How Can You Project Business Income Based on Growth?
How much money will your business make three years from now? Though determining an exact figure is virtually impossible, projecting business income to determine potential growth isn't as difficult as it may seem. Growth projections are typically based on some form of income, and especially when your business is somewhat regular, determining a rough figure is relatively easy. Here's a quick look at how business income projections work, their limitations and when it's time to consult a professional.
Start by looking at your past income and expenses. Take those figures and apply them to your current operations. Make sure that you take time to account for any one-time large projects that generated sizable income or significant expenses that are not normal for your operation, as they will skew your results.
Next, project any future anticipated expenses or income that you're already aware of, such as changes in contracted service costs, new machinery, moving to a new location, big upcoming projects or similar areas of interest. As you project your past income or expenses into the future, remember to add these expenses into the mix to provide a better level of accuracy.
Take a solid look at projections for your industry. Is it expected to expand or contract right now? If you're in residential construction, as an example, and the demand for housing in your area is rising and expected to continue to grow, you can expect that your business will grow at a similar rate, provided that you take the time for marketing and customer service to ensure future work and a solid reputation.
With these factors in mind, you should be able to make a relatively educated guess as to the future growth and income of your business. For more exacting figures, you may want to consult with a business appraiser.
By taking the time to determine growth projections for your business, you can quickly determine rough estimates of where your company is headed in the future. However, the process can be somewhat complicated if there are other factors, such as adjustments or one-time large projects, that should be taken into account. The accounting professionals at AccountRely can help you through the process, simply reach out today to get connected to one of our consultants who have experience in your industry.