If after reviewing and making adjustments to revenue generated by the income sources, you are still unable to achieve the desired financial outcome. The next step is to probe into your cost structure. Perhaps your cost structure is based on a much higher volume of business than you anticipated on month 36. If so you need to scrutinize elements of your fixed costs. Start with looking at the machinery and equipment costs. Assess the quantities of machinery and equipment that you plan to purchase. Perhaps the PCs that you budgeted can be of lower specifications and thus lower priced yet adequate for your needs. Perhaps the machine that you wanted to purchase has a capacity which is 5 times that of what you expect to be able to sell on month 36. If so, maybe you should find a lower capacity and hence lower cost machine.
Next look at the costs of furniture and renovations. Ask yourself whether you need to incur this sum of money for the type of furniture and renovation in your plan. Consider purchasing used or lower cost furniture instead of brand new expensive furniture. If the renovations are for own use premises such as an office or a workshop, you can get by with spending less. After all, other than the odd visitor, no one else will bother looking at it other than you and your staff. If the renovations are for a brick and mortar outlet, there may be less scope for lowering cost if it is based on a theme formulated by a designer. Still you can save some cost if you try.
Next look at the size of the premises that you intend to lease. It may be way too big for the volume of business expected in your forecast for month 36. If you are worried that you don’t have premises big enough for the volume expected on year 5, don’t. If that really happens, you have a pleasant problem compared with having too large an area on month 36.
Assess the number of employees that you require. It may be too many for the expected business throughput in the first 3 years. You may have too many managers or supervisors for the number of workers in your operations.
The overall solution is to trim costs to match the volume of business expected in 36 months. This can require you to right size the premises or number of employees or machinery and equipment or furniture and renovations. Once you made the necessary changes to the cost structure, you can go back to finetune the revenue forecast
Cost Structure Changes