Modeling The Business Financials Section of a Business Plan

Have a Good 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 oftentimes 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 small correlativity with in the business plan, particularly with the Strategic Plan section.  Guess what lays the foundation for a successful Strategic Plan?  The proceeding section, the Marketing Plan.  The order and type of section with in a business plan are significant since each business plan section should build on the other, which will correlate and culminate in developing financial data for easier financial projections.

Develop Realistic Financials

Financials need to be realistic to be believed, and if anything, they should be defined from a conservative point in frame. Too often as Business Plan Consultants I see the extremes- too many numbers, too many details, or conversely, too few. Find a balance.  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. 

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

When you are constructing your business financials, understand how they relate to one another. Using a Business Plan Writer, as well as, a financial software program can be very helpful here as it automatically makes those correlations.  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 chiefly 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, and what I see constantly overlooked as a  Business Plan Consultant, 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.

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 schema

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