You can also visit the Company Doctor's web site. Frequently, aspiring entrepreneurs trying to assemble financial projections for the first time let projected profits fall where they may. The result is that these entrepreneurs end up projecting profits far above their industry norm. Then ensure your projections bear some semblance of reality when compared to these references. The true profit potential of your business is a predictor of what you will personally realize from the success of that business.
Net profit is what a company earns after all expenses and taxes are deducted.
In addition, profits should also generate an adequate return on your investment. If you sold the business after 10 years, a selling price in this range would provide you a rate of return comparable to other risky investments. However, keep in mind that the selling price is a function of the buyer's perceived worth of your company at that time, and it may bear only a slight resemblance to the capital you originally invested. Furthermore, the more you dilute ownership of the company by bringing in additional investors, the more difficult it is to generate a reasonable return on your original equity investment in the business. Otherwise, you'd be better off staying in your present job and investing your funds in growth mutual funds rather than in a new, high-risk enterprise.