Every business needs to have a written business plan. But, how do you write a business plan?
Here's some advice on how to include things like a sales forecast, expense budget, and cash-flow statement. Based in the Washington, D. Getty Images A business plan is all conceptual until you start filling in the numbers and terms.
The sections about your marketing plan and strategy are interesting to read, but they don't mean a thing if you can't justify your business with good figures on the bottom line.
You do this in a distinct section of your business plan for financial forecasts and statements. The financial section of a business plan is one of the most essential components of the plan, as you will need it if you have any hope of winning over investors or obtaining a bank loan. Even if you don't need financing, you should compile a financial forecast in order to simply be successful in steering your business.
The Purpose of the Financial Section Let's start by explaining what the financial section of a business plan is not. Realize that the financial section is not the same as accounting. Many people get confused about this because the financial projections that you include--profit and loss, balance sheet, and cash flow--look similar to accounting statements your business generates.
But accounting looks back in time, starting today and taking a historical view. Business planning or forecasting is a forward-looking view, starting today and going into the future.
It's an elaborate educated guess. And you don't spend a lot of time on minute details in a financial forecast that depends on an educated guess for sales. You're going to need it if you are seeking investment from venture capitalists, angel investors, or even smart family members.
They are going to want to see numbers that say your business will grow--and quickly--and that there is an exit strategy for them on the horizon, during which they can make a profit.
Any bank or lender will also ask to see these numbers as well to make sure you can repay your loan. It should be a guide to running your business," Pinson says. One way, Berry says, is to break the figures into components, by sales channel or target market segment, and provide realistic estimates for sales and revenue.
But if you break the guess into component guesses and look at each one individually, it somehow feels better," Berry says. The Components of a Financial Section A financial forecast isn't necessarily compiled in sequence.
And you most likely won't present it in the final document in the same sequence you compile the figures and documents. Berry says that it's typical to start in one place and jump back and forth.
For example, what you see in the cash-flow plan might mean going back to change estimates for sales and expenses.
Still, he says that it's easier to explain in sequence, as long as you understand that you don't start at step one and go to step six without looking back--a lot--in between. Start with a sales forecast. Set up a spreadsheet projecting your sales over the course of three years.
Set up different sections for different lines of sales and columns for every month for the first year and either on a monthly or quarterly basis for the second and third years. Because you want to calculate gross margin.
Gross margin is sales less cost of sales, and it's a useful number for comparing with different standard industry ratios.The financial analysis section of your business plan should contain the data for financing your business now, what will be needed for future growth, and an estimation of your operating expenses.
Because of the structured, in-depth financial data required for this section, you should consult your accountant or other trusted and qualified. A description of the financial analysis section of a small business plan, what should be included, and a sample financial analysis.
How to Write the Financial Analysis Overview of the Financial Analysis Section of a Business Plan. Share and what the numbers mean. This stands even if you have help developing the financial analysis. Aug 20, · What is a business plan?
this doesn’t mean a very small font size and cramming tons of information onto a single page—it means that the business is described in very concise language that is direct and to-the-point.
the business’s target market, key financial highlights, and a summary of who does what on the management team. While /5(). It's at the end of your business plan, but the financial plan section is the section that determines whether or not your business idea is viable, and is a key component in determining whether or not your plan is going to be able to attract any investment in your business idea.
Basically, the financial plan section consists of three financial statements, the income statement, the cash flow projection and the balance . Overview of what is financial modeling, how & why to build a model.
A 3 statement model links income statement, balance sheet, and cash flow statement. More advanced types of financial models are built for valuation, plannnig, and as well as the AR days and inventory days assumptions.
A comprehensive business plan format guide. A full guide to the business plan contents including the standard business plan format for these 10 basic elements: The overview, executive summary; general company description; the opportunity; industry and market; your strategy; the team; a marketing plan; operational plan; financial plan and the appendix.