important if you’re writing a business plan to pursue a loan or other investment.

Dig Deeper: How to create financial forecasts and budgets

This is the place for additional data, charts, or other information that supports your plan.

Including an appendix can significantly enhance the credibility of your plan by showing readers that you’ve thoroughly considered the details of your business idea, and are backing your ideas up with solid data.

Just remember that the information in the appendix is meant to be supplementary. Your business plan should stand on its own, even if the reader skips this section.

Dig Deeper : What to include in your business plan appendix

Optional: Business plan cover page

Adding a business plan cover page can make your plan, and by extension your business, seem more professional in the eyes of potential investors, lenders, and partners. It serves as the introduction to your document and provides necessary contact information for stakeholders to reference.

Your cover page should be simple and include:

• Company logo
• Business name
• Value proposition (optional)
• Business plan title
• Completion and/or update date
• Address and contact information
• Confidentiality statement

Just remember, the cover page is optional. If you decide to include it, keep it very simple and only spend a short amount of time putting it together.

Dig Deeper: How to create a business plan cover page

How to use AI to help write your business plan

Generative AI tools such as ChatGPT can speed up the business plan writing process and help you think through concepts like market segmentation and competition. These tools are especially useful for taking ideas that you provide and converting them into polished text for your business plan.

The best way to use AI for your business plan is to leverage it as a collaborator , not a replacement for human creative thinking and ingenuity. 

AI can come up with lots of ideas and act as a brainstorming partner. It’s up to you to filter through those ideas and figure out which ones are realistic enough to resonate with your customers. 

There are pros and cons of using AI to help with your business plan . So, spend some time understanding how it can be most helpful before just outsourcing the job to AI.

Learn more: 10 AI prompts you need to write a business plan

• Writing tips and strategies

To help streamline the business plan writing process, here are a few tips and key questions to answer to make sure you get the most out of your plan and avoid common mistakes .  

Determine why you are writing a business plan

Knowing why you are writing a business plan will determine your approach to your planning project. 

For example: If you are writing a business plan for yourself, or just to use inside your own business , you can probably skip the section about your team and organizational structure. 

If you’re raising money, you’ll want to spend more time explaining why you’re looking to raise the funds and exactly how you will use them.

Regardless of how you intend to use your business plan , think about why you are writing and what you’re trying to get out of the process before you begin.

Keep things concise

Probably the most important tip is to keep your business plan short and simple. There are no prizes for long business plans . The longer your plan is, the less likely people are to read it. 

So focus on trimming things down to the essentials your readers need to know. Skip the extended, wordy descriptions and instead focus on creating a plan that is easy to read —using bullets and short sentences whenever possible.

Have someone review your business plan

Writing a business plan in a vacuum is never a good idea. Sometimes it’s helpful to zoom out and check if your plan makes sense to someone else. You also want to make sure that it’s easy to read and understand.

Don’t wait until your plan is “done” to get a second look. Start sharing your plan early, and find out from readers what questions your plan leaves unanswered. This early review cycle will help you spot shortcomings in your plan and address them quickly, rather than finding out about them right before you present your plan to a lender or investor.

If you need a more detailed review, you may want to explore hiring a professional plan writer to thoroughly examine it.

Use a free business plan template and business plan examples to get started

Knowing what information to include in a business plan is sometimes not quite enough. If you’re struggling to get started or need additional guidance, it may be worth using a business plan template. 

There are plenty of great options available (we’ve rounded up our 8 favorites to streamline your search).

But, if you’re looking for a free downloadable business plan template , you can get one right now; download the template used by more than 1 million businesses. 

Or, if you just want to see what a completed business plan looks like, check out our library of over 550 free business plan examples . 

We even have a growing list of industry business planning guides with tips for what to focus on depending on your business type.

Common pitfalls and how to avoid them

It’s easy to make mistakes when you’re writing your business plan. Some entrepreneurs get sucked into the writing and research process, and don’t focus enough on actually getting their business started. 

Here are a few common mistakes and how to avoid them:

Not talking to your customers : This is one of the most common mistakes. It’s easy to assume that your product or service is something that people want. Before you invest too much in your business and too much in the planning process, make sure you talk to your prospective customers and have a good understanding of their needs.

• Overly optimistic sales and profit forecasts: By nature, entrepreneurs are optimistic about the future. But it’s good to temper that optimism a little when you’re planning, and make sure your forecasts are grounded in reality. 
• Spending too much time planning: Yes, planning is crucial. But you also need to get out and talk to customers, build prototypes of your product and figure out if there’s a market for your idea. Make sure to balance planning with building.
• Not revising the plan: Planning is useful, but nothing ever goes exactly as planned. As you learn more about what’s working and what’s not—revise your plan, your budgets, and your revenue forecast. Doing so will provide a more realistic picture of where your business is going, and what your financial needs will be moving forward.
• Not using the plan to manage your business: A good business plan is a management tool. Don’t just write it and put it on the shelf to collect dust – use it to track your progress and help you reach your goals.
• Presenting your business plan

The planning process forces you to think through every aspect of your business and answer questions that you may not have thought of. That’s the real benefit of writing a business plan – the knowledge you gain about your business that you may not have been able to discover otherwise.

With all of this knowledge, you’re well prepared to convert your business plan into a pitch presentation to present your ideas. 

A pitch presentation is a summary of your plan, just hitting the highlights and key points. It’s the best way to present your business plan to investors and team members.

Dig Deeper: Learn what key slides should be included in your pitch deck

Use your business plan to manage your business

One of the biggest benefits of planning is that it gives you a tool to manage your business better. With a revenue forecast, expense budget, and projected cash flow, you know your targets and where you are headed.

And yet, nothing ever goes exactly as planned – it’s the nature of business.

That’s where using your plan as a management tool comes in. The key to leveraging it for your business is to review it periodically and compare your forecasts and projections to your actual results.

Start by setting up a regular time to review the plan – a monthly review is a good starting point. During this review, answer questions like:

• Did you meet your sales goals?
• Is spending following your budget?
• Has anything gone differently than what you expected?

Now that you see whether you’re meeting your goals or are off track, you can make adjustments and set new targets. 

Maybe you’re exceeding your sales goals and should set new, more aggressive goals. In that case, maybe you should also explore more spending or hiring more employees. 

Or maybe expenses are rising faster than you projected. If that’s the case, you would need to look at where you can cut costs.

A plan, and a method for comparing your plan to your actual results , is the tool you need to steer your business toward success.

Learn More: How to run a regular plan review

Free business plan templates and examples

Kickstart your business plan writing with one of our free business plan templates or recommended tools.

Free business plan template

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How to write a business plan FAQ

What is a business plan?

A document that describes your business , the products and services you sell, and the customers that you sell to. It explains your business strategy, how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

What are the benefits of a business plan?

A business plan helps you understand where you want to go with your business and what it will take to get there. It reduces your overall risk, helps you uncover your business’s potential, attracts investors, and identifies areas for growth.

Having a business plan ultimately makes you more confident as a business owner and more likely to succeed for a longer period of time.

What are the 7 steps of a business plan?

The seven steps to writing a business plan include:

• Write a brief executive summary
• Describe your products and services.
• Conduct market research and compile data into a cohesive market analysis.
• Describe your marketing and sales strategy.
• Outline your organizational structure and management team.
• Develop financial projections for sales, revenue, and cash flow.
• Add any additional documents to your appendix.

What are the 5 most common business plan mistakes?

There are plenty of mistakes that can be made when writing a business plan. However, these are the 5 most common that you should do your best to avoid:

• 1. Not taking the planning process seriously.
• Having unrealistic financial projections or incomplete financial information.
• Inconsistent information or simple mistakes.
• Failing to establish a sound business model.
• Not having a defined purpose for your business plan.

What questions should be answered in a business plan?

Writing a business plan is all about asking yourself questions about your business and being able to answer them through the planning process. You’ll likely be asking dozens and dozens of questions for each section of your plan.

However, these are the key questions you should ask and answer with your business plan:

• How will your business make money?
• Is there a need for your product or service?
• Who are your customers?
• How are you different from the competition?
• How will you reach your customers?
• How will you measure success?

How long should a business plan be?

The length of your business plan fully depends on what you intend to do with it. From the SBA and traditional lender point of view, a business plan needs to be whatever length necessary to fully explain your business. This means that you prove the viability of your business, show that you understand the market, and have a detailed strategy in place.

If you intend to use your business plan for internal management purposes, you don’t necessarily need a full 25-50 page business plan. Instead, you can start with a one-page plan to get all of the necessary information in place.

What are the different types of business plans?

While all business plans cover similar categories, the style and function fully depend on how you intend to use your plan. Here are a few common business plan types worth considering.

Traditional business plan: The tried-and-true traditional business plan is a formal document meant to be used when applying for funding or pitching to investors. This type of business plan follows the outline above and can be anywhere from 10-50 pages depending on the amount of detail included, the complexity of your business, and what you include in your appendix.

Business model canvas: The business model canvas is a one-page template designed to demystify the business planning process. It removes the need for a traditional, copy-heavy business plan, in favor of a single-page outline that can help you and outside parties better explore your business idea.

One-page business plan: This format is a simplified version of the traditional plan that focuses on the core aspects of your business. You’ll typically stick with bullet points and single sentences. It’s most useful for those exploring ideas, needing to validate their business model, or who need an internal plan to help them run and manage their business.

Lean Plan: The Lean Plan is less of a specific document type and more of a methodology. It takes the simplicity and styling of the one-page business plan and turns it into a process for you to continuously plan, test, review, refine, and take action based on performance. It’s faster, keeps your plan concise, and ensures that your plan is always up-to-date.

What’s the difference between a business plan and a strategic plan?

A business plan covers the “who” and “what” of your business. It explains what your business is doing right now and how it functions. The strategic plan explores long-term goals and explains “how” the business will get there. It encourages you to look more intently toward the future and how you will achieve your vision.

However, when approached correctly, your business plan can actually function as a strategic plan as well. If kept lean, you can define your business, outline strategic steps, and track ongoing operations all with a single plan.

See why 1.2 million entrepreneurs have written their business plans with LivePlan

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

Table of Contents

• Use AI to help write your plan
• Common planning mistakes
• Manage with your business plan
• Templates and examples

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Business Plan Financial Projections: How To Create Accurate Targets

• Written by Keith Murphy
• 16 min read

Small businesses and startups have a lot riding on their ability to create effective and accurate financial projections as part of their business plan. Solid financials are a strong enticement for investors, after all, and can help new businesses chart a course that will take them beyond the legendendarily difficult first year and into a productive and profitable future.

But the need for business owners to look ahead in order to secure funding, increase profits, and make intelligent financial decisions doesn’t end when startups become full-fledged businesses—and business plan financial projections aren’t just for startups. Existing businesses can also put them to good use by harvesting insights from their existing financial statements and creating sales projections and other financial forecasts that guide and improve their ongoing business planning.

What Are Business Plan Financial Projections?

Successful companies plan ahead, looking as best they can into the near and distant future to chart a course to growth, innovation, and competitive strength. Financial projections, both as part of an initial business plan and as part of ongoing business planning, use a company’s financial statements to help business owners forecast their upcoming expenses and revenue in a strategically useful way.

Most businesses use two types of financial projections:

• Short-term projections are broken down by month and generally cover the coming 12 months. They provide a guide companies can use to monitor and adjust their financial activity to set and hit targets for the financial year. In the first year, short-term projections will be entirely estimated, but in subsequent years, historical data can be used to help fine-tune them for greater accuracy and strategic utility.
• Long-term projections are focused on the coming three to five years and are generally used to secure investment (both initial and ongoing), provide a strategic roadmap for the company’s growth, or both.

For startups, creating financial projections is part of their initial business plan. Providing financial forecasts banks and potential investors can use to determine the financial viability of a business is key to obtaining financing and investments needed to get the business off the ground.

For existing businesses—for whom an initial business plan has evolved into business planning—financial projections are useful in attracting investors who want to see clear estimates for upcoming revenue, expenses, and potential growth. They’re also helpful in securing loans and lines of credit from financial institutions for the same reason. And even if you’re not trying to get funding or investments, financial projections provide a useful framework for building budgets focused on growth and competitive advantage.

So whether you’re a small business owner, an aspiring tycoon starting a new business, or part of the financial team at a well-established corporation, what matters most is viewing financial projections as a living, breathing reference tool that can help you plan and budget for growth in a realistic way while still setting aspirational goals for your business.

Financial projections, both as part of an initial business plan and as part of ongoing business planning, use a company’s financial statements to help business owners forecast their upcoming expenses and revenue in a strategically useful way.

Financial Projections: Core Components

Whether you’re preparing them as part of your business plan or to enhance your business planning, you’ll need the same financial statements to prepare financial projections: an income statement, a cash-flow statement, and a balance sheet.

• Income statements , sometimes called profit and loss statements , provide detailed information on your company’s revenue and expenses for a given period (e.g., a quarter, year, or multi-year period).
• Cash flow statements provide a comprehensive view of cash flowing into and out of a business. They record all cash flow from operations, investment, and financing activities.
• Balance sheets are used to showcase a company’s assets, liabilities, and owner’s equity for a specific period.

How to Create Financial Projections

The process of creating financial projections is the same whether you’re drafting a business plan or creating forecasts for an existing business. The primary difference is whether you’ll draw on your own research and expertise (a new business or startup business) or use historical data (existing businesses).

Keep in mind that while you’ll create the necessary documents separately, you’ll most likely finish them by consulting each of them as needed. For example, your sales forecast might change once you prepare your cash-flow statement. The best approach is to view each document as both its own piece of the financial projection puzzle and a reference for the others; this will help ensure you can assemble comprehensive and clear financial projections.

1. Start with a Sales Projection

A sales forecast is the first step in creating your income statement. You can start with a one, three, or five-year projection, but keep in mind that, without historical financial data, accuracy may decrease over time. It’s best to start with monthly income statements until you reach your projected break-even , which is the point at which revenue exceeds total operating expenses and you show a profit. Once you hit the break-even, you can transition to annual income statements.

Also, keep in mind factors outside of sales; market conditions, global environmental, political, and health concerns, sourcing challenges (including pricing changes and increased variable costs) and other business disruptors can put the kibosh on your carefully constructed forecasts if you leave them out of your considerations.

Start with a reasonable estimate of the units sold for the forecast period, and multiply them by the price per unit. This value is your total sales for the period.

Next, estimate the total cost of producing these units (i.e., the cost of goods sold , or COGS; sometimes called cost of sales ) by multiplying the per-unit cost by the number of units produced.

Deducting your COGS from your estimated sales yields your gross profit margin.

From the gross margin, subtract expenses such as wages, marketing costs, rent, and other operating expenses. The result is your projected operating income , or net income .

Using these figures, you can create an income statement:

2. Cash Flow Statement

Tracking your estimated cash inflows and outflows from investment and financing, combined with the cash generated by business operations, is the purpose of a cash flow projection .

Investment activities might include, for example, purchasing real estate or investing in research and development outside of daily operations.

Financing activities include cash inflows from investor funding or business loans, as well as cash outflows to repay debts or pay dividends to shareholders.

A reliable and accurate cash flow projection is essential to managing your working capital effectively and ensuring you have all the cash you need to cover your ongoing obligations while still having enough left to invest in growth and innovation or cover emergencies.

Drawing from our income statement, we can create a basic cash flow statement:

3. The Balance Sheet

Providing a “snapshot” of your businesses’ financial performance for a given period of time, the balance sheet contains your company’s assets, liabilities, and owner’s equity.

Assets include inventory, real estate, and capital, while liabilities represent financial obligations and include accounts payable, bank loans, and other debt.

Owner’s equity represents the amount remaining once liabilities have been paid.

Ideally, over time your company’s balance sheet will reflect your growth through a reduction of liabilities and an increase in owner’s equity.

We can complete our triumvirate of financial statements with a basic balance sheet:

Best Practices for Effective Financial Projections

Like a lot of other business processes, financial planning can be complex, time-consuming, and even frustrating if you’re still using manual workflows and paper documents or basic spreadsheet-style applications such as Microsoft Excel. You can get free templates for basic financial projections from the Service Corps of Retired Executives (SCORE), but even templates can only take you so far.

Without a doubt, the best advantage you can give yourself in creating effective and accurate financial projections—whether they’re for the financial section of your business plan or simply part of your ongoing business planning—is to invest in comprehensive procure-to-pay (P2P) software such as Planergy.

In addition to helpful templates, best-in-class P2P software also provides a rich array of real-time data analysis, reporting, and forecasting tools that make it easy to transform historical data (or market research) into accurate forecasts. In addition, artificial intelligence and process automation make it easy to collect, organize, manage and share your data with all internal stakeholders, so everyone has the information they need to create the most useful and complete forecasts and projections possible.

Beyond investing in P2P software, you can also improve the quality and accuracy of your financial projections by:

• Doing your homework. Invest in financial statement analysis and ratio analysis, with a focus not just on your own company, but your industry and the market in general. Learn the current ratios used for liquidity analysis, profitability, and debt and compare them to your own to get a more nuanced and useful understanding of how your company performs internally and within the context of the marketplace.
• Keeping it real. It can be all too easy to get carried away with pie-in-the-sky optimism when forecasting the future of your business. Rose-colored glasses aren’t exclusive to startups and small businesses; over-inflated estimates can hobble even veteran organizations if they don’t practice good data discipline and temper their hopes with practical considerations. Focus on creating realistic, but positive, projections, and you won’t have to worry about investors or lenders glancing askance at your hard work.
• Hoping for the best, but planning for the worst. Run two scenarios when performing your financial projections: the best-case scenario where everything goes perfectly to plan, and a worse-case scenario where Murphy’s Law holds sway. While actual performance will undoubtedly fall somewhere in between the two, having an upper and lower boundary appeals to investors and lenders who are assessing your company’s financial viability.

Financial Projections Help You Reach Your Goals for Growth

From startups to global corporations, every business needs reliable tools for financial forecasting. Take the time to create well-researched, data-driven financial projections, and you’ll be well-equipped to attract investors, secure funding, and chart a course for greater profits, growth, and performance in today’s competitive marketplace.

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Home » Projected Costs 101: A Beginner’s Guide

Projected Costs 101: A Beginner’s Guide

There are numerous expenses involved in opening a business. But there’s no need to try to figure out these costs on your own.

Over the course of your business, costs will change and fluctuate based on the projects that you take on. You need to be able to accurately project your costs in order to not get caught off guard when your costs increase.

If you struggle to project your costs and quantify future cost burdens, you should look into projected cost analysis. Read on to learn more.

What are Projected Costs?

Projected costs refer to the estimated expenses associated with a project or endeavor. They are not necessarily set in stone and may vary from the actual costs incurred.

The process of projecting costs involves identifying and estimating the different elements that contribute to the overall expenses of a project. These elements may include:

Direct Costs

Direct costs are those that are directly related to the resources used to complete the project. This includes materials, supplies, and direct labor.

Direct costs are typically tracked and allocated in time-phased budgets. This allows businesses to have a better understanding of the projected costs of the project.

Indirect Costs

Indirect costs are those that are not associated with direct resources but are still necessary for completion. This can include an array of items such as administrative costs, overhead, and support.

These costs may seem small in relation to the project’s budget. But they can add up to be significant and must be factored in.

Contingency Costs

These costs account for unforeseen events or risks that may arise during the project. Contingency amounts are included to provide a buffer for potential changes in scope, delays, or unexpected expenses. Contingency costs are equally important, as they provide a safety net to draw on if any unexpected expenses arise.

Interest Costs

These costs are associated with any loan taken out to finance the project. Interest costs can include loan interest payments, credit card debts, and other financing costs. When estimating future costs, projected interest costs need to be included in order to provide an accurate financial picture.

Tools and Strategies for Aid in Cost Projection

There are a variety of tools and strategies available to make cost projections more efficient such as cost estimating software. This helps organizations quickly and accurately calculate cost estimates.

Online bookkeeping , businesses can create estimates for their expenses by reviewing their past data. This allows businesses to make more informed decisions and plans for the future.

Analyzing historical cost data and market research can also aid in cost projection. Utilizing a combination of these tools and strategies, an accurate cost projection can be created.

Learning More About Projected Cost

The projected cost is an important part of any business. It’s essential to make sure estimates are accurate and realistic. Taking the time to identify and analyze risks can go a long way in helping to create an accurate cost projection.

Make sure to remain diligent and plan ahead to ensure your business is successful . Get your financial projections done right – hire an expert!

Did this article help you? If so, take a look at some of our other blog posts for more informative reads.

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Project Cost Estimation: How to Estimate Project Cost

Good cost estimation is essential for project management success. Many costs can appear over the project management life cycle, and an accurate project cost estimation method can be the difference between a successful plan and a failed one. Project cost estimating, however, is easier said than done. Projects bring risks, and risks bring unexpected costs and cost management issues.

What Is Project Cost Estimation?

Project cost estimation is the process that takes direct costs, indirect costs and other types of project costs into account and calculates a budget that meets the financial commitment necessary for a successful project. To do this, project managers and project estimators use a cost breakdown structure to determine all the costs in a project.

Project cost estimation is critical for any type of project , from building a bridge to developing that new killer app. Everything costs money, so the clearer you are on the amount required, the more likely you and your project team will achieve your objective.

Project cost estimating is a critical step during the project planning phase because it helps project managers create a project budget that covers the project costs that are needed to achieve the goals and objectives of the project set forth by executives and project stakeholders.

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Project Estimate Template

Use this free Project Estimate Template for Excel to manage your projects better.

What Is a Project Estimate?

A project estimate is the process of accurately forecasting the time, cost and resources required for a project. This is done by looking at historical data, getting information from the client and itemizing each resource and its duration of use in the project.

To create a project estimate, you should first define your project scope and then create a project cost breakdown structure, which allows you to pinpoint all of your different project costs for each stage of the project life cycle.

Project cost estimation is simplified with the help of project management software like ProjectManager . Add project budgets and planned costs for specific tasks and include labor rates for your team. When you build your plan on our Gantt chart, your estimated project costs will calculate automatically. Plus, as the project unfolds, you can track your costs in real time on our automated dashboard. Try it for free today.

What Is a Project Cost Breakdown Structure?

A cost breakdown structure (CBS) is a very important project costing tool that details the individual costs of a project on a document. Similar to a work breakdown structure (WBS) , it’s a hierarchical chart where each row represents a type of cost or item. This is done at the task level, which is called a bottom-up analysis.

Creating a cost breakdown structure might be time-consuming, but one that’s worth the effort in that the result is a more accurate estimate of costs than you’d get with a top-down approach, such as basing all your estimates on the costs of previous, similar projects.

Using a cost breakdown structure is an essential part of project cost management and resource management . By zeroing in on costs at the task level early during the project planning phase, you’re less likely to miss hidden costs that could come up later during the project execution stage and throw your project budget off.

Types of Project Costs

There are five main types of costs that make up your total project cost. Here’s a quick overview of these types of project costs and how to measure them.

• Direct costs: Direct costs are those that occur in a project and are attached to specific activities. These are generally costs that are easier to accurately estimate. They include raw materials, labor, supplies, etc.
• Indirect costs: Indirect costs in a project are those that are in support of the project, such as administrative fees. These can include everything from rent to salaries of the administrative staff to utilities, etc.
• Fixed costs: Fixed costs, as the name suggests, are those that don’t change throughout the life cycle of a project . Some examples of fixed costs include setup costs, rental costs, insurance premiums, property taxes, etc.
• Variable costs: Variable costs are costs that change due to the amount of work that’s done in the project and are variable in nature. These costs can include hourly labor wages, materials, fuel costs and so on.
• Sunk costs: In project cost estimating, when an investment has already been incurred and can’t be recovered it’s called a sunk cost or retrospective cost. Some examples of sunk costs include marketing, research, installation of new software, etc.

Free Project Cost Estimation Template

ProjectManager has free templates for every aspect of managing a project, including a free cost estimate template for Excel. It can be used for any project by simply replacing the items in the description column with those items that are relevant to your project.

This free cost estimate template has all the fields you’d need to fill in when estimating project costs. For example, there’s the description column followed by the vendor or subcontractor column and then there are columns to capture the labor and raw materials costs. These can be added together by line and then a total project cost can be calculated by the template.

Naturally, a cost estimate template is a static document. It’s handy in terms of collecting all your project costs and tracking them over the life cycle of the project. However, all that data must be manually added, which takes time and effort—two things that you don’t have in abundance when managing a project. Once you’re ready to streamline the cost estimate process you’ll find that there are many project management software solutions that can build budgets and track them in real time to keep you from overspending.

What Does a Project Estimator Do?

The project estimator or cost estimator, is tasked with figuring out the duration of the project in order to deliver it successfully. This includes determining the resources needed, including labor, materials, etc., which informs the project budget .

In order to do this, a project estimator must understand the project and its phases and be able to research the historical data of projects that were similar and executed in the past. Cost estimators also need to have a firm grasp of mathematical concepts.

Unlike a project manager , who’s responsible for the delivery and oversight of the project, a project estimator is focused on the direct and indirect costs associated with the project. Project estimators work closely with contractual professionals to develop accurate estimates, which are presented to project leaders.

Project Cost Estimation Techniques

All of these factors impact project cost estimation, making it difficult to come up with precise estimates. Luckily, there are cost estimating techniques that can help with developing a more accurate cost estimation.

Analogous Estimating

Seek the help of experts who have experience in similar projects, or use your own historical data. If you have access to relevant historical data, try analogous estimating, which can show precedents that help define what your future costs will be in the early stages of the project.

Parametric Estimating

There’s statistical modeling or parametric estimating , another cost estimation method that also uses historical data of key cost drivers and then calculates what those costs would be if the duration or another of the project is changed.

Bottom-Up Estimating

A more granular approach is bottom-up estimating, which uses estimates of individual tasks and then adds those up to determine the overall cost of the project. This cost-estimating method is even more detailed than parametric estimating and is used in complex projects with many variables such as software development or construction projects.

Three-Point Estimate

Another approach is the three-point estimate, which comes up with three scenarios: most likely, optimistic and pessimistic ranges. These are then put into an equation to develop an estimation.

Reserve Analysis

Reserve analysis determines how much contingency reserve must be allocated. This cost estimation method tries to wrangle uncertainty.

Cost of Quality

Cost of quality uses money spent during the project to avoid failures and money applied after the project to address failures. This can help fine-tune your overall project cost estimation. Plus, comparing bids from vendors can also help figure out costs.

Dynamic Project Costing Tools

Whenever you’re estimating costs, it helps to use online software to collect all of your project information. Project management software can be used in Congress with many of these techniques to help facilitate the process. Use online software to define your project teams, tasks and goals. Even manage your vendors and track costs as the project unfolds. We’ll show you how.

How to Estimate Project Costs in 10 Steps

The U.S. government has identified a 10-step process that results in reliable and valid cost estimates for project management . Those steps are outlined below.

• Define the cost estimate’s purpose: Determine the purpose of the cost estimate, the level of detail that is required, who receives the estimate and the overall scope of the estimate.
• Develop an estimating plan: Assemble a cost-estimating team and outline their estimation techniques. Develop a timeline , and determine who will do the independent cost estimate. Finally, create the team’s schedule.
• Define characteristics: Create a baseline description of the purpose, system and performance characteristics. This includes any technology implications, system configurations, schedules, strategies and relations to existing systems. Don’t forget support, security, risk items, testing and production, deployment and maintenance and any similar legacy systems.
• Determine cost estimating techniques: Define a work breakdown structure (WBS) and choose an estimating method that’s best suited for each element in the WBS. Cross-check for cost and schedule drivers; then create a checklist.
• Identify rules, assumptions and obtain data: Clearly define what’s included and excluded from the estimate and identify specific assumptions.
• Develop a point estimate: Develop a cost model by estimating each WBS element.
• Conduct a sensitivity analysis: Test the sensitivity of costs to changes in estimating input values and key assumptions, and determine key cost drivers.
• Conduct risk and uncertainty analysis: Determine the cost, schedule and technical risks inherent with each item on the WBS and how to manage them.
• Document the estimate and present it to management: Having documentation for each step in the cost estimate process keeps everyone on the same page with the cost estimate. Then you can brief the project stakeholders on cost estimates to get their approval.
• Update the cost estimate: Any changes to the cost estimate must be updated and reported . Also, perform a postmortem where you can document lessons learned.

Project Cost Estimation Example

Let’s take a moment to create a hypothetical project and run through a general cost estimate example to see how this process works. Construction cost estimation is straightforward so we’ll use a construction estimate example. This construction project will focus on the general requirements for cost estimation in project management.

Related:  Construction Estimate Template

First, you’ll want to have a list describing the various elements needed to build your construction project. Gather all your construction project management documents such as plans, designs and specifications, blueprints and permits to find out cost data. In your documents, you’ll find administrative costs, financing costs, legal fees, engineering fees, insurance and other cost items.

Now it’s time to use a work breakdown structure (WBS) to identify all your construction project activities. Identify the labor costs, direct costs and indirect costs associated with every activity in your project schedule. There are various cost estimating techniques such as bottom-up estimating which allow contractors to estimate costs for each construction activity to create accurate proposals for the construction bidding process.

These costs are then added together for a line total, and those line totals are added together to determine your total project cost. Having a cost estimation template is a good tool to collect and track this information.

ProjectManager Helps With Project Cost Estimation

ProjectManager is a project management software that has features to help create a more accurate project cost estimate. Our Gantt chart can be used to help you track costs and expenditures for projects and tasks.

Estimate Costs of Specific Tasks

When estimating individual tasks, costs can also be collected and tracked on our online Gantt chart. Here you can add a column for the estimated costs, baseline cost and the actual costs to help you keep the project on budget once it’s been executed.

Our online Gantt chart can not only track tasks, but you can set it up to track materials and fixed costs associated with each project task and monitor the difference between budget and actual costs. All of this data is collected on one page.

Start by creating a project and then go to the Gantt view on ProjectManager. If you already have data, you can import it by clicking on the import button on the top right-hand side of the page. Or you can use this online Gantt chart to collect the data. It can be easily shared with team members and stakeholders when you’re ready to get input or approval.

Estimate Costs of Resources

The resource management feature on ProjectManager is another tool that can help you achieve a more accurate project cost estimate. It offers a way to look at your costs through the workload across tasks and projects.

When planning a project with our resource management tool , you can account for employee schedules, equipment rentals, holidays and office space, among other factors that’ll impact your budget. Distributing project resources is one way to balance a budget.

Create a resource plan by scheduling the dates for planned resources, how long you’ll need them and the people who will be involved. That includes any equipment or site rentals. Break that down into the number of resources needed for each activity on a daily basis and you’ll be able to create a schedule with detailed resources, including duration and estimated costs.

FAQs About Project Cost Estimation

Here are some of the most frequently asked questions about project cost estimation online.

What Is Project Cost Analysis?

A project cost analysis is used to determine the costs and benefits associated with a project. It’s a process used to determine if the project is feasible.

What Is a Project Cost Breakdown?

A project cost breakdown is the process by which a project manager estimates what will need to be spent in order to deliver a project. A cost breakdown structure is used during the project cost estimating process to ensure all costs are accounted for.

Why Is Project Cost Estimation Important?

Cost estimation and cost management are an essential part of project management. The project manager is responsible for making the most accurate project budget possible by using a cost breakdown structure and project estimating techniques.

The project budget collects indirect costs and direct costs as it estimates the overall cost of delivering the project on time and meeting quality expectations. That means, whatever you’re going to need to make the project a success will be thought through during the cost estimation process.

Related Content

• Project Estimation Techniques: A Quick Guide
• Time Estimation in Project Management: Tips & Techniques
• Calculating Estimate at Completion (EAC)
• Parametric Estimating In Project Management
• What Is Job Costing? When to Use a Costing Sheet (Example Included)

When estimating costs on a project, you want to have the best tools to help you calculate a more accurate budget. ProjectManager is online project management software with online Gantt charts and resource management features that give you control over your project costs. See how ProjectManager can assist with your project cost estimation by taking this free 30-day trial today.

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What Is Business Development?

• Understanding the Basics
• Areas of Development
• The Process
• Creating a Plan
• Skills Needed

The Bottom Line

• Small Business
• How to Start a Business

Business Development: Definition, Strategies, Steps & Skills

Why more and more companies worldwide are embracing this planning process

In the simplest terms, business development is a process aimed at growing a company and making it more successful. That can include seeking new business opportunities, building and sustaining connections with existing clients, entering strategic partnerships, and devising other plans to boost profits and market share.

Key Takeaways

• The overarching goal of business development is to make a company more successful.
• It can involve many objectives, such as sales growth, business expansion, the formation of strategic partnerships, and increased profitability.
• The business development process can impact every department within a company, including sales, marketing, manufacturing, human resources, accounting, finance, product development, and vendor management.
• Business development leaders and team members need a wide range of both soft and hard skills.

How Business Development Works Within an Organization

Business development, sometimes abbreviated as BD, strives to increase an organization's capabilities and reach in pursuit of its financial and other goals. In that way, it can impact—and also call upon the specialized skills of—a variety of departments throughout the organization.

As the financial services giant American Express puts it, "When it comes to organizational growth, business development acts as the thread that ties together all of a company's functions or departments, helping a business expand and improve its sales, revenues, product offerings, talent, customer service, and brand awareness."

For example:

Sales and Marketing

Sales personnel frequently focus on a particular market or a particular (set of) client(s), often for a targeted revenue number. A business development team might assess the Brazilian market, for example, and conclude that sales of $1.5 billion can be achieved there in three years. With that as their goal, the sales department targets the customer base in the new market with their sales strategies.

Business development often takes a longer-range perspective in setting goals than many sales departments have in the past. As the Society for Marketing Professional Services puts it, "A traditional view of sales is akin to hunting, but business development is more like farming: it's a longer-term investment of time and energy and not always a quick payoff."

Marketing , which oversees the promotion and advertising of the company's products and services, plays a complementary role to sales in achieving its targets.

A business development leader and their team can help set appropriate budgets based on the opportunities involved. Higher sales and marketing budgets allow for aggressive strategies like cold calling , personal visits, roadshows, and free sample distribution. Lower budgets tend to rely on more passive strategies, such as online, print, and social media ads, as well as billboard advertising.

Legal and Finance

To enter a new market, a business development team must decide whether it will be worth going solo by clearing all the required legal formalities or whether it might be more sensible to form a strategic alliance or partnership with firms already operating in that market. Assisted by legal and finance teams, the business development group weighs the pros and cons of the available options and selects the one that best serves the business.

Finance may also become involved in cost-cutting initiatives. Business development is not just about increasing market reach and sales, but improving the bottom line . An internal assessment revealing high spending on travel , for instance, may lead to travel policy changes, such as hosting video conference calls instead of on-site meetings or opting for less expensive transportation modes. The outsourcing of non-core work, such as billing, technology operations, or customer service, may also be part of the development plan.

Project Management/Business Planning

Does an international business expansion require a new facility in the new market, or will all the products be manufactured in the base country and then imported into the targeted market? Will the latter option require an additional facility in the base country? Such decisions are finalized by the business development team based on their cost- and time-related assessments. Then, the project management /implementation team can swing into action to work toward the desired goal.

Product Management and Manufacturing

Regulatory standards and market requirements can vary across regions and countries. A medicine of a certain composition may be allowed in India but not in the United Kingdom, for example. Does the new market require a customized—or altogether new—version of the product?

These requirements drive the work of product management and manufacturing departments, as determined by the business strategy. Cost considerations, legal approvals, and regulatory adherence are all assessed as a part of the development plan.

Vendor Management

Will the new business need external vendors ? For example, will the shipping of a product require a dedicated courier service? Will the company partner with an established retail chain for retail sales? What are the costs associated with these engagements? The business development team works through these questions with the appropriate internal departments.

10 Potential Areas for Business Development

As noted earlier, business development can require employees throughout an organization to work in tandem to facilitate information, strategically plan future actions, and make smart decisions. Here is a summary list of potential areas that business development may get involved in, depending on the organization.

• Market research and analysis: This information helps identify new market opportunities and develop effective strategies.
• Sales and lead generation: This involves prospecting, qualifying leads, and coordinating with the sales team to convert leads into customers.
• Strategic partnerships and alliances: This includes forming strategic alliances, joint ventures, or collaborations that create mutually beneficial opportunities.
• Product development and innovation: This involves conducting market research, gathering customer feedback, and collaborating with internal teams to drive innovation.
• Customer relationship management: This involves customer retention initiatives, loyalty programs, and gathering customer feedback to enhance customer satisfaction and drive repeat business.
• Strategic planning and business modeling: This includes identifying growth opportunities, setting targets, and implementing strategies to achieve sustainable growth.
• Mergers and acquisitions: This involves evaluating potential synergies, conducting due diligence , and negotiating and executing deals.
• Brand management and marketing: This includes creating effective marketing campaigns, managing online and offline channels, and leveraging digital marketing techniques.
• Financial analysis and funding: This includes exploring funding options, securing investments, or identifying grant opportunities.
• Innovation and emerging technologies: This involves assessing the potential impact of disruptive technologies and integrating them into the organization's growth strategies.

The Business Development Process in Six Steps

While the specific steps in the business development process will depend on the particular company, its needs and capabilities, its leadership, and its available capital, these are some of the more common ones:

Step 1: Market Research/Analysis

Begin by conducting comprehensive market research to gain insights into market trends, customer needs, and the competitive landscape. Analyze data and gather additional information to identify potential growth opportunities and understand the market dynamics.

Step 2: Establish Clear Goals and Objectives

Leveraging that research, define specific objectives and goals for business development efforts. These goals could include revenue targets, market expansion goals, customer acquisition targets, and product/service development objectives. Setting clear goals provides a focus for the business development process.

Step 3: Generate and Qualify Leads

Use various sources, such as industry databases, networking , referrals, or online platforms to generate a pool of potential leads. Identify individuals or companies that fit the target market criteria and have the potential to become customers. Then, evaluate and qualify leads based on predetermined criteria to determine their suitability and potential value.

Step 4: Build Relationships and Present Solutions

Initiate contact with qualified leads and establish relationships through effective communication and engagement. Utilize networking events, industry conferences, personalized emails, or social media interactions to build trust and credibility. As your relationship forms, develop and present tailored solutions that align with the client's needs. Demonstrate the value proposition of the organization's offerings and highlight key benefits and competitive advantages.

Step 5: Negotiate and Expand

Prepare and deliver proposals that outline the scope of work, pricing, deliverables, and timelines. Upon agreement, coordinate with legal and other relevant internal teams to ensure a smooth contract execution process.

Step 6: Continuously Evaluate

Continuously monitor and evaluate the effectiveness of business development efforts. Analyze performance metrics , gather feedback from clients and internal stakeholders, and identify areas for improvement. Regularly refine strategies and processes to adapt to market changes and optimize outcomes.

While it's common for startup companies to seek outside assistance in developing the business, as a company matures, it should aim to build its business development expertise internally.

How to Create a Business Development Plan

To effectively create and implement a business development plan, the team needs to set clear objectives and goals—ones that are specific, measurable, achievable, relevant, and time-bound (SMART). You can align these objectives with the overall business goals of the company.

Companies often analyze the current state of the organization by evaluating its strengths, weaknesses, opportunities, and threats through a SWOT analysis . That can make it easier to identify target markets and customer segments and define their unique value proposition.

A substantial component of a business development plan is the external-facing stages. It should lay out sales and marketing strategies to generate leads and convert them into customers. In addition, it may explore new potential strategic partnerships and alliances to expand your reach, access new markets, or enhance your offerings.

Teams should conduct a financial analysis and do resource planning to determine the resources required for implementing the plan. Once you implement, you should track progress against the key performance indicators (KPIs) you've chosen.

Skills Needed for Business Development Jobs

Business development is a fast-growing field across industries worldwide. It is also one that calls upon a wide range of hard and soft skill sets.

Leaders and other team members benefit from well-honed sales and negotiating skills in order to interact with clients, comprehend their needs, and sway their decisions. They have to be able to establish rapport, cope with challenges, and conclude transactions. They need to be able to communicate clearly, verbally and in writing, to both customers and internal stakeholders.

Business development specialists should have a thorough awareness of the market in which they operate. They should keep up with market dynamics, competition activity, and other industry developments. They should be able to see potential opportunities, make wise judgments, and adjust tactics as necessary. Because many of their decisions will be data-driven, they need good analytical skills.

Internally, business development practitioners need to be able to clarify priorities, establish reasonable deadlines, manage resources wisely, and monitor progress to guarantee timely completion.

Finally, people who work in business development should conduct themselves with the utmost morality and honesty. They must uphold confidentiality, act legally and ethically, and build trust with customers and other stakeholders.

Why Is Business Development Important?

In addition to its benefits to individual companies, business development is important for generating jobs, developing key industries, and keeping the economy moving forward.

What Are the Most Important Skills for Business Development Executives?

Development executives need to have leadership skills, vision, drive, and a willingness to work with a variety of people to get to a common goal.

How Can I Be Successful in Business Development?

Having a vision and putting together a good team are among the factors that help predict success in business development. A successful developer also knows how to write a good business plan, which becomes the blueprint to build from.

What, in Brief, Should a Business Development Plan Include?

A business development plan, or business plan , should describe the organization's objectives and how it intends to achieve them, including financial goals, expected costs, and targeted milestones.

Business development provides a way for companies to rise above their day-to-day challenges and set a course for a successful future. More and more companies, across many different types of industries, are coming to recognize its value and importance.

American Express. " Business Development and Its Importance ."

Society for Marketing Professional Services. " What Is Business Development? "

World Economic Forum. " The Future of Jobs Report 2020 ," Page 30.

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Planning, Startups, Stories

Tim berry on business planning, starting and growing your business, and having a life in the meantime., business plan financials: starting costs.

It’s really important to have an idea of what you need before you start. Continuing with my series on standard business plan financials , startups need to project starting costs. Starting costs set up a starting balance, which is necessary to plan cash flow. And the starting costs are critical to determining whether a startup can bootstrap or needs outside funding. For existing companies that already have financial results, projections start with the expected ending balance of the previous period. But for startups, it’s about starting costs.

Starting costs are essentially the sum of two kinds of spending. You can estimate them both in two simple lists:

• Startup expenses : These are expenses that happen before the beginning of the plan, before the first month of operations. For example, many new companies incur expenses for legal work, logo design, brochures, site selection and improvements, and signage. If there is a business location, then normally the startup pays rent for a month or more before opening. And if employees start receiving compensation before the opening, then those disbursements are also startup expenses.
• Startup assets : Typical startup assets are cash (the money in the bank when the company starts), business or plant equipment, office furniture, vehicles, and starting inventory for stores or manufacturers.

A Simple Starting Costs Example

I’ve used a bicycle store as an example in several posts that are part of this series of standard business plan financials. Here’s a visual in spreadsheet form, of sample starting costs for a hypothetical bicycle store.

Notice that the lists for estimating starting costs, on the left in the illustration above, are matched to another list of starting funding, on the right side of the illustration. Books have to balance, so the initial estimates need to include not just the money you spend, but also where it comes from. In the case above, Garrett had to find $124,500, and you can see that he financed it with Accounts Payable, debt, and investment in various categories.

Another Simple Starting Costs Example

Here is another simple example: the starting costs worksheet that Magda developed for the restaurant I used for a sample sales forecast . Magda’s list includes rent and payroll, the same as in her monthly spending, but here they are included in starting costs because these expenses happen before the launch.

I included rent and payroll because they point out the importance in timing. The difference between these as startup expenses and running expenses is timing, and nothing else. Magda could have chosen to plan startup expenses as a running worksheet on expenses, starting a few months before launch, as in the illustration below. The launch in this case is early January, so the expenses for October through December are startup expenses. I prefer the separate lists, because I like the way the two lists create an estimate of starting costs. But that’s an option.

The LivePlan Alternative

If you’re a LivePlan user, the LivePlan interface assumes this method and has a more intuitive interface than the spreadsheet version I’m showing in this post. For LivePlan, you start your plan when you start spending, regardless of launch date. So the spending you do for rent and salaries and such, before launch, is part of the flow, as above. Also, LivePlan has its own guided way of helping you figure out what assets you need, how much they cost, and how you are going to finance starting costs, to set up your balance. And the LivePlan cash flow estimator will help you decide how much cash you need, so you don’t have to follow the spreadsheet method here (below).

How to Estimate Your Starting Costs

Obviously the goal with starting costs isn’t just to track them, but to estimate them ahead of time so you have a better idea, before you start a new business, of what the financial costs might be. Breaking the items down into a practical list makes the educated guess a lot easier. Ideally, you know the business you want to start, you are already familiar with the industry, so you can do a useful estimate for most of the startup costs from your own experience. If you don’t have enough firsthand knowledge, then you should be talking to people who do. For others, such as insurance, legal costs, or graphic design for logos, call some providers or brokers, and talk to partners; educate those guesses.

Starting Cash is the Hardest and Most Important

How much cash do you need in the bank, as you launch? That’s usually the toughest starting cost question. It’s also prone to misinformation, such as those alleged rules of thumb you can find everywhere, saying you need to have a year’s worth of expenses, or six months’ worth, before you start. It’s not that simple. For most businesses, the startup cash isn’t a matter of what’s ideal, or what some expert says is the rule of thumb – it’s how much money you have, can get, and are willing to risk.

The best way is to do a Projected Cash Flow while leaving the supposed starting cash balance at zero, which shows how much (at least in theory, according to assumptions) the startup really needs in cash to support the business as it grows, before it reaches a monthly cash flow break-even point. Magda did that to determine the $12,000 needed as starting cash for her restaurant. Note how, in the illustration here, the lowest point in cash is slightly less than $12,000:

That low point comes, theoretically, in the third month of the business, March. The low point is $11,609. Obviously that’s just an educated guess, but it’s based on assumptions for sales forecast, expense budget, and important cash flow factors including sales on account and purchasing inventory. So it’s better than a stab in the dark, or some rule of thumb. Just as an example, the total spending with the estimates shown here, the theoretical “year’s worth of spending,” is $182,000 (which you don’t see on the illustration, by the way, but take my word for it). The total for the first six months is $93,000. If Magda sticks to those old formulas, she can’t start the business. She is able to raise enough money, between loans and her savings, to put $12,000 into the starting cash balance. So that’s what she does. Then she launches and continues to have her monthly reviews, and watch the performance of all key indicators very carefully.

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Commercial Development Costs and How to Create a Real Estate Development Budget

Real estate development budgets often end up as living, breathing documents. Therefore, preliminary budgets should be built early, refined as a project progresses, and constantly reviewed against actual costs as an accountability benchmark.

But the process for building a real estate development budget is not always intuitive, and if you’re unfamiliar with the development and construction processes, it can be impossible.

In this article, we’ll offer a high-level overview of the significant cost categories by phase of development, discuss the importance of a well-defined scope to the budget creation process, and wrap up with a discussion of common mistakes creating a construction budget.

A breakdown of real estate development costs by phase

The first step in building a development budget is to understand the inputs and construction costs by each project phase.

Generally, the real estate development process follows 4 key phases:

Site selection & land acquisition

Pre-development, development & construction, post-construction/closeout or operation & management.

Cost breakdowns will fluctuate contingent on the type of real estate being developed. For example, medical office and retail products may call for more expensive finishes and buildout, while industrial or multi-family may benefit from fewer amenities or economies of scale.

Each of these phases of development includes major activities that incur expenses. Examples of costs by stage can consist of:

• Attorney and legal fees
• Feasibility study costs
• Land option fee
• Consulting fees
• Site evaluation & due diligence costs (i.e., boundary/topo surveys, geotechnical survey/soil study , traffic impact studies, environmental assessments, etc.)
• Architect & design costs
• Civil engineering & site plan costs
• Land-use attorney & legal fees
• Land entitlement requirements (rezoning fees, subdivision fees, etc.)
• Review & permitting fees
• Brokerage fees
• Sitework & earthwork costs (construction staking, erosion control, land clearing & grading, stormwater collection, etc.)
• Utility work & connection fees
• Foundation, parking, and landscaping costs
• Construction costs
• Interior buildout costs
• Construction management fees
• Inspection fees
• Leasing & brokerage fees
• Management & operating expenses (maintenance, CAPEX, taxes, insurance, etc.)

It’s important to note that development projects will also incur finance and bank costs and carrying costs. Financing costs may include lender-related fees and interest on the note. At the same time, other carrying costs will consist of insurance, taxes, and additional fees associated with land ownership.

Hard vs. soft costs incurred during real estate development

Instead of breaking down costs by phase, some real estate developers prefer to lump costs into one of two categories: hard costs and soft costs . We’ll look at the difference between hard and soft costs and discuss their impact on a construction budget.

What are construction hard costs?

Construction hard costs are generally related to the physical construction of a building. They are more tangible than soft costs and will often account for a majority of your development budget. Hard costs can include:

• Construction materials and labor
• Parking and paving
• Landscaping

Because hard costs are more closely tied to tangible products, they vary directly with fluctuating material and labor costs. As the prices of construction inputs change, so too will hard costs. So when estimating hard costs for a preliminary budget, it's essential to use quality historical information in addition to current bids.

Market volatility, supply chain constraints, and price fluctuations can significantly impact your ability to estimate hard costs accurately.

What are construction soft costs?

Construction soft costs are expenses that are not directly tied to the construction of a building. They are not as tangible and can be less evident than hard costs. Soft costs can include:

• Engineering and architecture costs
• Review and permit fees
• Maintenance and insurance costs
• Legal and accounting fees

Unlike hard costs, soft costs can continue even after the completion of a project. The ongoing maintenance, operation, and security of a property require continuing expenses.

Keep in mind that soft costs can directly impact a project's hard costs. For instance, an elaborately designed building may require more expensive materials and higher quality labor. Therefore, improperly managed soft costs can result in significant real estate budget estimation challenges.

The importance of monitoring scope

A scope document is the first step in clearly defining action steps and outcomes when undertaking a real estate development project. A well-defined scope establishes control factors and is vital for a couple of reasons:

Avoiding change orders

A change order is a term that refers to any variation or amendment to an original construction contract or scope of work.

Change orders can be the death of a construction project. They’ll add time and costs to the development, often create friction between parties, and may even lead to additional legal fees to arbitrate disputes.

A detailed scope will help minimize these disruptions. Not only does it help keep contractors on task, but it also discourages overzealous owners from seeking last-minute design changes that could delay or derail a project.

Keeping costs down

Controlling costs during real estate development is no easy task. However, it's so crucial to the success of a project that the industry created a standalone professional service, construction management, to help solve this need.

Poor site management, human error, and the inefficient sourcing of construction materials are some of the biggest culprits that lead to cost overruns. But even missteps during the design phase can lead to significant problems – overly designed architectural features or a flawed engineering plan can bust your real estate development budget.

A clearly defined end state and enumerated roles and responsibilities for each party help delineate tasks better and promote greater fiscal stewardship.

Keeping contingency buffers to a minimum

Cost contingency buffers are a great tool to allocate capital for unforeseen problems when building a real estate development budget. But lazy and flawed estimation practices have the industry accustomed to using contingency buffers as a crutch for poor forecasting.

These management reserves also pose a problem for transparency and consistency among budget forecasts within the real estate development industry, even as a line item on a proforma.

Indeed, development experience helps establish confidence intervals for project outcomes and, ultimately, necessary contingency buffers. Recent development projects can also be used as benchmarks to estimate current market and labor conditions – which can help inform critical levels of contingency buffers.

But a solid project scope will clearly define any necessary tasks – and holds the developer, principal/owner, and contractor accountable for accurate and minimal contingency reserves.

How to estimate development costs

Real estate development cost estimation is as much of an art as it is a science.

Nevertheless, developers and contractors often tout their ability to forecast costs more accurately than their competitors, which adds significant value for a real estate development project. But estimating development costs is more than plugging numbers into a spreadsheet and crossing your fingers.

Building a preliminary forecast begins with solid plans from both a land and building standpoint.

Once you’ve selected a site, you can more accurately estimate necessary site work and engineering costs, as well as other land development considerations like stormwater collection and utilities.

But site work is just one aspect of the development process. Estimating soft costs will largely depend on accurate 3 rd party quotes and recent historical data.

Thorough building plans, or at the very least, a solid vision of the future structure and design features, is essential to estimate hard costs accurately. And you’ll need to rely on educated conjecture, 3 rd party quotes, historical data, and materials future prices to help solidify those numbers.

Major contractors use several cost estimation techniques to develop budgets. Strategies like the unit pricing method and the square foot/budget method have proven effective.

As a real estate developer or owner, you should understand they exist and work with several contractors to determine the most favorable and accurate forecast.

Common mistakes when projecting your real estate development budget

Variance between forecasted and actual real estate development costs is unavoidable during a project. Prices vary by region, labor and materials costs continuously fluctuate, and major macroeconomic disruptions may be impossible to predict.

There are, however, common avoidable mistakes that result in poor real estate cost breakdowns and failed projects, including:

• Cost underestimating
• Failure to account for supply chain disruptions
• Failure to account for inflation
• Lack of a scope document and poor planning
• Overly optimistic schedule or timeline
• Incomplete or subpar due diligence
• Failure to account for futures prices
• Leaving no room/budget for inevitable setbacks

Cross-referencing your development budget against other current available estimates and with other industry professionals is an essential step to ensuring its accuracy.

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Marsh & Partners' real estate consulting services can help.

Preliminary development budget construction and financial analyses - feasibility studies - pre-development and development services - post-construction operation and management. We have experience in all phases of the real estate development process.

Determining the total costs of a commercial real estate development project is challenging, but critical in determining whether to move forward with a project.

Perfectly profitable deals have been scrapped because of inaccurate budget estimates. Just as otherwise unfeasible projects have been greenlit based on flawed information.

As an owner’s representative or development consultant, Marsh & Partners can help you navigate the challenging real estate development process – if you have questions, we’d love to chat .

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Estimating Construction Costs During Project Design & Pre-development

CRE Development Mistakes - Structuring Real Estate Development Land Contracts

How to Estimate Sitework and Land Development Costs

How to Calculate Development Cost

Published: 10 Aug 2022

Software development cost

Calculating software development costs is a complex task that requires a lot of skills, expertise, and attention to detail to come up with a reliable estimate. Based on the outcome of the estimation, businesses set priorities, develop business plans and strategies, distribute resources, and control expenses as the project runs its course. 

So, how to calculate development costs? There are several tried-and-true methods of software cost estimation that you can use to find out how much your project is going to cost. We will highlight them in our post: You can pick just one or use the combination of them and compare the outcome – the choice is always yours. Before you dive into the process of estimation, you need to take a few steps. 

How to estimate development cost: Steps

First off, project estimation is an act of resources (time, budget, human resources, team composition, etc) prediction a project or product will take to be developed. Here are the basic steps you can take as you prepare to address the question of how to calculate development costs. 

READ ALSO:  When do you Need Full-Cycle Product Development?

Step 1. Project Scope

The first step to knowing how much your project is worth is to define the scope of work. The Project Scope can only be defined by the person who initiates and drives software development – a stakeholder(s) who owns a product idea and has an understanding of business objectives, expectations, market, and more. The future product and its functionality will be described in the Project Scope – a key document that outlines the following: 

• The works to be performed by a team;
• Milestones and time-frames;
• Final deliverables;
• Acceptance criteria;
• Exclusions that are not part of the project;
• Risks that may affect the outcome of the project.

Project Scope is the first step toward giving an early-on answer to the question of “how to calculate development cost.” 

READ ALSO:  How to Reduce IT Development Costs

Step 2. Project Estimation Team

In many cases, project estimation is a team sport. It’s a rare occasion that companies rely on a single person to come up with a precise estimation, even if they have worked with a similar project in the past. 

For your Project Estimation Team, aim to pick specialists with expertise in your vertical and the technologies you are going to use, including software architects, CTOs, business analysts, and senior software developers. These can potentially be specialists who take your project to fruition. Essentially, they should be well-versed in the software development approaches (Waterfall, Scrum, Kanban, Incremental) and how to calculate development costs based on hours and human resources needed within the software development model of your choice.  

When you build a Project Estimation Team, it’s important to select people who already know how to estimate development costs and have a track record of successful estimations. The general recommendation is to avoid both overly optimistic estimates (which often speak about the lack of experience in project implementation) as well as pessimistic ones, pertaining to people who tend to overestimate the risks. 

Now that you have a Project Estimation Team and Project Scope on hand, it’s time to roll up the sleeves and address the question of how to calculate development costs in practice. 

READ ALSO:  What is Software Development as a Service?

Common methods of software cost estimation

Expert estimation

This method of software cost estimation relies on the company’s previous experience to generate an estimation for a new project(s). It’s probably the quickest way to resolve your “how to calculate development cost” conundrum, as you’ll be able to get the preliminary cost fast, given that your team has already dealt with such kinds of projects in the past. 

On the other hand, if it’s not your typical project, you will have to find an expert with relevant business acumen. The downside of the expert estimation approach is that you depend on the competence of the expert and their potentially subjective opinion. Thus, engaging more than one expert and comparing their estimations is recommended. 

Top-down or Analogous estimation

This method of software cost estimation is based on data from previous projects (a.k.a. “analogous projects”). The entire project can be broken down into several sub-tasks aiming to find similar parts in your previous projects. Then, the found data can be projected onto your project in question. You can combine this approach with Expert estimation, as in involving an expert to help you deconstruct the project and locate similar tasks completed in the past. 

This approach is preferred when you have existing expertise in-house thoroughly documented in case studies. It can hardly work for completely new projects outside your competence. 

READ ALSO:  Software Development Agreement: Checklist

Bottom-Up estimation

How to calculate development costs using a Bottom-Up method? This approach assumes that you start estimating the project by outlining various possible ways that may take you to your end goal. In other words, your task is to create a roadmap to implement your project. In many cases, it takes the work of the whole team to define and describe a set of tasks on your journey from the project’s beginning to the final solution. 

Three-Point estimation (PERT)

PERT is one of the most common and simple methods of software cost estimation. How to estimate development cost using PERT? It is based on three types of evaluation:

• optimistic (O = Optimistic),
• pessimistic (P = Pessimistic),
• realistic/medium (M = Middle or Most Likely)

PERT is widely used for projects with a low level of predictability. Using this approach is an easy way to define the sequence of tasks you need to fulfill and the relationships among them, which is at the same time, the biggest challenge of this method. PERT is often a go-to approach for new, ground-breaking solutions.  

Use Case Points

The foundation of this method of software cost estimation is based on use cases, a set of possible scenarios of interactions between systems and users aimed at achieving a particular goal. The idea behind this method is to describe all possible use cases in detail and estimate the scope of work related to them. 

The Use Case Points approach comes in handy when you are at a stage of outlining the functional requirements of your software product. After you’re through, you will be able to estimate the project cost on short notice. Its main challenge is to identify common use cases, which can be problematic for complex projects. 

READ ALSO:  Pros and Cons of Custom Software Application Development

A software development cost calculator: Potential challenges

If you underestimate the project cost or time-frames of critical tasks, it may lead to foiled deadlines and create huge pressure on the development team. When you have to adjust to new budgets in the middle of the software development process, it’s always stressful. 

You may wonder how to calculate development costs precisely. We’ve described the common ways to estimate the project’s price, but it can be challenging to get an accurate estimation on the first try, especially when you’re handling projects that are “terra incognita” for your organization. 

The more assumptions your Project Estimation Team makes, the more inaccurate the estimation will be. An Expert’s subjectiveness or inclination towards optimism or pessimism when it comes to the project cost also increases the likelihood of error. If you have a preliminary budget you know you can’t go over, it may affect the accuracy as well, because then you may succumb to compromising between the cost and quality. 

As an alternative, you can rely on a software development cost calculator provided by seasoned software development vendors, for example, nCube. It can be a good idea to compare estimates done by your team and the vendor’s team. 

We build teams of remote software development specialists in Eastern Europe and Latin America. If you lack the internal expertise to estimate your project, including such skills as project management, software architecture, business analysis, or senior software developers, let’s connect.

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• Project cost management: Definition, st ...

Project cost management: Definition, steps, and benefits

Cost management is the process of planning, budgeting, and reporting project spend in order to keep teams on budget and overall costs reasonable. In this article, we'll go over the four functions of cost management and explain exactly how to use them to improve your project's bottom line.

What is cost management?

Cost management is the process of estimating, budgeting, and controlling project costs. The cost management process begins during the planning phase and continues throughout the duration of the project as managers continuously review, monitor, and adjust expenditures to ensure the project doesn't go over the approved budget.

Why is cost management important?

Have you ever wondered what happens when a project goes significantly over budget? The consequences can be severe—from strained relationships with clients to financial losses. Let's consider an example:

A small software development team was tasked with creating a custom application for a client. Midway through, they realized the project was quickly exceeding the initial budget. They faced a common dilemma: continue as planned and absorb the extra costs or re-evaluate their approach.

By implementing rigorous cost management strategies, the team was able to identify areas where expenses were ballooning. They streamlined their project management processes, prioritized essential features, and renegotiated terms with subcontractors. This approach not only brought the project back within budget but also improved their working relationship with the client, who appreciated their transparency and commitment to delivering value.

This scenario highlights how effective cost management can transform a potentially disastrous situation into a success story.

How to create a cost management plan

Cost management is a continuous, fluid process. However, there are four main elements or functions that can be found in any cost management plan:

Cost estimating

Cost budgeting, cost control.

Because new expenses can appear and project scope can be adjusted, cost managers need to be prepared to perform all four functions at any time throughout the project life cycle. Your workflow will vary according to the project’s needs.

Here, we'll break down each of the four elements in greater detail and explain what is required from the cost manager at each stage.

The very first step in any cost management process is resource planning, which is when the cost manager reviews the project's scope and specs to figure out what resources the project will require.

A resource is anything that helps you complete a project—including tools, money, time, equipment, and even team members. To create the most accurate resource plan possible, consult directly with team leads and stakeholders about what resources they will need during the project. People with hands-on experience in each project department will have a better understanding of what resources will be required. 

For this step, you'll need:

Clearly defined project objectives

A high-level project roadmap or a work breakdown structure (WBS) , depending on the complexity of the project

A tentative resource management plan

A project scope statement

Once you have a list of necessary resources, the next step is to estimate what it will cost to procure them. The key to this step is to gather as much pricing information as possible so that you can make informed cost estimates.

For tangible resources like tools, supplies, and equipment, get real price quotes from sellers to inform your cost estimate. For labor costs, get multiple price quotes from potential contractors to help give you a realistic idea of what the work you require will actually cost. Keep in mind that some time may pass between when you make your estimate and when these items will be purchased, so you should build in some room in case prices rise. 

In addition to building in a cushion for each individual cost, you'll also need to add a buffer of 5–10% to your cost total to account for unexpected expenses. If this is your first time working with this project team, find out if the previous cost manager generated budget reports at the end of past projects. 

You can take a look at how much previous projects' final costs deviated from their initial estimates and use this cost data as a benchmark to estimate how much of a margin you need to build into your estimation report.

In the estimation stage , you'll need:

Project schedule or a PERT chart , depending on the complexity of the project

A list of your project deliverables

Clearly defined success metrics

Now that you have general estimates for your project needs and resource requirements, you can begin to work on your project budget . Your project budget is a detailed plan of how much you plan to spend during the project, for what, and by when. 

Depending on the complexity of your project, the “when” may significantly influence your cost management strategy. For multi-year projects, you may want to specify cost allocations so that no more than 30% of your budget should be spent in the first year, etc. This can prevent cost overruns later down the road.

In this stage, you'll need:

A project budget document 

A project stakeholder analysis

The bulk of the cost management process is made up of cost control . This is the process of recording and accounting costs as the project progresses, making adjustments, and alerting stakeholders to problems when they occur. The goal of the cost control step is to compare actual project costs with original budgets and estimates and take steps to make sure the project stays as close to plan as possible.

The frequency with which you review this will depend on your project. Sometimes you’ll want to review costs in real time. In other cases, you may check in monthly or even quarterly. Share cost updates as necessary through project status reports so the entire project team is on the same page.

Keep in mind that any changes to the project scope will impact the project budget and costs, so keep a close eye on scope creep. If the project cost deviates too much from what you budgeted, let your stakeholders know so you can proactively come up with an action plan.

Project management tool

Universal reporting tool

Post-project cost accounting

Once the project is over, it’s time to calculate cost variance and evaluate how far your project deviated from your original budget and estimates. What were the project’s total costs? How did your actual costs compare to your estimated costs? 

A successful project ends close to (but under) the forecasted project budget. If you spent too much money, you either underestimated your project budget or had too many unforeseen expenses. If this happens, hold a project post-mortem meeting to evaluate why that happened and prevent it from happening in the future.

On the flip side, spending too little of your budget is also not ideal. You estimated these costs for a reason, and if you came in significantly under budget, your cost-budgeting process was inaccurate. Log this information as historical data and keep it in mind for future projects, so you can increase your accuracy during the cost estimation phase.

How to calculate project costs

To ensure that your project stays profitable and within budget, it is essential to have a solid understanding of how to calculate project costs. 

Project managers have a variety of cost management methods to choose from, and picking the best one depends on the specific needs and scope of your project. Consider factors like project complexity, the predictability of tasks, client expectations, and the level of flexibility you'll need to achieve your cost-performance goals.

Calculating project costs on an hourly basis involves paying for the amount of work done, measured in hours. This method is particularly effective for projects where the scope is flexible or uncertain because it allows for adaptability as the project progresses. 

For example, consider a software development project. The development team's cost is calculated based on the number of hours they spend on the project. If the team works 100 hours a month at a rate of $100 per hour, the project costing for that month would be $10,000. This method provides flexibility and can accommodate changes in the project's scope effectively.

A flat rate, or fixed price, approach involves agreeing on a total project cost upfront. This method is ideal for projects with a well-defined scope and deliverables. This gives both parties a clear understanding of the total cost.

Imagine a marketing campaign. The agency and the client agree on a fixed price of $20,000 for the entire campaign. This price covers all aspects of the project, from planning to execution. The advantage here is predictability in budgeting, as the client knows exactly how much the project will cost, irrespective of the time and resources utilized.

The cost-plus method involves charging the actual costs of the project plus a markup or additional fee. This approach is often used in long-term projects where the costs cannot be accurately estimated at the start. It ensures that all project costs are covered and includes a profit margin.

For instance, in a construction project, the contractor charges for the actual costs incurred (like materials and labor) plus a fixed percentage as profit. If the material and labor costs amount to $50,000 and the agreed markup is 20%, the total charge to the client would be $60,000. This cost management method aligns the interests of the client and the contractor, as both parties aim for optimal cost performance.

Value-based pricing

Value-based pricing focuses on the value or benefit the client receives rather than the cost of the project itself. This estimation method is ideal for projects where the outcome has a high perceived value, regardless of the actual cost of delivery.

Consider a scenario where a consulting firm is helping a client increase their annual revenue. If the consultant's strategies result in a $1 million revenue increase, the consultant may charge a fee based on a percentage of the revenue increase, say 10%, which would be $100,000. Value-based pricing ensures that the pricing reflects the value delivered.

Effective project cost management methods

One of the most persistent challenges faced by teams across various industries is controlling and preventing budget overruns. These overruns not only strain financial resources but can also lead to compromised project quality, delayed timelines, and even project failure. 

Effective cost management is the key to tackling this challenge because it makes certain that projects are delivered within their allocated budgets while maintaining high standards of quality and efficiency.

Choosing the best cost-management method is key to addressing these financial challenges head-on. For further cost optimization, teams can leverage automation, management software, and dashboards that offer real-time cost analysis, cash flow, and future cost visualization. This will ultimately contribute to the success of your project.

Top-down estimating

Top-down estimating is a method where the overall project cost is estimated first, and then individual costs are deduced from this total. This approach is beneficial in the early stages of project planning, when detailed information is not yet available. It gives a quick and rough idea of how much the project will cost.

For example, in a new software development project, the project manager might estimate the total project cost at $200,000 based on previous similar projects. This total cost is then broken down into smaller segments like design, coding, testing, and deployment, each allocated a portion of the total budget. This method is effective for providing a preliminary cost framework and guiding early project decision-making.

Bottom-up estimating

Bottom-up estimating is the reverse of the top-down approach. It involves estimating individual tasks or components of the project first and then adding them up to get the total project cost. This estimation method is more accurate and reliable, especially for projects with a well-defined scope, as it considers detailed cost information.

Consider a construction project where each part of the project, such as foundation laying, framing, plumbing, and electrical work, is estimated individually based on detailed analysis. After estimating all these components, the costs are summed up to determine the overall project budget. Bottom-up estimating is ideal for teams that need precise control over each aspect of the project's costs.

Earned value management

Earned value management (EVM) is a sophisticated approach to cost management that combines measurements of project performance in terms of scope, schedule, and cost. EVM provides a comprehensive view of the project's progress and its alignment with the original project planning.

For instance, in a large infrastructure project, EVM would be used to track the following: 

Budgeted cost of work scheduled (BCWS)

Actual cost of work performed (ACWP)

Budgeted cost of work performed (BCWP) 

By comparing these figures, project managers can gauge the project's cost performance and take corrective action if necessary.

Three-point estimating

Three-point estimating is used to determine a more realistic estimate by considering three scenarios: 

Most optimistic (best-case) 

Most pessimistic (worst-case) 

Most likely 

This cost management method provides a range of possible outcomes, which can increase the predictability and cost performance of a project.

Take, for example, a new product development project. The project manager might estimate that the design phase could take 30 days (optimistic), 45 days (most likely), or 60 days (pessimistic). Using these three points, they calculate an average or weighted average duration, which helps in setting realistic timelines and budgets.

FAQ about cost management

What is the first step in project cost management.

The first step in project cost management is to define the baseline for your project's budget. This involves identifying all potential costs and inputs related to the project, including labor, materials, equipment, and any other expenses. Creating a baseline is essential because it provides the framework for monitoring and controlling expenses during the lifecycle of a project.

What are the 5 functions of cost management?

The five key functions of cost management are:

Cost estimation: Determining the total cost required for completing the project.

Cost budgeting: Allocating the overall cost estimate to individual work items to establish a baseline for measuring performance.

Cost control: Monitoring project expenses and implementing measures to keep costs within the approved budget.

Cash flow management : Ensuring there is adequate cash flow to meet project needs, which is critical for maintaining project momentum.

Procurement management: Managing the procurement of goods and services, ensuring that everything is obtained at the best possible cost and meets project needs.

What is cost management in project management?

Cost management in project management is the process of planning, estimating, budgeting, and controlling costs with the aim of completing the project within the approved budget. It involves a continuous process of measuring and monitoring project activities and expenses and implementing necessary adjustments to ensure that the project's financial resources are used effectively. 

Improve your project performance with cost management

Cost management has a lot of moving parts. But as long as your team has visibility into project costs, you can prevent cost overruns and ensure you’re finishing your project under budget every time.

To keep track of all of your project’s information, use a work management platform like Asana. From project costing and kickoff to post-mortem, Asana helps you stay in sync with your project team members and stakeholders during the entire project process.

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Home > Financial Projections > Cost Structure in a Business Plan

Cost Structure in a Business Plan

What is cost structure.

Financial projections need to take account of the cost structure of a business. Cost structure simply refers to the split between variable costs and fixed costs, but can have a significant impact on whether a new start up business is successful or not.

Fixed and Variable Costs

First a few definitions. A variable cost is a cost which changes in direct proportion to any production or selling activity, examples include, direct materials and labor used in manufacture, product cost, and sales commissions. On the other hand, a fixed cost is a cost which will occur whether or not a business has any production or selling activity. Fixed costs are a function of the passage of time, examples include rent, salaries, and insurance.

Low Fixed Cost Structure or High Fixed Cost Structure?

Although the cost structure of a business is to some extent fixed by the nature of the business and the type of industry in which it operates, decisions can be taken to directly influence the split between fixed and variable costs. It is important to understand that a business can have the same sales, total costs and therefore profit, but a completely different costs structure, as seen in the diagrams below.

Both businesses have the same sales, total costs, and profit, however, the first business has a high fixed cost structure compared to the low fixed cost structure of the second business.

Business Plan Cost Structure and Break Even

Consider as an example the two start up businesses shown in the table below. The financial projections of the first business show a high fixed cost structure. the business plans to start by investing heavily in production facilities, machinery and equipment to manufacture and distribute its own product. The consequence of this decision is high fixed costs but lower variable costs.

The second business proposes a lean start up. It plans to have the manufacture and distribution outsourced to a third party, its needs smaller premises and less investment in machinery and equipment and therefore has lower fixed costs but correspondingly higher variable costs, as payments need to be made to the third parties for manufacture and distribution.

Effect of Cost Structure on Break Even Calculations

In each case, the number of units sold (6,000), selling price (12,00), total costs (65,000), and profits (7,000) are identical. Using this information and the break even formula, the break even point can be calculated for each of the start up businesses.

The break even formula is:

and the break even units are given by the formula:

The results of the calculations using the formulas are summarized in the table below.

We can see that even though everything else is the same, the financial structure of the business has resulted in a completely different break even position.

For the low fixed cost structure business, only 3,083 units need to be sold at 12.00 to reach break even as shown in the diagram below.

In contrast for the high fixed cost business 5,028 units need to be sold to reach break even as indicated in the diagram below.

In order to break even, the high fixed cost business needs to sell 1,945 (63%) more units than the low fixed cost business.

The conclusion is that when producing financial projections for a start up business, in order to reduce the break even point to an acceptable level, the cost structure should aim to keep the fixed costs as low as possible.

About the Author

Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.

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Meta's minimum estimate for full-year 2024 total expenses will also be $2 billion higher than expected.

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Bears reveal plans for $4.7 billion domed lakefront stadium development: 'This is not an easy project'

The plans, according to the team, will include additional green and open space with access to the lakefront and the museum campus, which bears president kevin warren called “the most attractive footprint in the world.”.

A rendering of a proposed domed stadium on the lakefront unveiled at Wednesday’s news conference.

Chicago Bears

With Mayor Brandon Johnson as lead blocker, the Bears on Wednesday launched their hurry-up offense to win legislative approval of their $4.7 billion plan to build a domed lakefront stadium during the final month of the Illinois General Assembly’s spring session.

Working for the Bears is a $2 billion contribution from the team billed as the largest private investment in Illinois history.

The political obstacles include a cold reception from Gov. J.B. Pritzker and state legislative leaders with more important priorities, along with the potential for a legal battle with Friends of the Parks, the public advocacy group that serves as the primary protector of the lakefront. The group is guided by the Lakefront Protection Ordinance that prohibits new construction east of Lake Shore Drive.

“This is not an easy project,” Bears President Kevin Warren openly acknowledged at a Soldier Field news conference, adding “Chicago doesn’t like it easy. We like to do the difficult things — the things that resonate with people for generations to come.”

It will indeed be difficult to get any help from Pritzker, who was not invited to Bears’ big announcement. The governor has been critical of early reports that the team would ask for taxpayer assistance, and remained so on Wednesday.

“I’m highly skeptical of the proposal that’s been made and I believe strongly that this is not a high priority for legislators and certainly not for me, when I compare it to all the other things,” Pritzker said at a news conference in Maywood.

This rendering, part of the Chicago Bears’ presentation at Wednesday’s news conference, shows a downscaled Soldier Field, with much of the grandstand demolished, but the colonnades preserved.

Mayor leads cheers: ‘Thank you for believing in Chicago’

Johnson, on the other hand, happily took on the role as cheerleader for the project.

“This is a beautiful day for the city of Chicago…It’s an honor to celebrate the Bears’ commitment to remaining the Chicago Bears,” the mayor said. “Thank you for believing in Chicago and my administration.”

Johnson said he established three must-haves: no new or increased taxes; a “real and substantial private investment,” and “public use and participation.”

“Today’s announcement delivers on all three,” he said. “What it does not call for is raising existing taxes or imposing any new taxes...There are no new taxes on the residents of Chicago.”

• No love for new Bears stadium from Illinois’ top Democrats

That won’t be enough to get Friends of the Parks on board. The advocacy group issued a list of concerns, including a lack of community involvement, questions about the veracity of rosy economic impact estimates and, of course, the use of lakefront property.

“Once again, Chicago taxpayers are being told what is good for them. We are told that a new domed stadium on protected lakefront land will make Chicago a great city. We are already a great city — in large part due to our protected lakefront,” the group said in its statement.

“As is so often the case in Chicago, the powerful and wealthy are demanding that our entire city stop and fast track their plans to expand operations on the people’s lakefront.”

This rendering, part of the Chicago Bears’ presentation at Wednesday’s news conference, shows the proposed fixed-roof stadium.

By the numbers

Of the estimated $4.7 billion for the entire project, $3.22 billion is for the stadium alone. The rest is needed for infrastructure improvements. According to the team, the infrastructure work could be done in phases , though about $325 million would be required to make sure the stadium can open, bringing the minimum cost of opening the new facility to $3.5 billion.

Even with the $2 billion contribution from the Bears, a $900 million funding gap would still need to be filled just to build and finance the stadium designed by David Manica, architect of Allegiant Stadium in Las Vegas.

Karen Murphy, chief financial officer of the Bears, said the team hopes the Illinois Sports Facilities Authority will fill that gap by issuing 40-year bonds backed by the same 2% city hotel tax used to bankroll the 2003 renovation of Soldier Field. The 40-year bonds would also be enough to refinance $589.1 million in outstanding Soldier Field debt, along with $50 million owed on renovations at Guaranteed Rate Field.

Whenever hotel tax revenue fails to grow at 5.5% a year, Chicago taxpayers must make up the difference. That’s happened three times, and twice in the last three years. The biggest deficit was $27.3 million in 2022.

Seat removal begins at the start of Soldier Field renovations in 2002.

Sun-Times file

Murphy said the Bears’ new financing plan assumes more “conservative hotel tax growth” and “protects the city from unexpected drops” in hotel revenue. That’s just part of what made the deal so attractive to City Hall, according to Jill Jaworski, the city’s chief financial officer.

“Hotel revenues are relatively volatile. They definitely swing with the economy. One of the things that got us comfortable at the city when we looked at the plans the Bears had for the ISFA debt … was that they’re assuming a lower rate of growth. But they’ve also incorporated about … a $160 million liquidity reserve,” Jaworski said.

“Between looking at a lower rate of growth that is more reasonable so we’ll see that debt increase at a more modest rate, and the fact that we have such a large liquidity reserve that we could access — we think we have less risk under this scenario than we do right now....A more conservative structure — we think that insulates us more and reduces our risk going forward.”

Jaworski noted the current schedule for repaying Soldier Field bonds calls for balloon payments at the end, the result of modifications that salvaged the deal after the Sept. 11 terrorist attacks caused a tourism drop, leading to lower hotel tax revenues. Payments go from $56.7 million this year to $90.5 million in 2032, the year those bonds would be retired.

Because of that, “we would expect, without a refinancing, that that would hit the city budget every year in an increasing amount,” Jaworski said.

Soldier Field was built in 1924 and has been dedicated as a war memorial, potentially complicating any plans to deconstruct or reuse it. The refit, which debuted in 2004, cost the stadium its status as a national landmark.

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Labor leader touts jobs: ‘I’d like to build two stadiums’

Sources said the Bears and Sox plan to join forces and seek immediate approval of their ambitious stadium plans during the spring legislative session.

That will be a heavy lift, even with support from union leaders salivating at the promise of 43,000 construction jobs generated by the domed lakefront stadium alone.

“I’m a Bears fan. I want to be clear and I want them to win and I want them to have a great place to play,” Pritzker said at an unrelated news conference on Wednesday.

“But I just think that the taxpayers’ dollars need to be protected. I think it’s my job to be a good steward of those dollars.”

Illinois House Speaker Emanuel “Chris” Welch (D-Chicago) went so far as to say the Bears proposal would “fail miserably” if the team tried to get it passed in the spring session.

Chicago Federation of Labor President Bob Reiter was in Washington Wednesday and said he had not yet been briefed on specifics of the Bears’ plan. But the lure of 43,000 construction jobs on the lakefront stadium alone, not to mention the White Sox hopes for a ballpark in the South Loop, has Reiter sounding like he’s ready to start lobbying labor allies in Springfield.

“I’d like to build two stadiums,” Reiter told the Sun-Times, excited by the prospect of “modernizing our professional sports infrastructure” and “what that could mean for the people who work in stadiums, our members who play on the field, our members who work in the stands [and] the members who build the structures.”

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Warren anxious to dig in on lakefront

Warren was not intimidated by the early legislative opposition.

“We feel that the time is now. Every year that we wait, it’s $150 [million] to $250 million of increased costs that ultimately we’ll have to figure out. But we don’t think that’s prudent. The time is now. Our expectation is in this session,” Warren said.

“Even if we’re approved in a fall veto session, we wouldn’t be able to get in the ground because of the weather. It would push it back a year. If we’re approved in May, that would allow us to start construction and put people to work next summer and that would allow us 36 months later to open up our building in 2028. So this truly is one of those adages that time is money.”

The Bears apparently have abandoned plans to build a domed stadium on the 326-acre site of the old Arlington International Racecourse — after spending $197.2 million to acquire it. The team expressed disappointment at failing to secure a large enough property tax break on that land. Local school districts opposed a lower assessment, saying it would shortchange students.

The former Arlington International Racecourse in Arlington Heights. The Chicago Bears purchased the facility in hopes of building a stadium on the 326-acre parcel.

Anthony Vazquez/Sun-Times

Johnson was dazzled by the Bears’ multi-media presentation, and by the promise of tens of thousands of jobs and billions of dollars in tax-generating “economic activity” — and not at all concerned that progressive voters who put him in office won’t see it that way.

“These pictures are miraculous. We’re talking about thousands of lives that will benefit from this investment,” Johnson said. “The sooner we can put shovels in the ground and put people to work — that is our surest way to secure a better, stronger, safer Chicago. And it benefits the entire region. We’re talking about $8 billion of economic vibrancy as a result of this investment. The time is now for that. Think about how long we’ve been waiting for investments like this.”

Manica’s stadium design likely will be seen by many as a vast improvement over the much-criticized, spaceship-like seating bowl plopped onto Soldier Field’s historic colonnades in 2003. With the new stadium, Warren said, fans will be be protected from the elements but “feel like they’re outside.”

They “might even have to wear sunglasses” while looking up through the translucent roof, a design similar to the roof at SoFi Stadium, or through the “clear glass” walls at the lakefront and Chicago’s iconic skyline.

The Bears opened the renovated Soldier Field with a game against the Green Bay Packers on Sept. 29, 2003. The renovation left the Bears with what is now the smallest stadium in the National Football League — and with a futuristic seating bowl dwarfing the historic colonnades.

AFP/Getty Images

Warren said the team considered but dismissed the possibility of a retractable roof, since it would have added hundreds of millions of dollars to the cost — and, based on conversations with teams that do have retractable roofs, it likely would have been used just a handful of times each year.

Outside, Warren said, the team envisions developing a “promenade plaza” with food and beverage options, public restrooms, a sports and cultural museum, and ice skating in winter.

Soldier Field to be demolished — except for the colonnades

Chicagoan Marc Ganis, who has advised numerous NFL teams on stadium financing, on Tuesday said the timing of Warren’s stadium reveal was “brilliant.”

“The national and international focus of the sports world on Thursday night is going to be on the NFL draft and, in particular, the No. 1 draft pick — and the Bears own the No. 1 pick. By announcing the stadium plan the day before, it will get a tremendous amount of attention locally and also nationally and internationally,” Ganis said.

“Tens of millions of people around the country are going to see the renderings and the plans for the new stadium. The attention that it will receive will be dramatic — all because they have the No. 1 pick. It wouldn’t be the same if they had the No. 2 pick,” Ganis added.

“If everything goes as hoped,” he said, April 24 and April 25 will become “seminal dates” in Bears history — “taking the quarterback that they hope will be their franchise star leading them to Super Bowls for many years to come, and the stadium that will be the first that the team will ever have built and designed themselves.”

• Bears eye taxpayers for stadium-related infrastructure costs. The bill? $325 million to start, $1.5 billion overall

The plan calls for most of Soldier Field to be demolished, preserving only the historic colonnades. The Bears took great pains to make those columns a focal point for the 14 acres of new park land, playing fields and other recreational space that would be located south of the new stadium.

During a question-and-answer session after Wednesday’s presentation, Warren said he looked at “10-to-12” possible stadium sites in Chicago before settling on the lakefront.

The Michael Reese Hospital site that Friends of the Parks has urged the team to consider was rejected because it was “very narrow” and “doesn’t work from an NFL standpoint” because the stadium would have to be built “over an active train line.” The marshaling yards for trucks serving McCormick Place also would have to be relocated.

After years of tension between the Bears and their landlords at the Chicago Park District, Warren was asked whether he was seeking more favorable terms in a new stadium lease.

“The terms we’d be looking for is terms that you would do with a partner. We just want to be fair with each other,” Warren said, without elaborating. “And I’m confident with Mayor Johnson and the leadership of the city of Chicago that they’re fair people. They’re talented business people and we would be able to work out fair terms because that’s the only way that a public-private partnership is able to thrive.”

Sean Bloom sets sights on $2B real estate deal

Sean Bloom announces plans for a Las Vegas real estate development project projected to cost around two billion dollars.

Nevada, Las Vegas--(Newsfile Corp. - April 29, 2024) - Sean Bloom , a 21-year-old Las Vegas entrepreneur, is excited to announce a proposal for a Nevada-based real estate project with a cost estimate of over $2 billion.

"I'm really excited for all the people/families we're going to help with this project and the thousands of jobs we will create."

The proposed real estate project, a significant step towards addressing the inventory crisis in the Las Vegas market, proposes the development of several thousand habitable units across Nevada.

The project includes many affordable housing units, which aim to alleviate the city's affordability concerns.

"The affordable housing Crisis, especially in Vegas, is extremely concerning. The fact that there is a 100,000+ shortage is mind-boggling to me. Even just these couple thousand units we're building make us the largest workforce housing project in the United States." -Sean Bloom

Another goal of Bloom's real estate development project is to create an uptick in jobs in Nevada, a state ranked third in America for the highest unemployment rates.

As of March 2024, the unemployment rate in the Las Vegas Metropolitan Statistical Area (MSA) was 5.1%, showing a slight decrease from 5.2% in February 2024.

Sean Bloom states, "I believe that people want to work, but they need jobs. Much of our two-billion dollar real estate development plan involves channeling funds into creating construction, remodeling, management, and landscaping jobs."

While the project has not yet been officially launched, Sean Bloom says he is excited to announce that it is in the pipeline and hopes it will officially commence by the end of Q2 (2024).

Sean Bloom will spearhead the real estate development project alongside his father Jay Bloom .

For further information and updates, visit Sean Bloom's official website .

About Sean Sean Bloom

Sean Bloom is a twenty-one-year-old investor and entrepreneur from Las Vegas, Nevada. Sean is the son of real estate investor and developer Jay Bloom. Sean leads as the president and managing partner of the Bloom Family office.

Media Contact Sean Bloom (Bloom Family Offices) [email protected] Phone: n/a Source: DDIGITAL

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/207342