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Contrary to the top down method, the bottom up approach begins with a micro\/inside-out view and builds towards a macro view. This means a projection is made based on the main value drivers of your business. In the simplest form, cash flow equates to projected EBITDA (earnings before interest, taxes, depreciation, and amortization) less capital investments. There are many other balance sheet implications for cash flow (accounts receivable, payables, inventory, etc.). Depending on the industry and round of investing, that level of detail may be unnecessary.<\/p>\n<\/p>\n
From creating the revenue projections you know already how many units of sales you aim to have. You then add per unit of sales the costs of raw materials and labor costs involved in producing those goods. For a SaaS business COGS are different Navigating Financial Growth: Leveraging Bookkeeping and Accounting Services for Startups<\/a> compared to \u2018normal\u2019 businesses as there is no regular production or service delivery process involved. However, also SaaS companies definitely incur COGS, such as hosting costs, customer support and onboarding costs, and online payment costs.<\/p>\n<\/p>\nHow To Create Your Financial Projections<\/h2>\n<\/p>\n