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Not long ago, I was asked: "What are the critical success factors for e-commerce?" I answered: "There is only one. Making a profit." If you are launching a new business - or a new business activity - you need to be able to calculate how long it will take to make a profit and how much money you will lose along the way. A cashflow chart allows you to do this quickly and easily. You can download my dead simple cashflow calculator for free. It's an Excel spreadsheet that works in any Excel 95 or later version of the software. Using it is simple. Across the top are months 1 to 24. Down the side are sections for income and expenses. In the "income" section, enter all sources of income. This might be a single entry of "sales of products" or you might want to break down your sales into individual products. In addition, any other sources of income should be entered into the first column under income. Under "expenses", enter all sources of expense you anticipate. These will probably include salaries, rent, office equipment, wholesale purchase of products, utilities and any other expenses. Now, under each month, enter the expected income and expenses of that month in the appropriate cell. The chart will automatically calculate the profit or loss for that month and the profit or loss cumulated since you started the business. As a result, you can readily see how much money you will lose (negative cashflow) before you begin making a profit. This figure is important. It represents the amount of investment you will need in order to make your business succeed. However, most entrepreneurs are optimistic when calculating cashflow. So be prepared to take double the anticipated loss. By changing figures in the chart, you can explore various strategies and determine which will work best for you. You can continue to modify the cashflow chart after the business is up an running. Indeed, if initial sales or expenses are different to those anticipated, you will need to modify the chart.
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