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 sheet and a brief explanation/analysis of these three statements.
This article will lead you through the preparation of each of these three financial statements on the following pages. First, however, you need to gather together some of the financial data you'll need by examining your expenses.
Think of your business expenses as broken into two categories; your start up expenses and your operating expenses.
All the costs of getting your business up and running go into the start up expenses category. These expenses may include:
- business registration fees
- business licensing and permits
- starting inventory
- rent deposits
- down payments on property
- down payments on equipment
- utility set up fees
This is just a sampling of start up expenses; your own list will probably expand as soon as you start writing them down.
Operating expenses are the costs of keeping your business running. Think of these as the things you're going to have to pay each month. Your list of operating expenses may include:
- salaries (yours and staff salaries)
- rent or mortage payments
- raw materials
- loan payments
- office supplies
Once again, this is just a partial list to get you going. Once you have your operating expenses list complete, the total will show you what it will cost you to keep your business running each month.
Multiply this number by 6, and you have a six month estimate of your operating expenses. Then add this to the total of your start up expenses list, and you'll have a ballpark figure for your complete start up costs.
Now let's look at putting some financial statements for your business plan together, starting with the Income Statement.