Trying to build something without the tools or information you need can feel like an uphill climb — especially when the thing you’re trying to build is your business plan financials. Since you’re just starting out with your new business, you really don’t know exactly what your revenue, costs and profits will look like.

This is one area of building a business plan that clients often need the most help with, and after years of working with different methodologies, I’ve settled on a highly strategic approach.

Having financial projections is a key part of securing funding. Here are nine things you need to include when creating your business plan financials.

As you begin working on your business plan financials it’s important to know at the outset that there’s no way to get this 100% right. It’s a forecast, so nobody expects it to be totally accurate. Your goal is to paint a picture of what you’re working towards.

If your projections are either too weak or too aggressive, you run the risk of setting your business up for failure. That’s why you need to be strategic when choosing numbers that make sense for the success of your plan.

Here are some ideas on what to include when creating your business plan financials.

Where to Begin

Business plan financials are your predictions of your business’ potential. They estimate the future health of your business.

At a minimum, this section should include:

  • Cash flow statement
  • Balance sheet
  • Income statement

This data should include from the beginning of the start-up phase to three years out. The goal here is to tell the story of your business through numbers. You want each piece of the financial statement to correlate with the others.

It should be no surprise that of all the different sections of your business plan this is the one that investors and bankers will be most interested in. They want to be able to see where the break-even point is as that’ll help determine when they begin to see a return on their investment.  Each investor may have their own take on which numbers matter most. Bankers are most concerned by what underwriters will assess when the loan application comes through.

They’ll be looking to see how your financials show if your business is able to have steady and stable growth. You need to convey your goals are attainable. Avoid showing predicted growth that is too aggressive. Do not include sales targets as they want you to present your plan is both low-risk and low-volatility.

Most importantly, this section is where you need to keep yourself honest. As you ask yourself the hard questions like “How will I be profitable?” and start putting all the numbers on paper, you may find your strategy needs to shift, and that’s completely normal.

Start With What You Know

As you create your financials, it’s important to do it in a way that allows room for updates.  You’ll have variables that change as you take steps towards opening day, so it’s natural for the numbers to move over time.

The biggest number in your business plan financials will be your overall asking amount.  Whoever is investing in your business is going to want to know why you choose that particular number. It’s generally recommended that it covers your startup costs plus three months of cushion for operating costs.

The numbers you already know are your starting point. Based on all your research, you should have a good idea of costs for things like: how many people you’ll have on your team, any real estate purchases required, monthly cost of utilities, and how much it’ll be to build your website.

As you compile a comprehensive list of all your known numbers, it’s important to make note of your sources. If you’re relying on a specific website for salary information, include that as a comment in your spreadsheet or include it in an appendix.

Using a template for your business plan financials will make the entire process much easier. If you aren’t working with a professional to create your business plan, look for a reputable provider to find one that you can customize for your own needs.

Let’s break this down a little further and look at the nine subsections you’ll need to address.

Your Start Up Costs

This is the section of the business plan financials where you build out your start-up costs, and I like to break this section down into four main parts.

#1.  List your assets.

Your assets are anything that could be sold for cash at a later date.  They hold some of their value over time, even if they depreciate a bit. Things like large equipment (like a generator), vehicles, and office equipment should all be included.

#2. Estimate the useful years of the assets.

How many years will you get out of each asset before it needs to be replaced? Once you know that, you can then calculate how much depreciation you can claim each year.

#3. List any land and buildings.

If there’s any land or buildings required for your business to be operational, this is where you list them. Leased spaces or rentals don’t count — only assets that’ll be owned by the business.  The reason land is included here and not in your other list of assets is simply because unlike the other assets, it’ll appreciate in value.

#4. Other start-up costs.

It’s likely you already have a running list of costs that aren’t assets that includes anything you’ll need to pay for or purchase in order to get the business up and running. This section is where you add everything on that list, plus anything else you can think of.

Operational Costs

These are the costs that you will incur on a monthly basis. That includes payroll and our own salary, as well as any recurring bills that need to be paid.

#5. Monthly payroll and wages.

While it may be tempting to leave yourself out of this calculation, don’t. You should be including a salary for yourself that you can reasonably live on. You’ll then want to list out all the members on your team, their titles, and the average monthly salary for each one.

#6. Monthly operating expenses.

When you start putting together the numbers for this section, you’ll want to consider all the ongoing costs. Look back at the market entry section as well as your operation strategy section of your business plan to look for items that’ll be a long-term expense. For example, while you may have calculated how much your start-up costs will be for marketing, what will you spend each month to keep up with the strategy?

Revenue and Growth

This is where you use all the research you’ve done to show what you expect in terms of your revenue and growth potential.

#7. Monthly Revenue

Depending on the type of business you’re starting and if you have any previous experience, you may fall anywhere on the spectrum between already having an idea of your monthly revenue or having no clue what it may look like.

Start by plugging in your estimates, and if you have multiple revenue streams all of them should be accounted for here. You’ve already completed research that included looking at things like industry averages, so you can use those as your guide.  While you can’t predict the future, your goal should be to be realistic, and potentially err on the side of being a bit more conservative.

#8. Growth Plan

A successful business will grow, but it can be challenging to estimate how much and how quickly. This is another area where some outside help from someone who specializes in writing business plans can be very beneficial. You’re going to be estimating year-over-year growth, but you’ll also need to take into account that costs will rise. For businesses that see more fluctuations in their cost of goods, balancing revenue and costs will be an ongoing challenge that needs to be accounted for in your growth plan.

#9. Loan Amortization Schedule (If Applicable)

For those looking to secure a loan for the funding, both investors or the bank will expect to see a plan that accounts for paying the loan back. This means calculating the number of years for the term of the loan and interest rate will need to get to repay the loan. If you know what terms you need from your loan in order to effectively repay it in a timely manner, you’ll be able to more quickly determine if the investment offers you’ve received meet your needs.

Asking for Help with Your Business Plan Financials

It’s completely normal to feel a bit intimidated by creating your business plan financials section, so asking for help is in your best interest. Having something is better is than nothing, and working with an expert can take some of the pressure off and help guide you through it.

You have to expect that anyone who looks at this section will have questions about how you arrived at the numbers, and that’s not a bad thing. Having more people providing input can help you refine your numbers to include things you may not have thought of. Your role is to be prepared with explanations for why each number is what it is.

Whether or not you choose to engage a professional to help with your business plan financials, this is one section you can expect to work and rework a few times before it’s ready. By knowing what to include and using credible sources to formulate the numbers, you’ll have the best shot at securing the financing you need to bring your business to life.

 

If you get into trouble or need support, reach out and our team would be glad to help.

Ashley Cheeks

Author Ashley Cheeks

Ashley Cheeks is a Business Plan Consultant. Her core business plan writer expertise is in designing business plans for bank and investor funding. She founded Written Success after years of being a professional business plan writer as a freelance consultant, and working for companies including GE and Fluor. She lives in Houston with her husband, daughter and son.

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