Creating a financial plan for a business plan is often the most intimidating part for small business owners.
It’s also one of the most vital. Businesses with well-structured and accurate financial statements are more prepared to pitch to investors, receive funding, and achieve long-term success.
Thankfully, you don’t need an accounting degree to successfully create your budget and forecasts.
Here is everything you need to include in your business plan’s financial plan, along with optional performance metrics, funding specifics, mistakes to avoid, and free templates.
A sound financial plan for a business plan is made up of six key components that help you easily track and forecast your business financials. They include your:
What do you expect to sell in a given period? Segment and organize your sales projections with a personalized sales forecast based on your business type.
While not too different from traditional sales forecasts—there are a few specific terms and calculations you’ll need to know when forecasting sales for a subscription-based business.
Create, review, and revise your expense budget to keep your business on track and more easily predict future expenses.
How much do your current, and future, employees’ pay, taxes, and benefits cost your business? Find out by forecasting your personnel costs.
Track how you make money and how much you spend by listing all of your revenue streams and expenses in your profit and loss statement.
Manage and create projections for the inflow and outflow of cash by building a cash flow statement and forecast.
Need a snapshot of your business’s financial position? Keep an eye on your assets, liabilities, and equity within the balance sheet.
Do you plan to pursue any form of funding or financing? If the answer is yes, you’ll need to include a few additional pieces of information as part of your business plan’s financial plan example.
Every entrepreneur takes risks with the biggest being assumptions and guesses about the future. Just be sure to track and address these unknowns in your plan early on.
Investors will want to know your long-term plans as a business owner. While you don’t need to have all the details, it’s worth taking the time to think through how you eventually plan to leave your business.
With your financial statements and forecasts in place, you have all the numbers needed to calculate insightful financial ratios.
While including these metrics in your financial plan for a business plan is entirely optional, having them easily accessible can be valuable for tracking your performance and overall financial situation.
It’s not hard. Anybody who can run a business can understand these key financial terms. And every business owner and entrepreneur should know them.
Unsure of which business ratios you should be using? Check out this list of key financial ratios that bankers, financial analysts, and investors will want to see.
Do you want to know when you’ll become profitable? Find out how much you need to sell to offset your production costs by conducting a break-even analysis.
How much could a business decision be worth? Evaluate the efficiency or profitability by calculating the potential return on investment (ROI).
Your financial statements are the core part of your business plan’s financial plan that you’ll revisit most often. Instead of worrying about getting it perfect the first time, check out the following resources to learn how to improve your projections over time.
I was glad to be asked about common mistakes with startup financial projections. I read about 100 business plans per year, and I have this list of mistakes.
Learn how to improve your business financial projections by following these five basic guidelines.
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