New Venture Business Plan - Estimating Costs

Course #: BU121

Estimating costs

Having trouble finding costs for your new venture? Are you looking for fixed and variable costs for your break-even analysis? What about numbers for your proforma balance sheet and proforma income statement? This guide will help you with the financial section of your business plan.

Costs such as production, shipping and advertising can be very difficult to find because companies are not inclined to release this information and only publicly-traded companies are compelled to disclose some of it. Moreover, publicly-traded companies are not necessarily the best comparator for new ventures.

Nevertheless, below you will find the steps to guide you through Industry Canada’s Financial Performance Data that allows you to benchmark your costs against smaller enterprises.

Financial Performance Data - Canada

Industry Canada’s Financial Performance Data (formerly the SME Benchmarking Tool) can help start-ups by outlining the cost structure of businesses in your industry at different revenue levels. As such, it can also help you project your costs as your business grows. Follow the steps below to create a customized report. Here you can find information on small and medium-sized enterprises (SME) with annual revenues between $30,000 and $5,000,000. If you want more information about the Financial Performance Data site, read the FAQs.

Report Criteria Selection

Step 1: Start on the Report Criteria page.

Step 2: Select the geographic market of your business. The default is Canada but you can select a province or territory.

Step 3: Select incorporation status. You have three choices – incorporated, unincorporated and all businesses - to make comparisons with the most appropriate group of businesses. Be aware that the financial information available varies by incorporation status. Read the FAQs for details.

Step 4: Select how you want the values to display: as a percentage of total revenue or in a dollar amount (1000s). Click Continue.

Industry Selection

Step 5: Select your industry. Businesses are grouped according to the North American Industry Classification System (NAICS) which uses a numeric code to classify industries. If you know the NAICS code, enter it in the text box. If you do not know your industry code, find it by keyword searching or browsing a list of valid codes. Go to NAICS (North American Industry Classification System) and under HTML format click Classification structure and definitions. Enter your product name in the search box then click search. NAICS is hierarchical. The more detailed codes (5 or 6 digits) might provide the best comparison group for your business. However, the data available for more detailed classifications might be limited, so consider looking at a broader industry grouping of which your business is part.

Step 6: Click "Create report" to generate your report. The reports include information on the entire industry, as well as comparison groups (both halves and quartiles) so that you can compare businesses closest in size (based on revenue level) to your new venture.

Export Report

Step 7: Click "Export Report to Excel" to download data in Excel format.

Add your Own Data

Step 8: Click “Add your data to the report” above Report details to enter your own Revenue and Expense item information. Your data will be displayed beside the industry averages in the report. This may help you project how the cost structure for your business may change as your business grows and revenue levels increase.

Credits: This course guide was created by Afra Bolefski and is now maintained by Yanli Li.