Profit Loss Projections

[rforbes]

I'm trying to project my expected income and expenses for 3 years after I take over a company and I'm having issues trying to project years 2 and 3.

Basically I did my 1 year projections by going off of the company's P&L statements (I averaged the numbers over the last few years), now I need to determine how much each category should increase by (or decrease) for years 2 & 3.

I'm going through the P&L's for the last 5 years and trying to get an average increase percentage, but the problem is, one year numbers may increase a little, but the next year they decrease a lot, the next year they increase then the next year they decrease again.

For example, I'm looking at Auto Expenses:
- 2014 to 2015 costs increased by 6%
- 2015 to 2016 costs decreased by 40%
- 2016 to 2017 costs increased by 28%
- 2017 to 2018 costs decreased by 38%

How do I figure out how much to increase or decrease these expenses for the next year and the one after that?

Thank you.

 

[lev888]

So there was no increase/decrease for 1 year projections, just the averages of the last 4 years. Why do you need to change, for example, the auto expenses for year 2 and 3?

 

[rforbes]

I'm pretty sure the bank is going to want to see some costs/revenue rising (possibly some decreasing as well) in year 2 and 3. I don't think they're going to want me to just copy and paste year 1 into year 2 and then again to year 3.

 

[JeffM]

Look at major categories of expense like wages, cost of goods sold, rent and utilities as a percentage of revenues. Those should be relatively stable. If not, what is driving those expenses.