The Types of Financials for a Business Plan

Have a Great Strategic Plan to Start

If you develop your Strategic Plan effectively, completing the Financials should not be difficult.  The principal reason why business owners have such a hard time with the Financials Section of a Business Plan is oft due to a cursory job on their Strategic Planning (as well as other important business plan sections).  Financials are typically not realistic because there is little correlation with in the business plan, exceptionally with the Strategic Plan section.  Guess what lays the foundation for a successful Strategic Plan?  The proceeding section, the Marketing Plan.  The sections and the order of the sections in a business plan are very important because each section builds on the previous section, the culmination of which makes for certain data from which solid Financial Projections can be made.

The Main Kinds of Business Financials

You should have two sets of Financials, simple and detailed, as well as, conservative and best case.  The following types of financials are typical for a Business Plan.

• Cash Flow: Monthly basis for 12-36 months. Yearly and Quarterly basis for 3-5 years.
• Income Statement: Monthly basis for 12 months. Yearly and Quarterly basis for 3-5 years.
• Balance Sheet:  Yearly and Quarterly basis for 3-5 years.

The Financials Should Interrelate

It is important to understand that your Financials relate to each other when building them (a reason why Financial Software Programs are so beneficial).  There’s a lot of back and forth between the Income Statement, Balance Sheet and Cash Flow Statement.  The Cash Flow Statement is the most important Financial for many reasons but principally because it shows in detail how much cash is necessary to finance and grow your company.

Assumptions Are Critical

A very important component of the Financial Section is the Assumptions area.  This details the assumptions you have utilized in constructing the financials.  You should also list the various calculations and formulas used in your financials since those formulas can be company, deal or project specific.  Financials should also include Return of Investment / Return on Equity calculations and the assumptions used in those calculations.

Develop Realistic Financials

Your Financials need to be believable and realistic.  If anything, they need to be conservative.  Too often we see extremes of too few numbers or too many numbers.  If you build out your Financials as a direct result of your Strategic Plan, this process results in numbers that are realistic and achievable.  An option is to build two sets of Financials, conservative and a little more aggressive.  We find if you have truly conservative numbers, you will often exceed your Plan, which is a great Psychological resurrect for any company in any stage of development. 

An Example Format for the Financials Section of a Business Plan

Adjust for your needs and particular business plan purpose.

1)     Sources and Uses of Funds

2)     Financial Strategy

3)     Capital Equipment Valuation

4)     Company Collateral

5)     Assumptions

6)     Financials

7)     Valuations

8)     Financial Analysis

9)     Budgets

10)   Exit Strategy

11)   Harvesting Value Strategy

12)   Venture Risk

13)   Effects of Investment and Finance on Cash Flow

14)   Tax Strategies

This article is written by Frank Goley, Business Plan Writer for ABC Business Consulting.