This article features the financial plan, which requires reviewing and considering all the other data presented elsewhere in the business plan. The financial plan serves two purposes: It guides the management team into making a decision and it informs investors of your company’s financial picture; past, present, and future. Projections are normally made three to five years into  the future. These figures are generally shown on a monthly basis for the first year, quarterly for the second year, and annually for all other years. Since this information is very confidential you should probably indicate in the plan that this data is available only to qualified investors and make sure that they sign a ‘Confidentiality Agreement’, first. Income statements, balance sheets, cash flow statements, and all other financial exhibits can be included in this section or they can be included in the ‘Exhibit’, also called ‘Appendices’, section of your business plan. In any event this is the section  of your plan, where if you completely have no idea what you are doing you should get qualified help. Projecting the financials of a businesses is the hardest part of developing a business plan for someone who doesn’t have any business education. There are simple financial templates that are designed specifically for a person without a business background, however I would recommend that even if you are able to complete your financial projections by using a template you still have someone with experience and knowledge in the area to take a look at your numbers. Even if you do have a business knowledge a second set of eyes may shed a different light and help you improve and make your financial projections more REALISTIC.

I will repeat this again, as this is very important and could make or break a deal with an investor: The financial projections should be realistic and based upon the business plan findings.

The financial projections should cover these elements:

• Your company’s past financial statement (balance sheets, profit and loss statements, tax forms, funds applications) for up to three years. This is for an existing business.
• Key Assumptions – Interest rates, Accounts receivable, Firm tax status, payroll burden, GET status, Inventory levels, Working cash levels, etc.
• Use and source of initial capital – start-up expenses, capital purchases and working capital and assumed funding sources and their terms.
• Revenue projections
• Direct cost schedule
• Payroll expenses
• Operating expenses
• Projected income statement
• Projected cash flow statement
• Balance sheet projections
• Venture valuation – Net Present Value and Venture Valuation Method
• Project Evaluators – NPV, IRR and Break-Even Analysis

Related posts:

1. Business Plan Checklist
2. Funding Options from Loan Sources
3. Executive Summary – What is the Critical Information that Investors are Looking for?