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Chapter 5 Developing a Financial Plan

SOFTWARE

Spreadsheet Application

ACTIVITY

(OPTIONAL)

Preparing a Projected Income Statement

Objective: Analyze and project income and expenses for a new business

venture.

Practice Situation

Natasha Lee is developing a business plan for a new venture called Southwest

Lighting and Sound Productions in Austin, Texas. Natasha has worked as a freelance

lighting and sound technician in the area and has identified a strong demand for a

lighting and sound equipment rental business. She has several clients with ongoing

needs for contract lighting and sound production.

Part of the business plan for Southwest Lighting and Sound Productions should

include projected financial statements. Prepare a projected income statement for the

first 12 months of operation (January–December) based on the information below.

Based on her research, Natasha estimates her income will be $1,500 a month for

lighting equipment rentals and $2,500 a month for sound equipment rentals in the first

six months of business. As she becomes established, she anticipates an increase of

30 percent in monthly equipment rental revenues for months 6 through 12. Natasha has

agreements with one club owner for three sound production gigs per month at $1,200

each. She estimates that she can secure three lighting production contracts each month

at $900 each. In July, the city hosts the South by Southwest Music Festival. She has a

contract to produce seven stage performances for a total fee of $8,400 for the festival.

Natasha estimates her monthly expenses as follows:

Advertising: $250 Jan–June; $150 July–Dec

Office telephone and cell phones: $145

Electric & water utilities: $75

Payroll tax expenses: $650

Equipment maintenance: $100

Salary for assistant: $2,000

Fuel for delivery van: $65

Salary for Natasha: $3,500

Insurance: equipment $355, van $120,

Salary for technician: $2,500

liability $250

Storage facility rent: $800

Interest expense on equipment loan: $165

Van maintenance: $50

Office rent: $400

Chapter 5 Business and Personal Finance

Developing A Financial Plan Spreadsheet Application