If you don’t know what an operating annual budget is, it’s a list of numbers. To put it simply, it has revenues on one side and expenses on the other side. When you subtract your expenses from your revenues, you get your net income. This net income tells you if you can earn a living selling your idea.
It’s also a list of guesses. You haven’t sold anything yet, so all you’re doing at this point is guessing. You’re guessing what you think you could earn and spend within a year based on what you know and what your industry (the people who are also selling the same idea) is doing.
So I plugged in some numbers to see if I could make making a living operating a lice-treatment franchise. “Without even putting in your cost-of-goods figures, your net income is a minus $31,000,” Wyman tells me. “You can tell right off the bat that your expenses now exceed your revenue so you must make considerable changes to your pro forma to start making any sense.”
This whole thing makes my head itch.