TOOLS

DEVELOPING A BASIC INCOME STATEMENT

  • How much of your solution you can sell in the first year

  • For what price

 

That's your gross revenue number

Next, you need to figure out how much it costs to:

  • Make your product or perform your service

  • Pay for people to do the work

  • Rent any space you need

  • Frugally market the solution

The number you generate will be your gross expense number

Subtract the gross revenue number from the gross expense number. That's called EBITDA, or earnings before interest, tax, depreciation, and amortization.

Multiply the EBITDA number by sixty percent. The product is the number you can roughly expect the business would generate after taxes. This is called net income.