Entrepreneurs are a courageous bunch—except when it comes to math. I've seen many notoriously tough senior executives shudder at the prospect of running financial projections for their business plans. So I've developed a much kinder, simpler guide to help you crunch the numbers that matter most.

Break-Even Analysis
The most important numbers for a start-up are often the most basic. Among them: Predicting what it will take to have more money coming in per month than going out. Get that wrong, and you could find yourself out of cash, and out of business.

Start by estimating the revenues generated by an average sale. Then subtract the costs that change with each transaction, like sales commissions and costs of producing the products sold. The result is your "unit contribution." Next, predict your monthly overhead, or expenses that don't vary directly with sales volume, such as rent, salaries, utilities, legal fees, and accounting expenses. Finally, divide your monthly overhead by your unit contribution. That number will tell you how many transactions you'll need per month to break-even.

Now for the analysis. Is that a realistic sales target? When do you think you'll hit it? What resources will you need to get there? How much cash will you burn through in the meantime?

Marketing Efficiency
If you reach customers directly—as opposed to selling your products to a wholesaler or retailer that will then sell to customers—then make sure each of them brings in more money than it costs you to get them in the door. Get that basic number wrong, and no amount of sales volume will save you.

First, estimate the cost of acquiring one customer, by researching similar companies, and forming a hypothesis you'll test and hone over time. Then, estimate the lifetime value per customer. Predict how long an average customer will stick around, and how much unit contribution they'll generate during that time. Ideally, the lifetime value of a customer should be three or more times greater than the cost of acquiring a customer.

Financial Projections