PINAGKAWITAN INTEGRATED NATIONAL HIGH SCHOOL

ENTREPRENEURSHIP
4th Quarter-Worktext, Week 4
(4 days)

Lesson: FORECAST THE REVENUE OF THE BUSINESS

You’ve likely heard hundreds of times from mentors and business experts that you need to set a budget to keep your
small business expenses on track. But how do you make decisions about your budget? Like how many employees you
can afford to hire or how much you can spend on advertising? If you don’t know how much revenue, you’ll be bringing in
the coming months and years? If you’re starting a business from scratch, making revenue forecast will be particularly
challenging, where established businesses use historical data to predict what will happen in the future. In order to
prepare an accurate budget, you first need to develop a revenue forecast for your business.

A forecast is an educated prediction for the upcoming year about how much money your company will likely
bring in, so that you can estimate what you can afford to spend, and what your profit margin be like? On the
other hand, Revenue is the amount of money that a company receives during a specific period, including
discounts and deductions for a returned merchandise.

Don’t worry if your forecasts aren’t completely accurate, you can always alter them after your first few months.
Concentrate instead on trying to make your figures as realistic as possible.

Example of a revenue forecast

Why Revenue Forecasting Matters

1. Revenue forecasting helps you budget business expenses early because you have a better idea of the total
amount of money you have to budget each month. And if you start to get off track, either on your revenue
predictions or on fixed expenses, you’re more likely to catch those deviations early if you have a forecast to
compare with.
2. Forecasting will also help you time important moves—like bringing in a new hire, launching a new marketing
campaign, or cutting costs during slow seasons—to match your predicted revenue throughout the year. A
detailed, well-researched forecast can even help convince lenders or investors to contribute funds to your
business. While no revenue forecast will ever be 100% accurate down to the penny, it will provide you with a
very educated guess for your upcoming financial needs. This information will be crucial to your ability to make
the best possible choices for your business.

Revenue Forecasting Tips and Tricks

Two different ways to go about forecasting upcoming revenue for your business:

1. Judgment Forecasting involves using your intuition and experience as the business owner to set a general
pattern for your expectation of the year’s income and expenses.
2. Quantitative Forecasting is more scientific, using actual past revenue data from your own business or other
businesses in your industry as a basis for tracking trends and predicting changes.

Experts recommend using a combination of judgment and quantitative forecasting methods to achieve the most
accurate possible prediction of what the upcoming fiscal year will be. If you’ve been in business for a little while, start
with last year’s revenue statements as a basis for predicting what will happen in coming year. Then, consider any recent
changes in personnel, products, pricing, competition, or other factors which could impact your future revenue.
PINHS 4th Quarter Entrepreneurship 11 PINHS Page 1
 PINAGKAWITAN INTEGRATED NATIONAL HIGH SCHOOL

Updating your forecast isn’t just an annual task to check off your to-do list. Rather, it is a living document that should be
constantly reviewed and updated to reflect changes in your business. Ideally, keep your revenue forecast up to date by
inputting changes once per month, or at minimum once per quarter.

Forecasting for Newer Businesses

Revenue forecasting for established businesses is comparatively straightforward, but what if you have a newer business
with no revenue history to inform your predictions? Without the benefit of solid quantitative data, you’ll need to be very
smart (and thorough!) in utilizing judgment forecasting methods to develop your predictions.

As Covestor CEO Asheesh Advani explains, “forecasting business revenue and expenses during the startup stage is really
more art than science.” As a starting point, Advani recommends focusing more on your upcoming expenses than on
upcoming cash flow. What is your overhead (or fixed costs)? Which costs are likely to fluctuate?

Marketing, legal, and licensing expenses tend to spiral out of control during the early stages of a startup, so consider
doubling or even tripling your initial estimates. Advani encourages startups to create two versions of the initial revenue
forecast—an optimistic version, and a more conservative/realistic version. “Embrace your dreams and build at least one
set of projections with aggressive assumptions,” Advani says. “You won’t become big unless you think big! By building
two sets of revenue projections, you’ll force yourself to make conservative assumptions and then relax some of these
assumptions for your aggressive case.”

How to Forecast Revenue?

1. Choose between Qualitative Forecasting or Quantitative Forecasting (or a mixture).

A Qualitative method is a type of forecasting based on judgment, opinions, intuition, emotions, or
personal experiences and are subjective in nature while Quantitative Forecasting is a type of forecasting
method based on mathematical models and are objective in nature. They rely heavily on mathematical
computations.

2. Start with last year’s revenue statements for a basis of prediction. The thought of forecasting sales intimidates
a lot of people, but in actually, it’s simply an act of looking at some raw data and making some logical
assumptions from it. If you own an existing business, look at your past sales figures, and then consider the
following factors to make an educated guess about future sales on a month by month basis:

 Your customers: Identify your customer base and determine which ones you’ll include in the
forecast. Remember, common wisdom says that you’ll get 80 percent of your business from 20
percent of your customers.

PINHS 4th Quarter Entrepreneurship 11 PINHS Page 2

 PINAGKAWITAN INTEGRATED NATIONAL HIGH SCHOOL
 Your service area: Do you have plans for expansion? If so, include your current geographical area as
well as the area you plan to include in the future.
 Market conditions: What is the state of the market? Will it remain steady or increase?
 Business position: Consider the position of your business within your industry, and factor in your
growth expectations.
 Seasonal adjustments: Many businesses have increased and decreased sales in a cyclical seasonal
cycle. If your business falls into that pattern, take this into consideration.

3. Consider any recent changes in personnel, products, pricing, competition, or other factors. The forecaster should
choose a technique that makes the best use of available data. If there are changes in personnel like
reassignment of an employee to a higher job 138 position, innovation of the product which may need additional
budget that will also affect pricing, changes in competitors and other factors to consider in making your forecast.
4. Calculate anticipated revenue. You have a great idea for a business. But now you need to know how to calculate
start up costs and expected revenue for business. The type of business you open will determine the amount of
money you will need to open. However, as a rule you should count on having six months’ worth of money on
hand to cover your expenses. Startup cost are the expenses that are incurred prior to opening. For example,
startup costs may include legal work, logo design, brochures, site selection and building improvements.
Compare startup costs with your startup assets. This include cash, starting inventory and equipment.
5. Separate individual income sources to get a clear picture of potential ups and downs from each revenue stream.
Revenue streams are the various sources from which a business earns money from the sale of goods or the
provision of services. The types of revenue that a business records on its account depend on the types of
activities carried out by the business. Generally speaking, the revenue accounts of retail businesses are more
diverse, as compared to business that provide services. Separating your individual income sources will give you
good and accurate forecast of your business.
6. Constantly review and update the forecast to reflect changes in your business. Once your business is established
and running well, you may be inclined to let things continue to run as they are. However, it’s actually time to
plan again. After the crucial early stages, you should regularly review your progress, identify how you can make
the most of the market position you’ve established and decide where to take your business next. You will need
to revisit and update your business plan with your new strategy in mind and make sure you introduce the
development you’ve noted.

FORECAST THE COST TO BE INCURED

Financial forecast assists you to meet your business goals. They are a future prediction of your business finances, as
compared with statement, which provides details of actual results or progress. Predicting the financial future of your
business is not easy, especially if you’re starting a business and don’t have a trading history. However, forecasting and
making adjustments frequently will enable you to become more accurate. Monthly or weekly forecasts may be
necessary when starting your business, experiencing rapid growth, or having financial difficulties. Regular forecasts allow
you to closely monitor your finances and develop strategies to fix problems before they become major issues. Monthly
or quarterly forecasts may be more appropriate for a stable, established business.

Start-up costs
Whether starting a new business or purchasing an existing one you will need to factor in startup costs, such as:
a. legal or accounting fees b. insurance costs c. furniture, equipment, supplies or fit-out d. stock e. advertising
f. permits g. cash required to fund the business until you start collecting payments from customers h. staff wages
i. leasing costs of property, plant and equipment

Starting a business often costs more than you expect; it is a good idea to add an extra 20 percent to your forecast to
allow for unexpected expenses.

COMPUTE FOR PROFIT

It is important for a business to understand how much profit they’ve made to give it an idea as to whether the business
is successful. With so much money going in and out of a business, it is not always easy to see whether what a small
business owner is doing is actually making money. By calculating profit, it helps give some clarity.
If a business is making a profit it can: • expand and grow • attract more investment • employ more staff It is worth
mentioning that profit is a different to cash. Some things will affect the cash flow of the business, but won’t affect profit
e.g. money taken out of the business for personal use. Likewise, some items will affect profit but will not affect cash such
as provisions e.g. where a business makes an adjustment for a customer not paying.

WHAT IS PROFIT?

PINHS 4th Quarter Entrepreneurship 11 PINHS Page 3

 PINAGKAWITAN INTEGRATED NATIONAL HIGH SCHOOL
Profit is the difference between the price and cost when talking about one item. When dealing with higher volumes of
items, total profit is the difference between revenue and total cost. Generally speaking, profit is the incentive behind the
majority of business transactions. One side wants to buy a product or a service, and the other wants to sell it for a profit.

To recap and understand what profit is:

•first remember that cost is money spent, then revenue is money earned, and finally, profit is money gained.

How to calculate Profit?

When calculating profit for one item, the profit formula is simple enough: Profit = Price - Cost. When determining the
profit for a higher quantity of items, the formula looks like this: Total Profit = Revenue - Total Cost or expressed
differently Total profit = unit price * quantity - unit cost * quantity.

Depending on the quantity of units sold, the following are the variables used to determine Profit:
1. cost - the amount for which items are acquired or produced, also known as the cost of goods sold,
2. unit cost - the amount for which a single item is acquired or produced,
3. price - price for which the items are sold,
4. unit price - the amount for which a single item is sold,
5. quantity - the number of items for which the profit is calculated,
6. total cost - cost multiplied by the number of items,
7. discount - the percentage price reduction,
8. total profit - total amount of money gained.

Using the profit formula and the information from selected Balance Sheet & Income Statement, we can calculate that
Company ICTORY profit was: P2,000,000.00 – P1,000,000.00 – P50,000.00 – P95,000.00 = P855,000.00.

GROSS PROFIT

Gross Profit is the profit a company makes after deducting the costs associated with making and selling its product, or
the cost associated with providing its services. Gross profit will appear on company’s income statement and can be
calculated by subtracting the cost of goods sold (COGS) from revenue (sales). The figures can be found on a company’s
income statement. It may also be referred to as sales profit or gross income.

Gross profit assesses a company's efficiency at using its labor and supplies in producing goods or services. The metric
mostly considers variable costs—that is, costs that fluctuate with the level of output, such as: • materials • direct labor,
assuming it is hourly or otherwise dependent on output levels • commissions for sales staff • credit card fees on
customer purchases • equipment, perhaps including usage-based depreciation • utilities for the production site •
shipping

The formula for gross profit is: Gross Profit = Revenue – Cost of Goods Sold

As generally defined, gross profit does not include fixed costs (that is, costs that must be paid regardless of the level of
output). Fixed costs include rent, advertising, insurance, salaries for employees not directly involved in the production
and office supplies.

PINHS 4th Quarter Entrepreneurship 11 PINHS Page 4

 PINAGKAWITAN INTEGRATED NATIONAL HIGH SCHOOL

However, it should be noted that a portion of the fixed cost is assigned to each unit of production under absorption
costing, which is required for external reporting under the generally accepted accounting principles (GAAP). For
example, if a factory produces 10,000 widgets in each period, and the company pays P30,000 in rent for the building, a
cost of P3 would be attributed to each widget under absorption costing.

Gross profit shouldn't be confused with operating profit, also known as earnings before interest and tax (EBIT), which is
a company's profit before interest and taxes are factored in. Operating profit is calculated by subtracting operating
expenses from gross profit.

Gross profit can be used to calculate another metric, the gross profit margin. This metric is useful for comparing a
company's production efficiency over time. Simply comparing gross profits from year to year or quarter to quarter can
be misleading, since gross profits can rise while gross margins fall, a worrying trend that could land a company in hot
water. Although the terms are similar (and sometimes used interchangeably), gross margin is not the same as gross
profit margin. Gross profit is expressed as a currency value, gross profit margin as a percentage. The formula for gross
profit margin is as follows:

Example:

To calculate the gross profit, we first add up the cost of goods sold, which sums up to P350,462.00. We do not include
selling, administrative and other expenses since these are mostly fixed costs. We then subtract the cost of goods sold
from revenues to obtain a gross profit of P1,088,403.00 – P350,462.00 = P737,941.00 million.

To obtain the gross profit margin, we divide the gross profit by total revenues for a margin of
P737,941.00/P1,088,403.00 = 67.80%.

Limitations of using Gross Profit

Standardized income statements prepared by financial data services may give slightly different gross profits. These
statements conveniently display gross profits as a separate line item, but they are only available for public companies.
Investors reviewing private companies' income should familiarize themselves with the cost and expense items on a non-
standardized balance sheet that do and don't factor into gross profit calculations.

PINHS 4th Quarter Entrepreneurship 11 PINHS Page 5

 PINAGKAWITAN INTEGRATED NATIONAL HIGH SCHOOL
Name: _________________________ Subject Teacher: _____________________
Grade and Section: _______________ Contact No.: _____________________

ENTREPRENEURSHIP
Score:
4th Quarter Written Works and Performance Tasks
Week 4

Directions: Forecasting Revenue. From the given template make a forecast revenue of your business. Put your work in a
separate ANSWER SHEET.

Directions: Compute for Profit. Compute the profit of your startup business. Put your work in a separate ANSWER
SHEET.

Parent’s Name and Signature

PINHS 4th Quarter Entrepreneurship 11 PINHS Page 6

 PINAGKAWITAN INTEGRATED NATIONAL HIGH SCHOOL

ENTREPRENEURSHIP

4TH Quarter-Worktext, Week 5 (4 days)

PRESENTATION OF BUSINESS PLAN

Making a business proposal presentation to prospective investors is stressful for nearly all entrepreneurs. Even if they
are confident their business plan is well thought out, they still worry that they will not be able to express the most
important aspects of their plan and engage the investors’ interest in the short time allotted for the in-person
presentation. The keys to a successful presentation are advance preparation and rehearsal until your delivery is smooth
and polished.

Preparing the Business Plan Presentation

Business plan presentations are designed to sell your idea to investors through a concise and engaging overview of what
your business does, how it fills a consumer need and what you are looking for in terms of an investment. Seasoned
investors are busy, and typically aren't interested in a long, drawn-out presentation filled with irrelevant information. In
fact, many seasoned venture capitalists and angel investors will give you a specific time limit and suggested outline for
your presentation; if you receive these suggestions, it's a good idea to follow them. If you don't receive specific
guidance, using Microsoft Powerpoint application focus your presentation on the following key points:

Slides 1-3. Introduce yourself, your company and its product. Describe your market and how you solve your customer’s
problem. Explain how your product is different than anything else on the market.

Slides 4-6. Discuss the size of the market for your product. Explain who your customer are. Demonstrate growth in your
market in the next 3-5 years.

Slides 7-8. Discuss the competitive advantages your venture has that will lead to outstanding revenue growth and
profitability. Demonstrate your projected revenues and pretax profits for the next 3-5 years.

Slides 9-10. Discuss your marketing strategies, including distribution channels and sales strategies. Slides 10 onwards.
Introduce your management team and advisory board members. Include one or two points about each person’s
background and experience. and explain how each person on the team brings a critical element necessary for your
company’s success.

Final slides. Reveal the total amount of capital you need and a short list of major expenditures. By following this
general outline and focusing on the most important information, you'll answer most of the investors' questions and give
them the details they need to make a decision. Remember to only hit the highlights, and don’t try to fit your entire
business plan into the presentation. Too many slides can result in information overload, and they will not remember the
most important pieces of information. Aim for a business plan PowerPoint of about 10-12 slides.

Rehearsing Your Presentation

Once you've created the presentation, practice presenting it to ensure that you appear polished and professional come
presentation day. Again, keep time limits in mind, and respect the investors' time. Don't forget to include time for
questions in your overall presentation plan.
To begin rehearsing, create an outline of the presentation, addressing the important points that you want to cover. If
you are using presentation software like PowerPoint, print a copy of your presentation in outline view, and use that to
identify the key points you want to make from each slide and jot down additional notes about what you want to say.
Creating the outline not only ensures that you cover all of the key points, it also keeps you from simply reading what's
on the screen, which will quickly bore the audience.
Once you have an idea of what you are going to say, rehearse your presentation with colleagues. Invite members of your
management team or trusted associates into a conference room and conduct a dress rehearsal of the presentation. Get
their feedback on what parts of the presentation might need editing or clarification. Time your presentation and cut it
down if necessary. Rehearse the presentation several more times on your own.

IMPLEMENTATION OF BUSINESS PLAN

Whether a business is a start-up or already well established, business implementation becomes the responsibility of all
the employees. Implementation is the process of executing a plan or policy so that a concept becomes a reality. To
implement a plan properly, managers should communicate clear goals and expectations, and supply employees with the
resources needed to help the company achieve its goals.

PINHS 4th Quarter Entrepreneurship 11 PINHS Page 7

 PINAGKAWITAN INTEGRATED NATIONAL HIGH SCHOOL

1. Improvement Through Change. The implementation of a plan brings about change meant to help improve the
company or solve a problem. The changes can occur to policies, management structures, organizational
development, budgets, processes, products or services. Since the status quo can be detrimental to a company,
change can help improve the work environment and/or the customer experience.
2. Good Organizational Development. Part of good organizational development involves including all employees in
implemented changes. When a company shares its ideas and goals with workers, the workers will feel a sense of
ownership and loyalty to the company, as well as feel included in something important that is larger than their
respective job descriptions. Making workers feel valued also helps maintain or improve employee retention.
Communicating goals to employees helps encourage participation and can give a plan a strong start.
3. Increased Interdepartmental Cooperation. When executed properly, business implementation can increase
interdepartmental cooperation. It can be easy for a department within a business to work independently and
only rely on another department when a need arises, particularly in large company. Business implementation
helps unite departments, open the lines of communication, create a diverse culture within the organization and
increase efficiency and productivity.
4. Setting Clear Priorities. As well as communicating goals, business strategy implementation sets clear priorities.
Priorities are generally based on due dates, client needs, financial concerns, worker needs or logistics. Deadlines
help guarantee the implementation of a plan with realistic due dates, but a company must provide its workers
with clear action steps and resources to ensure the success of the plan. Failure to communicate priorities can
cause inefficiencies, miscommunications, worker frustration and low morale. When priorities or deadlines are
realistic, employees feel as if a company is setting them up for success.
5. Moving a Company Forward. Business implementation is important for moving a company forward, as is not
underestimating the importance of implementation planning. When a business fails to implement and execute
its strategies properly, it fails to move forward and grow. According to website Business Balls, to implement and
execute a plan successfully, there must be "motivational leadership," a plan of action and "performance
management."

IDENTIFY THE REASON FOR KEEPING BUSINESS RECORD

1. Monitor the progress of your business. You need good records to monitor the progress of your business. Records
can show whether your business is improving, which items are selling, or what changes you need to make. Good
records can increase the likelihood of business success.
2. Prepare your financial statements. You need good records to prepare accurate financial statements. These include
income (profit and loss) statements and balance sheets. These statements can help you in dealing with your bank
or creditors and help you manage your business.

• An income statement shows the income and expenses of the business for a given period of time.
• A balance sheet shows the assets, liabilities, and your equity in the business on a given date.

3. Identify sources of your income. You will receive money or property from many sources. Your records can identify
the sources of your income. You need this information to separate business from nonbusiness receipts and taxable
from nontaxable income.

4. Keep track of your deductible expenses. Unless you record them when they occur, you may forget expenses when
you prepare your tax return.
5. Keep track of your basis in property. Your basis is the amount of your investment in property for tax purposes.
You will use the basis to figure the gain or loss on the sale, exchange, or other disposition of property, as well as
deductions for depreciation, amortization, depletion, and casualty losses.
6. Prepare your tax return. You need good records to prepare your tax returns. These records must support the
income, expenses, and credits you report. Generally, these are the same records you use to monitor your business
and prepare your financial statement.
7. Support items reported on your tax returns. You must keep your business records available at all times for
inspection by Bureau of Internal Revenue. If the BIR examines any of your tax returns, you may be asked to explain
the items reported. A complete set of records will speed up the examination.

PINHS 4th Quarter Entrepreneurship 11 PINHS Page 8

 PINAGKAWITAN INTEGRATED NATIONAL HIGH SCHOOL

Name: _________________________ Subject Teacher: _____________________

Grade and Section: _______________ Contact No.: _____________________

ENTREPRENEURSHIP
Score:
4TH Quarter Written Works and Performance Tasks
Week 5

Direction: Read and analyze the given questions below. Answer each question briefly.

1. What are business plan presentations designed for?

2. What is implementation? How do you implement a plan?

3. What are the goals of a business plan implementation?

4. Give the reasons why keeping business records are important.

Parent’s Name and Signature

PINHS 4th Quarter Entrepreneurship 11 PINHS Page 9