We already know the business plan is the blueprint for any business, but, what should you include in potentially the most important section of your business plan, the finances? A business plan has a lot of important elements to help you secure funding and launch a new business. That’s why we’ve been spending some time talking about what to include in different sections or types of business plans. Arguably, one of the most important parts of a business plan is the financial section, especially when using the plan to secure investments. Potential investors want to see your current and projected financial information. It is crucial for you to include the information needed for investors and lenders to look into, as they have to know what they are going to invest in. So, here’s what you should consider when working on that section:
Sales Forecast: Using a spreadsheet, project your sales over the next several years. A business plan expert can help you decide how far out you need to project for your specific industry. Either make an educated guess or use past results to help determine your projections. Starting with the forecast can help you figure out additional finance needs. This is a way to estimate your future sales. Sales forecasts target the exact month, quarter or year when the revenue is expected to hit.
Expense Budget: How much is it going to cost to run the business and make the sales you’ve forecasted? Make a budget of both fixed and variable costs, estimating interest and taxes for various items.
Cash Flow Statement: Create a cash flow statement showing how money will move in and out of our business. This basically measures how much and how well a business, company or organization manages its cash flow and position. It shows investors if they can generate enough money to pay off debt obligations and other expenses.A typical cash flow statement is broken down into 12 months.
Income Projections: Using the sales forecast and cash flow statement, work on detailing the income forecast for your business. If you are unsure, work with a business consultant who can help talk you through this.
Projected Balance Sheet: Some of the assets and liabilities won’t be included in the other sections, so be sure to include them here. Assets include month by month cash, accounts receivable, inventory, buildings and equipment. Liabilities are your debts, so any bills you haven’t paid yet (accounts payable) and loans.
Break Even Analysis: When will your business break even? Financiers want to know this, so include an analysis in your business plan to give them an idea of your goals and projections. There is no net loss or gain. An example of this would be your fixed and variable costs. What are your variable costs, and how much do they make up to be? What about your fixed costs? How much is your rent? Insurance? Employment salary? These are things to calculate and write down.
It is important to have a business plan that is made specifically for your company. It is not a one size fit for all template as each business differs from the next one. That is why getting an expert to help create your business plan takes a lot of the burden off, as business plan consultants know how to create a plan that works and is custom made for you. They have helped thousands of people just like you write business plans by asking the right questions, getting to know you and your ideas and helping you develop new ideas to incorporate into your plan.