Business Plan Financials Notes

“Funding and financials go hand-in-hand., John”

“Just like Lisa Marie Presley and divorce papers,” John said.

“The financials tell you how much you need for funding, and the funding relates back to how much profit is in the financials.”

“So this would be in the sources and uses of funds sheet, the amount of financing I need?”

“Yes, that is correct John. One of the first sheets the banker will turn to is the sources and uses of funds. They want to know how much you need and what it is going to be used for.

“Additionally, it is wise to tie the financials back to the text in your narrative. Also, investors like having the track record of an existing business to compare with the projections for the new business. So, it pays to inject real world numbers of comparables when possible.”

“This is where the advantage of a franchise comes into play,” John said.

“Yep, a franchise typically will have real-world comparable numbers to call on. If the business is a start-up then friendly non-competitor numbers, public company data or primary marketing research can be used.”

“Just as you described earlier.”

“Exact-a-mundo.

“In the business plan, the business and marketing sections should provide the financial assumptions. Although it is probably a good measure to have an assumptions subsection as well.”

“Just like the Who the night that Keith Moon passed out on the drums.”

Do not sugarcoat the numbers or present blue sky in this section. Investors will see right through this and when the numbers lose credibility the whole plan falls apart. If investors and/or bankers can't trust your numbers they won't trust you.

The opening of the financials section should be a one-page overview of the financial data. If the plan is being prepared for the purposes of attracting funding, the amount needed and what you're willing to give in return - interest, ownership, and the like – needs to be included.

Relevant Financials to Include in Your Business Plan

Existing Businesses:

Uses of Funds

Cash Flow Statement (3 – 5 years)

Income Statement (3 – 5 years)

Income Projections

Breakeven Analysis

Balance Sheet

Business Financial History or Loan Application

New Businesses:

Uses of Funds

Cash Flow Statement (3 – 5 years)

Income Statement (3 – 5 years)

Income Projections

Breakeven Analysis

Loan Application

It may also be useful to include a startup budget for a new business. This will help get an accurate picture of what you'll need in order to get your business up and running.

Building a Small Business That Warren Buffett Would Love - Available Everywhere, Spring 2012