The Income Statement is one of the three financial statements that you need to include in the Financial Plan section of the business plan.
The Income Statement shows your Revenues, Expenses, and Profit for a particular period. It's a snapshot of your business that shows whether or not your business is profitable at that point in time; Revenue - Expenses = Profit/Loss.
While established businesses normally produce an Income Statement each fiscal quarter, or even once each fiscal year, for the purposes of the business plan, an Income Statement should be generated more frequently - monthly for the first year.
Here's an Income Statement template for a service-based business. It's followed by an explanation of how to adapt this Income Statement template to a product-based business.
YOUR BUSINESS NAME
Income Statement for the year ending _____________
(Row listing each month)
TOTAL REVENUE: Services
TOTAL REVENUE: MISCELLANEOUS
TOTAL DIRECT COSTS
GENERAL AND ADMINISTRATION
Accounting and Legal Fees
Advertising and Promotion
Depreciation and Amortization
Credit Card Commissions
Credit Card Charges
TOTAL GENERAL AND ADMINISTRATION
NET INCOME BEFORE INCOME TAXES
Not all of the categories in this Income Statement will apply to your business. Leave out those that don't apply and add categories where necessary to adapt this template to your business.
To use this template as part of the business plan, you'll need to set it up as a table and fill in the appropriate figures for each month (as indicated by the line "row listing each month"). There are links to two excellent examples of Income Statements provided by the Royal Bank in the sidebar of this article.
If you have a product-based business, the Revenue section of the Income Statement will look different. Revenue will be called Sales, and inventory needs to be accounted for. For instance, if you look at the Royal Bank's example of an Income Statement for Kamiko's Fine Foods, you'll see the Revenue section of the Income Statement described as:
COST OF SALES
The Expense portion of the Income Statement, however, is very similar to the template I've provided above.
Ready to move on to the next financial statement that you need to include in the Financial Plan section of your business plan? The Cash Flow Projection is next.