what is financial aspect in business plan

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How to Write the Financial Section of a Business Plan

An outline of your company's growth strategy is essential to a business plan, but it just isn't complete without the numbers to back it up. here's some advice on how to include things like a sales forecast, expense budget, and cash-flow statement..

A business plan is all conceptual until you start filling in the numbers and terms. The sections about your marketing plan and strategy are interesting to read, but they don't mean a thing if you can't justify your business with good figures on the bottom line. You do this in a distinct section of your business plan for financial forecasts and statements. The financial section of a business plan is one of the most essential components of the plan, as you will need it if you have any hope of winning over investors or obtaining a bank loan. Even if you don't need financing, you should compile a financial forecast in order to simply be successful in steering your business. "This is what will tell you whether the business will be viable or whether you are wasting your time and/or money," says Linda Pinson, author of Automate Your Business Plan for Windows  (Out of Your Mind 2008) and Anatomy of a Business Plan (Out of Your Mind 2008), who runs a publishing and software business Out of Your Mind and Into the Marketplace . "In many instances, it will tell you that you should not be going into this business." The following will cover what the financial section of a business plan is, what it should include, and how you should use it to not only win financing but to better manage your business.

Dig Deeper: Generating an Accurate Sales Forecast

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How to Write the Financial Section of a Business Plan: The Purpose of the Financial Section Let's start by explaining what the financial section of a business plan is not. Realize that the financial section is not the same as accounting. Many people get confused about this because the financial projections that you include--profit and loss, balance sheet, and cash flow--look similar to accounting statements your business generates. But accounting looks back in time, starting today and taking a historical view. Business planning or forecasting is a forward-looking view, starting today and going into the future. "You don't do financials in a business plan the same way you calculate the details in your accounting reports," says Tim Berry, president and founder of Palo Alto Software, who blogs at Bplans.com and is writing a book, The Plan-As-You-Go Business Plan. "It's not tax reporting. It's an elaborate educated guess." What this means, says Berry, is that you summarize and aggregate more than you might with accounting, which deals more in detail. "You don't have to imagine all future asset purchases with hypothetical dates and hypothetical depreciation schedules to estimate future depreciation," he says. "You can just guess based on past results. And you don't spend a lot of time on minute details in a financial forecast that depends on an educated guess for sales." The purpose of the financial section of a business plan is two-fold. You're going to need it if you are seeking investment from venture capitalists, angel investors, or even smart family members. They are going to want to see numbers that say your business will grow--and quickly--and that there is an exit strategy for them on the horizon, during which they can make a profit. Any bank or lender will also ask to see these numbers as well to make sure you can repay your loan. But the most important reason to compile this financial forecast is for your own benefit, so you understand how you project your business will do. "This is an ongoing, living document. It should be a guide to running your business," Pinson says. "And at any particular time you feel you need funding or financing, then you are prepared to go with your documents." If there is a rule of thumb when filling in the numbers in the financial section of your business plan, it's this: Be realistic. "There is a tremendous problem with the hockey-stick forecast" that projects growth as steady until it shoots up like the end of a hockey stick, Berry says. "They really aren't credible." Berry, who acts as an angel investor with the Willamette Angel Conference, says that while a startling growth trajectory is something that would-be investors would love to see, it's most often not a believable growth forecast. "Everyone wants to get involved in the next Google or Twitter, but every plan seems to have this hockey stick forecast," he says. "Sales are going along flat, but six months from now there is a huge turn and everything gets amazing, assuming they get the investors' money."  The way you come up a credible financial section for your business plan is to demonstrate that it's realistic. One way, Berry says, is to break the figures into components, by sales channel or target market segment, and provide realistic estimates for sales and revenue. "It's not exactly data, because you're still guessing the future. But if you break the guess into component guesses and look at each one individually, it somehow feels better," Berry says. "Nobody wins by overly optimistic or overly pessimistic forecasts."

Dig Deeper: What Angel Investors Look For

How to Write the Financial Section of a Business Plan: The Components of a Financial Section

A financial forecast isn't necessarily compiled in sequence. And you most likely won't present it in the final document in the same sequence you compile the figures and documents. Berry says that it's typical to start in one place and jump back and forth. For example, what you see in the cash-flow plan might mean going back to change estimates for sales and expenses.  Still, he says that it's easier to explain in sequence, as long as you understand that you don't start at step one and go to step six without looking back--a lot--in between.

• Start with a sales forecast. Set up a spreadsheet projecting your sales over the course of three years. Set up different sections for different lines of sales and columns for every month for the first year and either on a monthly or quarterly basis for the second and third years. "Ideally you want to project in spreadsheet blocks that include one block for unit sales, one block for pricing, a third block that multiplies units times price to calculate sales, a fourth block that has unit costs, and a fifth that multiplies units times unit cost to calculate cost of sales (also called COGS or direct costs)," Berry says. "Why do you want cost of sales in a sales forecast? Because you want to calculate gross margin. Gross margin is sales less cost of sales, and it's a useful number for comparing with different standard industry ratios." If it's a new product or a new line of business, you have to make an educated guess. The best way to do that, Berry says, is to look at past results.
• Create an expenses budget. You're going to need to understand how much it's going to cost you to actually make the sales you have forecast. Berry likes to differentiate between fixed costs (i.e., rent and payroll) and variable costs (i.e., most advertising and promotional expenses), because it's a good thing for a business to know. "Lower fixed costs mean less risk, which might be theoretical in business schools but are very concrete when you have rent and payroll checks to sign," Berry says. "Most of your variable costs are in those direct costs that belong in your sales forecast, but there are also some variable expenses, like ads and rebates and such." Once again, this is a forecast, not accounting, and you're going to have to estimate things like interest and taxes. Berry recommends you go with simple math. He says multiply estimated profits times your best-guess tax percentage rate to estimate taxes. And then multiply your estimated debts balance times an estimated interest rate to estimate interest.
• Develop a cash-flow statement. This is the statement that shows physical dollars moving in and out of the business. "Cash flow is king," Pinson says. You base this partly on your sales forecasts, balance sheet items, and other assumptions. If you are operating an existing business, you should have historical documents, such as profit and loss statements and balance sheets from years past to base these forecasts on. If you are starting a new business and do not have these historical financial statements, you start by projecting a cash-flow statement broken down into 12 months. Pinson says that it's important to understand when compiling this cash-flow projection that you need to choose a realistic ratio for how many of your invoices will be paid in cash, 30 days, 60 days, 90 days and so on. You don't want to be surprised that you only collect 80 percent of your invoices in the first 30 days when you are counting on 100 percent to pay your expenses, she says. Some business planning software programs will have these formulas built in to help you make these projections.
• Income projections. This is your pro forma profit and loss statement, detailing forecasts for your business for the coming three years. Use the numbers that you put in your sales forecast, expense projections, and cash flow statement. "Sales, lest cost of sales, is gross margin," Berry says. "Gross margin, less expenses, interest, and taxes, is net profit."
• Deal with assets and liabilities. You also need a projected balance sheet. You have to deal with assets and liabilities that aren't in the profits and loss statement and project the net worth of your business at the end of the fiscal year. Some of those are obvious and affect you at only the beginning, like startup assets. A lot are not obvious. "Interest is in the profit and loss, but repayment of principle isn't," Berry says. "Taking out a loan, giving out a loan, and inventory show up only in assets--until you pay for them." So the way to compile this is to start with assets, and estimate what you'll have on hand, month by month for cash, accounts receivable (money owed to you), inventory if you have it, and substantial assets like land, buildings, and equipment. Then figure out what you have as liabilities--meaning debts. That's money you owe because you haven't paid bills (which is called accounts payable) and the debts you have because of outstanding loans.
• Breakeven analysis. The breakeven point, Pinson says, is when your business's expenses match your sales or service volume. The three-year income projection will enable you to undertake this analysis. "If your business is viable, at a certain period of time your overall revenue will exceed your overall expenses, including interest." This is an important analysis for potential investors, who want to know that they are investing in a fast-growing business with an exit strategy.

Dig Deeper: How to Price Business Services

How to Write the Financial Section of a Business Plan: How to Use the Financial Section One of the biggest mistakes business people make is to look at their business plan, and particularly the financial section, only once a year. "I like to quote former President Dwight D. Eisenhower," says Berry. "'The plan is useless, but planning is essential.' What people do wrong is focus on the plan, and once the plan is done, it's forgotten. It's really a shame, because they could have used it as a tool for managing the company." In fact, Berry recommends that business executives sit down with the business plan once a month and fill in the actual numbers in the profit and loss statement and compare those numbers with projections. And then use those comparisons to revise projections in the future. Pinson also recommends that you undertake a financial statement analysis to develop a study of relationships and compare items in your financial statements, compare financial statements over time, and even compare your statements to those of other businesses. Part of this is a ratio analysis. She recommends you do some homework and find out some of the prevailing ratios used in your industry for liquidity analysis, profitability analysis, and debt and compare those standard ratios with your own. "This is all for your benefit," she says. "That's what financial statements are for. You should be utilizing your financial statements to measure your business against what you did in prior years or to measure your business against another business like yours."  If you are using your business plan to attract investment or get a loan, you may also include a business financial history as part of the financial section. This is a summary of your business from its start to the present. Sometimes a bank might have a section like this on a loan application. If you are seeking a loan, you may need to add supplementary documents to the financial section, such as the owner's financial statements, listing assets and liabilities. All of the various calculations you need to assemble the financial section of a business plan are a good reason to look for business planning software, so you can have this on your computer and make sure you get this right. Software programs also let you use some of your projections in the financial section to create pie charts or bar graphs that you can use elsewhere in your business plan to highlight your financials, your sales history, or your projected income over three years. "It's a pretty well-known fact that if you are going to seek equity investment from venture capitalists or angel investors," Pinson says, "they do like visuals."

Dig Deeper: How to Protect Your Margins in a Downturn

Related Links: Making It All Add Up: The Financial Section of a Business Plan One of the major benefits of creating a business plan is that it forces entrepreneurs to confront their company's finances squarely. Persuasive Projections You can avoid some of the most common mistakes by following this list of dos and don'ts. Making Your Financials Add Up No business plan is complete until it contains a set of financial projections that are not only inspiring but also logical and defensible. How many years should my financial projections cover for a new business? Some guidelines on what to include. Recommended Resources: Bplans.com More than 100 free sample business plans, plus articles, tips, and tools for developing your plan. Planning, Startups, Stories: Basic Business Numbers An online video in author Tim Berry's blog, outlining what you really need to know about basic business numbers. Out of Your Mind and Into the Marketplace Linda Pinson's business selling books and software for business planning. Palo Alto Software Business-planning tools and information from the maker of the Business Plan Pro software. U.S. Small Business Administration Government-sponsored website aiding small and midsize businesses. Financial Statement Section of a Business Plan for Start-Ups A guide to writing the financial section of a business plan developed by SCORE of northeastern Massachusetts.

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How to Prepare a Financial Plan for Startup Business (w/ example)

Free Financial Statements Template

Ajay Jagtap

• December 7, 2023
• 13 Min Read

If someone were to ask you about your business financials, could you give them a detailed answer?

Let’s say they ask—how do you allocate your operating expenses? What is your cash flow situation like? What is your exit strategy? And a series of similar other questions.

Instead of mumbling what to answer or shooting in the dark, as a founder, you must prepare yourself to answer this line of questioning—and creating a financial plan for your startup is the best way to do it.

A business plan’s financial plan section is no easy task—we get that.

But, you know what—this in-depth guide and financial plan example can make forecasting as simple as counting on your fingertips.

Ready to get started? Let’s begin by discussing startup financial planning.

What is Startup Financial Planning?

Startup financial planning, in simple terms, is a process of planning the financial aspects of a new business. It’s an integral part of a business plan and comprises its three major components: balance sheet, income statement, and cash-flow statement.

Apart from these statements, your financial section may also include revenue and sales forecasts, assets & liabilities, break-even analysis , and more. Your first financial plan may not be very detailed, but you can tweak and update it as your company grows.

Key Takeaways

• Realistic assumptions, thorough research, and a clear understanding of the market are the key to reliable financial projections.
• Cash flow projection, balance sheet, and income statement are three major components of a financial plan.
• Preparing a financial plan is easier and faster when you use a financial planning tool.
• Exploring “what-if” scenarios is an ideal method to understand the potential risks and opportunities involved in the business operations.

Why is Financial Planning Important to Your Startup?

Poor financial planning is one of the biggest reasons why most startups fail. In fact, a recent CNBC study reported that running out of cash was the reason behind 44% of startup failures in 2022.

A well-prepared financial plan provides a clear financial direction for your business, helps you set realistic financial objectives, create accurate forecasts, and shows your business is committed to its financial objectives.

It’s a key element of your business plan for winning potential investors. In fact, YC considered recent financial statements and projections to be critical elements of their Series A due diligence checklist .

Your financial plan demonstrates how your business manages expenses and generates revenue and helps them understand where your business stands today and in 5 years.

Makes sense why financial planning is important to your startup or small business, doesn’t it? Let’s cut to the chase and discuss the key components of a startup’s financial plan.

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Key Components of a Startup Financial Plan

Whether creating a financial plan from scratch for a business venture or just modifying it for an existing one, here are the key components to consider including in your startup’s financial planning process.

Income Statement

An Income statement , also known as a profit-and-loss statement(P&L), shows your company’s income and expenditures. It also demonstrates how your business experienced any profit or loss over a given time.

Consider it as a snapshot of your business that shows the feasibility of your business idea. An income statement can be generated considering three scenarios: worst, expected, and best.

Your income or P&L statement must list the following:

• Cost of goods or cost of sale
• Gross margin
• Operating expenses
• Revenue streams
• EBITDA (Earnings before interest, tax, depreciation , & amortization )

Established businesses can prepare annual income statements, whereas new businesses and startups should consider preparing monthly statements.

Cash flow Statement

A cash flow statement is one of the most critical financial statements for startups that summarize your business’s cash in-and-out flows over a given time.

This section provides details on the cash position of your business and its ability to meet monetary commitments on a timely basis.

Your cash flow projection consists of the following three components:

✅ Cash revenue projection: Here, you must enter each month’s estimated or expected sales figures.

✅ Cash disbursements: List expenditures that you expect to pay in cash for each month over one year.

✅ Cash flow reconciliation: Cash flow reconciliation is a process used to ensure the accuracy of cash flow projections. The adjusted amount is the cash flow balance carried over to the next month.

Furthermore, a company’s cash flow projections can be crucial while assessing liquidity, its ability to generate positive cash flows and pay off debts, and invest in growth initiatives.

Balance Sheet

Your balance sheet is a financial statement that reports your company’s assets, liabilities, and shareholder equity at a given time.

Consider it as a snapshot of what your business owns and owes, as well as the amount invested by the shareholders.

This statement consists of three parts: assets , liabilities, and the balance calculated by the difference between the first two. The final numbers on this sheet reflect the business owner’s equity or value.

Balance sheets follow the following accounting equation with assets on one side and liabilities plus Owner’s equity on the other:

Here is what’s the core purpose of having a balance-sheet:

• Indicates the capital need of the business
• It helps to identify the allocation of resources
• It calculates the requirement of seed money you put up, and
• How much finance is required?

Since it helps investors understand the condition of your business on a given date, it’s a financial statement you can’t miss out on.

Break-even Analysis

Break-even analysis is a startup or small business accounting practice used to determine when a company, product, or service will become profitable.

For instance, a break-even analysis could help you understand how many candles you need to sell to cover your warehousing and manufacturing costs and start making profits.

Remember, anything you sell beyond the break-even point will result in profit.

You must be aware of your fixed and variable costs to accurately determine your startup’s break-even point.

• Fixed costs: fixed expenses that stay the same no matter what.
• Variable costs: expenses that fluctuate over time depending on production or sales.

A break-even point helps you smartly price your goods or services, cover fixed costs, catch missing expenses, and set sales targets while helping investors gain confidence in your business. No brainer—why it’s a key component of your startup’s financial plan.

Having covered all the key elements of a financial plan, let’s discuss how you can create a financial plan for your startup or small business.

How to Create a Financial Section of a Startup Business Plan?

1. determine your financial needs.

You can’t start financial planning without understanding your financial requirements, can you? Get your notepad or simply open a notion doc; it’s time for some critical thinking.

Start by assessing your current situation by—calculating your income, expenses , assets, and liabilities, what the startup costs are, how much you have against them, and how much financing you need.

Assessing your current financial situation and health will help determine how much capital you need for your small business and help plan fundraising activities and outreach.

Furthermore, determining financial needs helps prioritize operational activities and expenses, effectively allocate resources, and increase the viability and sustainability of a business in the long run.

Having learned to determine financial needs, let’s head straight to setting financial goals.

2. Define Your Financial Goals

Setting realistic financial goals is fundamental in preparing an effective financial plan for your business plan. So, it would help to outline your long-term strategies and goals at the beginning of your financial planning process.

Let’s understand it this way—if you are a SaaS startup pursuing VC financing rounds, you may ask investors about what matters to them the most and prepare your financial plan accordingly.

However, a coffee shop owner seeking a business loan may need to create a plan that appeals to banks, not investors. At the same time, an internal financial plan designed to offer financial direction and resource allocation may not be the same as previous examples, seeing its different use case.

Feeling overwhelmed? Just define your financial goals—you’ll be fine.

You can start by identifying your business KPIs (key performance indicators); it would be an ideal starting point.

3. Choose the Right Financial Planning Tool

Let’s face it—preparing a financial plan using Excel is no joke. One would only use this method if they had all the time in the world.

Having the right financial planning software will simplify and speed up the process and guide you through creating accurate financial forecasts.

Many financial planning software and tools claim to be the ideal solution, but it’s you who will identify and choose a tool that is best for your financial planning needs.

Create a Financial Plan with Upmetrics in no time

Enter your Financial Assumptions, and we’ll calculate your monthly/quarterly and yearly financial projections.

Start Forecasting

4. Make Assumptions Before Projecting Financials

Once you have a financial planning tool, you can move forward to the next step— making financial assumptions for your plan based on your company’s current performance and past financial records.

You’re just making predictions about your company’s financial future, so there’s no need to overthink or complicate the process.

You can gather your business’ historical financial data, market trends, and other relevant documents to help create a base for accurate financial projections.

After you have developed rough assumptions and a good understanding of your business finances, you can move forward to the next step—projecting financials.

5. Prepare Realistic Financial Projections

It’s a no-brainer—financial forecasting is the most critical yet challenging aspect of financial planning. However, it’s effortless if you’re using a financial planning software.

Upmetrics’ forecasting feature can help you project financials for up to 7 years. However, new startups usually consider planning for the next five years. Although it can be contradictory considering your financial goals and investor specifications.

Following are the two key aspects of your financial projections:

Revenue Projections

In simple terms, revenue projections help investors determine how much revenue your business plans to generate in years to come.

It generally involves conducting market research, determining pricing strategy , and cash flow analysis—which we’ve already discussed in the previous steps.

The following are the key components of an accurate revenue projection report:

• Market analysis
• Sales forecast
• Pricing strategy
• Growth assumptions
• Seasonal variations

This is a critical section for pre-revenue startups, so ensure your projections accurately align with your startup’s financial model and revenue goals.

Expense Projections

Both revenue and expense projections are correlated to each other. As revenue forecasts projected revenue assumptions, expense projections will estimate expenses associated with operating your business.

Accurately estimating your expenses will help in effective cash flow analysis and proper resource allocation.

These are the most common costs to consider while projecting expenses:

• Fixed costs
• Variable costs
• Employee costs or payroll expenses
• Operational expenses
• Marketing and advertising expenses
• Emergency fund

Remember, realistic assumptions, thorough research, and a clear understanding of your market are the key to reliable financial projections.

6. Consider “What if” Scenarios

After you project your financials, it’s time to test your assumptions with what-if analysis, also known as sensitivity analysis.

Using what-if analysis with different scenarios while projecting your financials will increase transparency and help investors better understand your startup’s future with its best, expected, and worst-case scenarios.

Exploring “what-if” scenarios is the best way to better understand the potential risks and opportunities involved in business operations. This proactive exercise will help you make strategic decisions and necessary adjustments to your financial plan.

7. Build a Visual Report

If you’ve closely followed the steps leading to this, you know how to research for financial projections, create a financial plan, and test assumptions using “what-if” scenarios.

Now, we’ll prepare visual reports to present your numbers in a visually appealing and easily digestible format.

Don’t worry—it’s no extra effort. You’ve already made a visual report while creating your financial plan and forecasting financials.

Check the dashboard to see the visual presentation of your projections and reports, and use the necessary financial data, diagrams, and graphs in the final draft of your financial plan.

Here’s what Upmetrics’ dashboard looks like:

8. Monitor and Adjust Your Financial Plan

Even though it’s not a primary step in creating a good financial plan for your small business, it’s quite essential to regularly monitor and adjust your financial plan to ensure the assumptions you made are still relevant, and you are heading in the right direction.

There are multiple ways to monitor your financial plan.

For instance, you can compare your assumptions with actual results to ensure accurate projections based on metrics like new customers acquired and acquisition costs, net profit, and gross margin.

Consider making necessary adjustments if your assumptions are not resonating with actual numbers.

Also, keep an eye on whether the changes you’ve identified are having the desired effect by monitoring their implementation.

And that was the last step in our financial planning guide. However, it’s not the end. Have a look at this financial plan example.

Startup Financial Plan Example

Having learned about financial planning, let’s quickly discuss a coffee shop startup financial plan example prepared using Upmetrics.

Important Assumptions

• The sales forecast is conservative and assumes a 5% increase in Year 2 and a 10% in Year 3.
• The analysis accounts for economic seasonality – wherein some months revenues peak (such as holidays ) and wanes in slower months.
• The analysis assumes the owner will not withdraw any salary till the 3rd year; at any time it is assumed that the owner’s withdrawal is available at his discretion.
• Sales are cash basis – nonaccrual accounting
• Moderate ramp- up in staff over the 5 years forecast
• Barista salary in the forecast is $36,000 in 2023.
• In general, most cafes have an 85% gross profit margin
• In general, most cafes have a 3% net profit margin

Projected Balance Sheet

Projected Cash-Flow Statement

Projected Profit & Loss Statement

Break Even Analysis

Start Preparing Your Financial Plan

We covered everything about financial planning in this guide, didn’t we? Although it doesn’t fulfill our objective to the fullest—we want you to finish your financial plan.

Sounds like a tough job? We have an easy way out for you—Upmetrics’ financial forecasting feature. Simply enter your financial assumptions, and let it do the rest.

So what are you waiting for? Try Upmetrics and create your financial plan in a snap.

Build your Business Plan Faster

with step-by-step Guidance & AI Assistance.

Frequently Asked Questions

How often should i update my financial projections.

Well, there is no particular rule about it. However, reviewing and updating your financial plan once a year is considered an ideal practice as it ensures that the financial aspirations you started and the projections you made are still relevant.

How do I estimate startup costs accurately?

You can estimate your startup costs by identifying and factoring various one-time, recurring, and hidden expenses. However, using a financial forecasting tool like Upmetrics will ensure accurate costs while speeding up the process.

What financial ratios should startups pay attention to?

Here’s a list of financial ratios every startup owner should keep an eye on:

• Net profit margin
• Current ratio
• Quick ratio
• Working capital
• Return on equity
• Debt-to-equity ratio
• Return on assets
• Debt-to-asset ratio

What are the 3 different scenarios in scenario analysis?

As discussed earlier, Scenario analysis is the process of ascertaining and analyzing possible events that can occur in the future. Startups or small businesses often consider analyzing these three scenarios:

• base-case (expected) scenario
• Worst-case scenario
• best case scenario.

About the Author

Ajay is a SaaS writer and personal finance blogger who has been active in the space for over three years, writing about startups, business planning, budgeting, credit cards, and other topics related to personal finance. If not writing, he’s probably having a power nap. Read more

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6 Elements of a Successful Financial Plan for a Small Business

Improve your chances of growth by covering these bases in your plan.

Table of Contents

Many small businesses lack a full financial plan, even though evidence shows that it is essential to the long-term success and growth of any business. 

For example, a study in the New England Journal of Entrepreneurship found that entrepreneurs with a business plan are more successful than those without one. If you’re not sure how to get started, read on to learn the six key elements of a successful small business financial plan.

What is a business financial plan, and why is it important? 

A business financial plan is an overview of a business’s financial situation and a forward-looking projection for growth. A business financial plan typically has six parts: sales forecasting, expense outlay, a statement of financial position, a cash flow projection, a break-even analysis and an operations plan.

A good financial plan helps you manage cash flow and accounts for months when revenue might be lower than expected. It also helps you budget for daily and monthly expenses and plan for taxes each year.

Importantly, a financial plan helps you focus on the long-term growth of your business. That way, you don’t get so caught up in the day-to-day activities that you lose sight of your goals. Focusing on the long-term vision helps you prioritize your financial resources. 

The 6 components of a successful financial plan for business

1. sales forecasting.

You should have an estimate of your sales revenue for every month, quarter and year. Identifying any patterns in your sales cycles helps you better understand your business, and this knowledge is invaluable as you plan marketing initiatives and growth strategies . 

For instance, a seasonal business can aim to improve sales in the off-season to eventually become a year-round venture. Another business might become better prepared by understanding how upticks and downturns in business relate to factors such as the weather or the economy.

Sales forecasting is also the foundation for setting company growth goals. For instance, you could aim to improve your sales by 10 percent over each previous period.

2. Expense outlay

A full expense plan includes regular expenses, expected future expenses and associated expenses. Regular expenses are the current ongoing costs of your business, including operational costs such as rent, utilities and payroll. 

Regular expenses relate to standard business activities that occur each year, such as conference attendance, advertising and marketing, and the office holiday party. It’s a good idea to distinguish essential expenses from expenses that can be reduced or eliminated if needed.

Expected future expenses are known future costs, such as tax rate increases, minimum wage increases or maintenance needs. Generally, a part of the budget should also be allocated to unexpected future expenses, such as damage to your business caused by fire, flood or other unexpected disasters. Planning for future expenses ensures your business is financially prepared via budget reduction, increases in sales or financial assistance.

Associated expenses are the estimated costs of various initiatives, such as acquiring and training new hires, opening a new store or expanding delivery to a new territory. An accurate estimate of associated expenses helps you properly manage growth and prevents your business from exceeding your cost capabilities. 

As with expected future expenses, understanding how much capital is required to accomplish various growth goals helps you make the right decision about financing options.

3. Statement of financial position (assets and liabilities)

Assets and liabilities are the foundation of your business’s balance sheet and the primary determinants of your business’s net worth. Tracking both allows you to maximize your business’s potential value. 

Small businesses frequently undervalue their assets (such as machinery, property or inventory) and fail to properly account for outstanding bills. Your balance sheet offers a more complete view of your business’s health than a profit-and-loss statement or a cash flow report. 

A profit-and-loss statement shows how the business performed over a specific time period, while a balance sheet shows the financial position of the business on any given day.

4. Cash flow projection

You should be able to predict your cash flow on a monthly, quarterly and annual basis. Projecting cash flow for the full year allows you to get ahead of any financial struggles or challenges. 

It can also help you identify a cash flow problem before it hurts your business. You can set the most appropriate payment terms, such as how much you charge upfront or how many days after invoicing you expect payment .

A cash flow projection gives you a clear look at how much money is expected to be left at the end of each month so you can plan a possible expansion or other investments. It also helps you budget, such as by spending less one month for the anticipated cash needs of another month.

5. Break-even analysis

A break-even analysis evaluates fixed costs relative to the profit earned by each additional unit you produce and sell. This analysis is essential to understanding your business’s revenue and potential costs versus profits of expansion or growth of your output. 

Having your expenses fully fleshed out, as described above, makes your break-even analysis more accurate and useful. A break-even analysis is also the best way to determine your pricing.

In addition, a break-even analysis can tell you how many units you need to sell at various prices to cover your costs. You should aim to set a price that gives you a comfortable margin over your expenses while allowing your business to remain competitive.

6. Operations plan

To run your business as efficiently as possible, craft a detailed overview of your operational needs. Understanding what roles are required for you to operate your business at various volumes of output, how much output or work each employee can handle, and the costs of each stage of your supply chain will aid you in making informed decisions for your business’s growth and efficiency.

It’s important to tightly control expenses, such as payroll or supply chain costs, relative to growth. An operations plan can also make it easier to determine if there is room to optimize your operations or supply chain via automation, new technology or superior supply chain vendors.

For this reason, it is imperative for a business owner to conduct due diligence and become knowledgeable about merchant services before acquiring an account. Once the owner signs a contract, it cannot be changed, unless the business owner breaks the contract and acquires a new account with a new merchant services provider. 

Tips on writing a business financial plan

Business owners should create a financial plan annually to ensure they have a clear and accurate picture of their business’s finances and a realistic view for future growth or expansion. A financial plan helps the business’s leaders make informed decisions about purchases, debt, hiring, expense control and overall operations for the year ahead. 

A business financial plan is essential if a business owner is looking to sell their business, attract investors or enter a partnership with another business. Here are some tips for writing a business financial plan.

Review the previous year’s plan.

It’s a good idea to compare the previous year’s plan against actual performance and finances to see how accurate the previous plan and forecast were. That way, you can address any discrepancies or overlooked elements in next year’s plan.

Collaborate with other departments.

A business owner or other individual charged with creating the business financial plan should collaborate with the finance department, human resources department, sales team , operations leader, and those in charge of machinery, vehicles or other significant business tools. 

Each division should provide the necessary data about projections, value and expenses. All of these elements come together to create a comprehensive financial picture of the business.

Use available resources.

The Small Business Administration (SBA) and SCORE, the SBA’s nonprofit partner, are two excellent resources for learning about financial plans. Both can teach you the elements of a comprehensive plan and how best to work with the different departments in your business to collect the necessary information. Many websites, including business.com , and service providers, such as Intuit, offer advice on this matter. 

If you have questions or encounter challenges while creating your business financial plan, seek advice from your accountant or other small business owners in your network. Your city or state has a small business office that you can contact for help.

Business financial plan templates

Many business organizations offer free information that small business owners can use to create their financial plan. For example, the SBA’s Learning Platform offers a course on how to create a business plan. It also offers worksheets and templates to help you get started. You can seek additional help and more personalized service from your local office.

SCORE is the largest volunteer network of business mentors. It began as a group of retired executives (SCORE stands for “Service Corps of Retired Executives”) but has expanded to include business owners and executives from many industries. Advice is free and available online, and there are SBA district offices in every U.S. state. In addition to participating in group or at-home learning, you can be paired with a mentor for individualized help. 

SCORE offers templates and tips for creating a small business financial plan. SCORE is an excellent resource because it addresses different levels of experience and offers individualized help.

Other templates can be found in Microsoft Office’s template library, QuickBooks’ online resources, Shopify’s blog and other places. You can also ask your accountant for guidance, since many accountants provide financial planning services in addition to their usual tax services.

Diana Wertz contributed to the writing and research in this article.

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Start » startup, business plan financials: 3 statements to include.

The finance section of your business plan is essential to securing investors and determining whether your idea is even viable. Here's what to include.

If your business plan is the blueprint of how to run your company, the financials section is the key to making it happen. The finance section of your business plan is essential to determining whether your idea is even viable in the long term. It’s also necessary to convince investors of this viability and subsequently secure the type and amount of funding you need. Here’s what to include in your business plan financials.

[Read: How to Write a One-Page Business Plan ]

What are business plan financials?

Business plan financials is the section of your business plan that outlines your past, current and projected financial state. This section includes all the numbers and hard data you’ll need to plan for your business’s future, and to make your case to potential investors. You will need to include supporting financial documents and any funding requests in this part of your business plan.

Business plan financials are vital because they allow you to budget for existing or future expenses, as well as forecast your business’s future finances. A strongly written finance section also helps you obtain necessary funding from investors, allowing you to grow your business.

Sections to include in your business plan financials

Here are the three statements to include in the finance section of your business plan:

Profit and loss statement

A profit and loss statement , also known as an income statement, identifies your business’s revenue (profit) and expenses (loss). This document describes your company’s overall financial health in a given time period. While profit and loss statements are typically prepared quarterly, you will need to do so at least annually before filing your business tax return with the IRS.

Common items to include on a profit and loss statement :

• Revenue: total sales and refunds, including any money gained from selling property or equipment.
• Expenditures: total expenses.
• Cost of goods sold (COGS): the cost of making products, including materials and time.
• Gross margin: revenue minus COGS.
• Operational expenditures (OPEX): the cost of running your business, including paying employees, rent, equipment and travel expenses.
• Depreciation: any loss of value over time, such as with equipment.
• Earnings before tax (EBT): revenue minus COGS, OPEX, interest, loan payments and depreciation.
• Profit: revenue minus all of your expenses.

Businesses that have not yet started should provide projected income statements in their financials section. Currently operational businesses should include past and present income statements, in addition to any future projections.

[Read: Top Small Business Planning Strategies ]

A strongly written finance section also helps you obtain necessary funding from investors, allowing you to grow your business.

Balance sheet

A balance sheet provides a snapshot of your company’s finances, allowing you to keep track of earnings and expenses. It includes what your business owns (assets) versus what it owes (liabilities), as well as how much your business is currently worth (equity).

On the assets side of your balance sheet, you will have three subsections: current assets, fixed assets and other assets. Current assets include cash or its equivalent value, while fixed assets refer to long-term investments like equipment or buildings. Any assets that do not fall within these categories, such as patents and copyrights, can be classified as other assets.

On the liabilities side of your balance sheet, include a total of what your business owes. These can be broken down into two parts: current liabilities (amounts to be paid within a year) and long-term liabilities (amounts due for longer than a year, including mortgages and employee benefits).

Once you’ve calculated your assets and liabilities, you can determine your business’s net worth, also known as equity. This can be calculated by subtracting what you owe from what you own, or assets minus liabilities.

Cash flow statement

A cash flow statement shows the exact amount of money coming into your business (inflow) and going out of it (outflow). Each cost incurred or amount earned should be documented on its own line, and categorized into one of the following three categories: operating activities, investment activities and financing activities. These three categories can all have inflow and outflow activities.

Operating activities involve any ongoing expenses necessary for day-to-day operations; these are likely to make up the majority of your cash flow statement. Investment activities, on the other hand, cover any long-term payments that are needed to start and run your business. Finally, financing activities include the money you’ve used to fund your business venture, including transactions with creditors or funders.

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How to Write the Financial Section of a Business Plan

Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.

Taking Stock of Expenses

The income statement, the cash flow projection, the balance sheet.

The financial section of your business plan determines whether or not your business idea is viable and will be the focus of any investors who may be attracted to your business idea. The financial section is composed of four financial statements: the income statement, the cash flow projection, the balance sheet, and the statement of shareholders' equity. It also should include a brief explanation and analysis of these four statements.

Think of your business expenses as two cost categories: your start-up expenses and your operating expenses. All the costs of getting your business up and running should be considered start-up expenses. These may include:

• Business registration fees
• Business licensing and permits
• Starting inventory
• Rent deposits
• Down payments on a property
• Down payments on equipment
• Utility setup fees

Your own list will expand as soon as you start to itemize them.

Operating expenses are the costs of keeping your business running . Think of these as your monthly expenses. Your list of operating expenses may include:

• Salaries (including your own)
• Rent or mortgage payments
• Telecommunication expenses
• Raw materials
• Distribution
• Loan payments
• Office supplies
• Maintenance

Once you have listed all of your operating expenses, the total will reflect the monthly cost of operating your business. Multiply this number by six, and you have a six-month estimate of your operating expenses. Adding this amount to your total startup expenses list, and you have a ballpark figure for your complete start-up costs.

Now you can begin to put together your financial statements for your business plan starting with the income statement.

The income statement shows your revenues, expenses, and profit for a particular period—a snapshot of your business that shows whether or not your business is profitable. Subtract expenses from your revenue to determine your profit or loss.

While established businesses normally produce an income statement each fiscal quarter or once each fiscal year, for the purposes of the business plan, an income statement should be generated monthly for the first year.

Not all of the categories in this income statement will apply to your business. Eliminate those that do not apply, and add categories where necessary to adapt this template to your business.

If you have a product-based business, the revenue section of the income statement will look different. Revenue will be called sales, and you should account for any inventory.

The cash flow projection shows how cash is expected to flow in and out of your business. It is an important tool for cash flow management because it indicates when your expenditures are too high or if you might need a short-term investment to deal with a cash flow surplus. As part of your business plan, the cash flow projection will show how  much capital investment  your business idea needs.

For investors, the cash flow projection shows whether your business is a good credit risk and if there is enough cash on hand to make your business a good candidate for a line of credit, a  short-term loan , or a longer-term investment. You should include cash flow projections for each month over one year in the financial section of your business plan.

Do not confuse the cash flow projection with the cash flow statement. The cash flow statement shows the flow of cash in and out of your business. In other words, it describes the cash flow that has occurred in the past. The cash flow projection shows the cash that is anticipated to be generated or expended over a chosen period in the future.

There are three parts to the cash flow projection:

• Cash revenues: Enter your estimated sales figures for each month. Only enter the sales that are collectible in cash during each month you are detailing.
• Cash disbursements: Take the various expense categories from your ledger and list the cash expenditures you actually expect to pay for each month.
• Reconciliation of cash revenues to cash disbursements: This section shows an opening balance, which is the carryover from the previous month's operations. The current month's revenues are added to this balance, the current month's disbursements are subtracted, and the adjusted cash flow balance is carried over to the next month.

The balance sheet reports your business's net worth at a particular point in time. It summarizes all the financial data about your business in three categories:

• Assets:  Tangible objects of financial value that are owned by the company.
• Liabilities: Debt owed to a creditor of the company.
• Equity: The net difference when the  total liabilities  are subtracted from the total assets .

The relationship between these elements of financial data is expressed with the equation: Assets = Liabilities + Equity .

For your  business plan , you should create a pro forma balance sheet that summarizes the information in the income statement and cash flow projections. A business typically prepares a balance sheet once a year.

Once your balance sheet is complete, write a brief analysis for each of the three financial statements. The analysis should be short with highlights rather than an in-depth analysis. The financial statements themselves should be placed in your business plan's appendices.

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How to Craft the Financial Section of Business Plan (Hint: It’s All About the Numbers)

Writing a small business plan takes time and effort … especially when you have to dive into the numbers for the financial section. But, working on the financial section of business plan could lead to a big payoff for your business.

Read on to learn what is the financial section of a business plan, why it matters, and how to write one for your company.  

What is the financial section of business plan?

Generally, the financial section is one of the last sections in a business plan. It describes a business’s historical financial state (if applicable) and future financial projections. Businesses include supporting documents such as budgets and financial statements, as well as funding requests in this section of the plan.  

The financial part of the business plan introduces numbers. It comes after the executive summary, company description , market analysis, organization structure, product information, and marketing and sales strategies.

Businesses that are trying to get financing from lenders or investors use the financial section to make their case. This section also acts as a financial roadmap so you can budget for your business’s future income and expenses. 

Why it matters 

The financial section of the business plan is critical for moving beyond wordy aspirations and into hard data and the wonderful world of numbers. 

Through the financial section, you can:

• Forecast your business’s future finances
• Budget for expenses (e.g., startup costs)
• Get financing from lenders or investors
• Grow your business

• Growth : 64% of businesses with a business plan were able to grow their business, compared to 43% of businesses without a business plan.
• Financing : 36% of businesses with a business plan secured a loan, compared to 18% of businesses without a plan.

So, if you want to possibly double your chances of securing a business loan, consider putting in a little time and effort into your business plan’s financial section. 

Writing your financial section

To write the financial section, you first need to gather some information. Keep in mind that the information you gather depends on whether you have historical financial information or if you’re a brand-new startup. 

Your financial section should detail:

• Business expenses 

Financial projections

Financial statements, break-even point, funding requests, exit strategy, business expenses.

Whether you’ve been in business for one day or 10 years, you have expenses. These expenses might simply be startup costs for new businesses or fixed and variable costs for veteran businesses. 

Take a look at some common business expenses you may need to include in the financial section of business plan:

• Licenses and permits
• Cost of goods sold 
• Rent or mortgage payments
• Payroll costs (e.g., salaries and taxes)
• Utilities 
• Equipment 
• Supplies 
• Advertising 

Write down each type of expense and amount you currently have as well as expenses you predict you’ll have. Use a consistent time period (e.g., monthly costs). 

Indicate which expenses are fixed (unchanging month-to-month) and which are variable (subject to changes). 

How much do you anticipate earning from sales each month? 

If you operate an existing business, you can look at previous monthly revenue to make an educated estimate. Take factors into consideration, like seasonality and economic ups and downs, when basing projections on previous cash flow.

Coming up with your financial projections may be a bit trickier if you are a startup. After all, you have nothing to go off of. Come up with a reasonable monthly goal based on things like your industry, competitors, and the market. Hint : Look at your market analysis section of the business plan for guidance. 

A financial statement details your business’s finances. The three main types of financial statements are income statements, cash flow statements, and balance sheets.

Income statements summarize your business’s income and expenses during a period of time (e.g., a month). This document shows whether your business had a net profit or loss during that time period. 

Cash flow statements break down your business’s incoming and outgoing money. This document details whether your company has enough cash on hand to cover expenses.

The balance sheet summarizes your business’s assets, liabilities, and equity. Balance sheets help with debt management and business growth decisions. 

If you run a startup, you can create “pro forma financial statements,” which are statements based on projections.

If you’ve been in business for a bit, you should have financial statements in your records. You can include these in your business plan. And, include forecasted financial statements. 

You’re just in luck. Check out our FREE guide, Use Financial Statements to Assess the Health of Your Business , to learn more about the different types of financial statements for your business.

Potential investors want to know when your business will reach its break-even point. The break-even point is when your business’s sales equal its expenses. 

Estimate when your company will reach its break-even point and detail it in the financial section of business plan.

If you’re looking for financing, detail your funding request here. Include how much you are looking for, list ideal terms (e.g., 10-year loan or 15% equity), and how long your request will cover. 

Remember to discuss why you are requesting money and what you plan on using the money for (e.g., equipment). 

Back up your funding request by emphasizing your financial projections. 

Last but not least, your financial section should also discuss your business’s exit strategy. An exit strategy is a plan that outlines what you’ll do if you need to sell or close your business, retire, etc. 

Investors and lenders want to know how their investment or loan is protected if your business doesn’t make it. The exit strategy does just that. It explains how your business will make ends meet even if it doesn’t make it. 

When you’re working on the financial section of business plan, take advantage of your accounting records to make things easier on yourself. For organized books, try Patriot’s online accounting software . Get your free trial now!

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How to Write a Financial Plan for a Business Plan

Noah Parsons

4 min. read

Updated July 11, 2024

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.

• Key components of a financial plan in business plans

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:

Sales forecast

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.

Subscription sales forecast

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.

Expense budget

Create, review, and revise your expense budget to keep your business on track and more easily predict future expenses.

How to forecast personnel costs

How much do your current, and future, employees’ pay, taxes, and benefits cost your business? Find out by forecasting your personnel costs.

Profit and loss forecast

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.

Cash flow forecast

Manage and create projections for the inflow and outflow of cash by building a cash flow statement and forecast.

Balance sheet

Need a snapshot of your business’s financial position? Keep an eye on your assets, liabilities, and equity within the balance sheet.

What to include if you plan to pursue funding

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.

Highlight any risks and assumptions

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.

Plan your exit strategy

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.

• Financial ratios and metrics

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.

Key financial terms you should know

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.

Common business ratios

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.

Break-even analysis

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 to calculate ROI

How much could a business decision be worth? Evaluate the efficiency or profitability by calculating the potential return on investment (ROI).

• How to improve your financial plan

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.

Common mistakes with business forecasts

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.

How to improve your financial projections

Learn how to improve your business financial projections by following these five basic guidelines.

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Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

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How to Complete the Financial Section of Business Plan

A plan intends to explain the business, introduce critical contributors, products and, services and defines the goals for the future. It paints a picture of the founder’s expectations and helps others see their vision. The financial section of the plan provides the proof behind the story. It is the section that investors and lenders are most interested in, and often the first section they read, despite it being near the end of the plan. It also acts as a roadmap and a guide for the direction the company will take into the future.

Financial Section Elements

While it may sound complicated, the financial section of a business plan only contains three documents and a brief explanation of each. It is necessary to prepare an income statement, cash flow projection and a balance sheet either using spreadsheets, or software that does all of the calculations automatically. Before beginning this statement, it’s necessary to gather the following information:

Business Start-Up Expenses

This list of all of the costs associated with getting the business up and running comprises what primarily are one-time fees such as registering the company. Following is only a partial list of possible start-up costs, every business is unique, and the list may, or may not, contain these items and more.

• Business registration fees
• Licensing and permits
• Product inventory
• Deposit on rental property
• Down payment to purchase property
• Down payment on machines and equipment
• Set-up fees for utilities

Business Operating Costs

As the name implies, operating costs are the ongoing expenses that need to be paid to keep the business running. These expenses are usually monthly bills, and for a start-up, estimate six months worth of these costs. A company’s list of operating expenses might include:

• Monthly mortgage payment or rent
• Logistics and distribution
• Marketing and promotion
• Loan paymentsRaw materials
• Office supplies
• Building/vehicle maintenance

The Income Statement

This financial statement details the company’s revenues, expenses, and profit for a set period. Established businesses generated these annually, or semi-annually, based on actual performance. Start-ups with no previous years to look at have to use statistical data within the industry to make reasonable projections. A start-up will also produce monthly versions of this statement to show the forecast of growth. This section will include the data such as:

• Gross revenue (sales, interest income and sales of assets)
• General and administrative expenses (start-up and operating costs)
• Corporate tax rate (expected tax liabilities)

The math is simple here: subtract the expenditures from the revenue, and the remaining number is profit. When put into the proper format, an income statement gives a clear view of the financial viability of a company.

Cash-Flow Projection

This statement shows how you expect cash to flow in to, and out of, your business. It’s an essential internal cash management tool and a source of data that shows what your business’s capital needs will be in the near future. For investors and bank loan officers, it helps determine your creditworthiness and amount you can borrow. The cash-flow projection contains three parts:

• Cash revenues — This part details the incoming cash from sales for specific periods of time, usually monthly. It is an estimate, based upon past performance and future projections for current businesses, and industry averages for start-ups.
• Cash disbursements — Every monthly bill or other expense that is paid out in cash gets listed in this section. As with revenue, these are estimates, either based upon historical data, current data, or industry data.
• Cash flow projection — This merely is a reconciliation of the cash revenues to cash disbursements. Adding the current month’s revenues to the carried-over balance, then subtracting the month’s disbursements creates estimated cash flow.

The Balance Sheet

The final financial statement required for the business plan’s financial section is a balance sheet. This statement is a snapshot of the company’s net worth at a given point in time. Established businesses produce a balance sheet annually. Information from the income statement and cash flow projection are used to complete this statement. It summarizes the business’s financial data into three main categories:

• Assets — This is the total of all of the tangible items that the company owns that hold monetary value. That includes equipment, property, and cash-on-hand, for example.
• Liabilities — This is the total amount of debt that the company owes its creditors. You’ll include every debt, whether recurring, one-time, fixed, or variable.
• Equity — This is merely the difference between the company’s assets, including retained earnings and current earnings, and its liabilities.

Side-Notes and Details

In some cases, it may be necessary to explain details within the financial statements. Denote these instances within the statement and include a brief explanation sheet as an attachment. It may also be useful to add information on the process used to estimate revenues and expenses, which will show interested parties the intent and help them better understand the data.

Don’t Sweat the Process

It’s important to note that the order in which these financial statements is created may vary from the way they are presented here. This is to be expected. In fact, most business plan creators end up going back and forth with these statements as the numbers reveal the business’s financial reality. It paints a crystal clear picture of its economic viability, which can present to a lender, investor, or shareholder with confidence.

All of these financial documents can be created by using accounting and business software readily available online. Even so, some people aren’t entirely comfortable creating financial statements for their business plan, and outsource this critical task to a professional. Even the largest corporations struggle with financial planning and reporting, and they often hire the job out to someone more qualified. It’s merely a matter of making sure that the data is accurate, easy to track, and based on sound accounting practices.

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Business Financial Plan Example: Strategies and Best Practices

Any successful endeavor begins with a robust plan – and running a prosperous business is no exception. Careful strategic planning acts as the bedrock on which companies build their future. One of the most critical aspects of this strategic planning is the creation of a detailed business financial plan. This plan serves as a guide, helping businesses navigate their way through the complex world of finance, including revenue projection, cost estimation, and capital expenditure, to name just a few elements. However, understanding what a business financial plan entails and how to implement it effectively can often be challenging. With multiple components to consider and various economic factors at play, the financial planning process may appear daunting to both new and established business owners.

This is where we come in. In this comprehensive article, we delve into the specifics of a business financial plan. We discuss its importance, the essential elements that make it up, and the steps to craft one successfully. Furthermore, we provide a practical example of a business financial plan in action, drawing upon real-world-like scenarios and strategies. By presenting the best practices and demonstrating how to employ them, we aim to equip business owners and entrepreneurs with the tools they need to create a robust, realistic, and efficient business financial plan. This in-depth guide will help you understand not only how to plan your business finances but also how to use this plan as a roadmap, leading your business towards growth, profitability, and overall financial success. Whether you're a seasoned business owner aiming to refine your financial strategies or an aspiring entrepreneur at the beginning of your journey, this article is designed to guide you through the intricacies of business financial planning and shed light on the strategies that can help your business thrive.

Understanding a Business Financial Plan

At its core, a business financial plan is a strategic blueprint that sets forth how a company will manage and navigate its financial operations, guiding the organization towards its defined fiscal objectives. It encompasses several critical aspects of a business's financial management, such as revenue projection, cost estimation, capital expenditure, cash flow management, and investment strategies.

Revenue projection is an estimate of the revenue a business expects to generate within a specific period. It's often based on market research, historical data, and educated assumptions about future market trends. Cost estimation, on the other hand, involves outlining the expenses a business anticipates incurring in its operations. Together, revenue projection and cost estimation can give a clear picture of a company's expected profitability. Capital expenditure refers to the funds a company allocates towards the purchase or maintenance of long-term assets like machinery, buildings, and equipment. Understanding capital expenditure is vital as it can significantly impact a business's operational capacity and future profitability. The cash flow management aspect of a business financial plan involves monitoring, analyzing, and optimizing the company's cash inflows and outflows. A healthy cash flow ensures that a business can meet its short-term obligations, invest in its growth, and provide a buffer for future uncertainties. Lastly, a company's investment strategies are crucial for its growth and sustainability. They might include strategies for raising capital, such as issuing shares or securing loans, or strategies for investing surplus cash, like purchasing assets or investing in market securities.

A well-developed business financial plan, therefore, doesn't just portray the company's current financial status; it also serves as a roadmap for the business's fiscal operations, enabling it to navigate towards its financial goals. The plan acts as a guide, providing insights that help business owners make informed decisions, whether they're about day-to-day operations or long-term strategic choices. In a nutshell, a business financial plan is a key tool in managing a company's financial resources effectively and strategically. It allows businesses to plan for growth, prepare for uncertainties, and strive for financial sustainability and success.

Essential Elements of a Business Financial Plan

A comprehensive financial plan contains several crucial elements, including:

• Sales Forecast : The sales forecast represents the business's projected sales revenues. It is often broken down into segments such as products, services, or regions.
• Expenses Budget : This portion of the plan outlines the anticipated costs of running the business. It includes fixed costs (rent, salaries) and variable costs (marketing, production).
• Cash Flow Statement : This statement records the cash that comes in and goes out of a business, effectively portraying its liquidity.
• Income Statements : Also known as profit and loss statements, income statements provide an overview of the business's profitability over a given period.
• Balance Sheet : This snapshot of a company's financial health shows its assets, liabilities, and equity.

Crafting a Business Financial Plan: The Steps

Developing a business financial plan requires careful analysis and planning. Here are the steps involved:

Step 1: Set Clear Financial Goals

The initial stage in crafting a robust business financial plan involves the establishment of clear, measurable financial goals. These objectives serve as your business's financial targets and compass, guiding your company's financial strategy. These goals can be short-term, such as improving quarterly sales or reducing monthly overhead costs, or they can be long-term, such as expanding the business to a new location within five years or doubling the annual revenue within three years. The goals might include specific targets such as increasing revenue by a particular percentage, reducing costs by a specific amount, or achieving a certain profit margin. Setting clear goals provides a target to aim for and allows you to measure your progress over time.

Step 2: Create a Sales Forecast

The cornerstone of any business financial plan is a robust sales forecast. This element of the plan involves predicting the sales your business will make over a given period. This estimate should be based on comprehensive market research, historical sales data, an understanding of industry trends, and the impact of any marketing or promotional activities. Consider the business's growth rate, the overall market size, and seasonal fluctuations in demand. Remember, your sales forecast directly influences the rest of your financial plan, particularly your budgets for expenses and cash flow, so it's critical to make it as accurate and realistic as possible.

Step 3: Prepare an Expense Budget

The next step involves preparing a comprehensive expense budget that covers all the costs your business is likely to incur. This includes fixed costs, such as rent or mortgage payments, salaries, insurance, and other overheads that remain relatively constant regardless of your business's level of output. It also includes variable costs, such as raw materials, inventory, marketing and advertising expenses, and other costs that fluctuate in direct proportion to the level of goods or services you produce. By understanding your expense budget, you can determine how much revenue your business needs to generate to cover costs and become profitable.

Step 4: Develop a Cash Flow Statement

One of the most crucial elements of your financial plan is the cash flow statement. This document records all the cash that enters and leaves your business, presenting a clear picture of your company's liquidity. Regularly updating your cash flow statement allows you to monitor the cash in hand and foresee any potential shortfalls. It helps you understand when cash comes into your business from sales and when cash goes out of your business due to expenses, giving you insights into your financial peaks and troughs and enabling you to manage your cash resources more effectively.

Step 5: Prepare Income Statements and Balance Sheets

Another vital part of your business financial plan includes the preparation of income statements and balance sheets. An income statement, also known as a Profit & Loss (P&L) statement, provides an overview of your business's profitability over a certain period. It subtracts the total expenses from total revenue to calculate net income, providing valuable insights into the profitability of your operations.

On the other hand, the balance sheet provides a snapshot of your company's financial health at a specific point in time. It lists your company's assets (what the company owns), liabilities (what the company owes), and equity (the owner's or shareholders' investment in the business). These documents help you understand where your business stands financially, whether it's making a profit, and how your assets, liabilities, and equity balance out.

Step 6: Revise Your Plan Regularly

It's important to remember that a financial plan is not a static document, but rather a living, evolving roadmap that should adapt to your business's changing circumstances and market conditions. As such, regular reviews and updates are crucial. By continually revisiting and revising your plan, you can ensure it remains accurate, relevant, and effective. You can adjust your forecasts as needed, respond to changes in the business environment, and stay on track towards achieving your financial goals. By doing so, you're not only keeping your business financially healthy but also setting the stage for sustained growth and success.

Business Financial Plan Example: Joe’s Coffee Shop

Now, let's look at a practical example of a financial plan for a hypothetical business, Joe’s Coffee Shop.

Sales Forecast

When constructing his sales forecast, Joe takes into account several significant factors. He reviews his historical sales data, identifies and understands current market trends, and evaluates the impact of any upcoming promotional events. With his coffee shop located in a bustling area, Joe expects to sell approximately 200 cups of coffee daily. Each cup is priced at $5, which gives him a daily sales prediction of $1000. Multiplying this figure by 365 (days in a year), his forecast for Year 1 is an annual revenue of $365,000. This projection provides Joe with a financial target to aim for and serves as a foundation for his further financial planning. It is worth noting that Joe's sales forecast may need adjustments throughout the year based on actual performance and changes in the market or business environment.

Expenses Budget

To run his coffee shop smoothly, Joe has identified several fixed and variable costs he'll need to budget for. His fixed costs, which are costs that will not change regardless of his coffee shop's sales volume, include rent, which is $2000 per month, salaries for his employees, which total $8000 per month, and utilities like electricity and water, which add up to about $500 per month.

In addition to these fixed costs, Joe also has variable costs to consider. These are costs that fluctuate depending on his sales volume and include the price of coffee beans, milk, sugar, and pastries, which he sells alongside his coffee. After a careful review of all these expenses, Joe estimates that his total annual expenses will be around $145,000. This comprehensive expense budget provides a clearer picture of how much Joe needs to earn in sales to cover his costs and achieve profitability.

Cash Flow Statement

With a clear understanding of his expected sales revenue and expenses, Joe can now proceed to develop a cash flow statement. This statement provides a comprehensive overview of all the cash inflows and outflows within his business. When Joe opened his coffee shop, he invested an initial capital of $50,000. He expects that the monthly cash inflows from sales will be about $30,417 (which is his annual revenue of $365,000 divided by 12), and his monthly cash outflows for expenses will amount to approximately $12,083 (his total annual expenses of $145,000 divided by 12). The cash flow statement gives Joe insights into his business's liquidity. It helps him track when and where his cash is coming from and where it is going. This understanding can assist him in managing his cash resources effectively and ensure he has sufficient cash to meet his business's operational needs and financial obligations.

Income Statement and Balance Sheet

With the figures from his sales forecast, expense budget, and cash flow statement, Joe can prepare his income statement and balance sheet. The income statement, or Profit & Loss (P&L) statement, reveals the profitability of Joe's coffee shop. It calculates the net profit by subtracting the total expenses from total sales revenue. In Joe's case, this means his net profit for Year 1 is expected to be $220,000 ($365,000 in revenue minus $145,000 in expenses).

The balance sheet, on the other hand, provides a snapshot of the coffee shop's financial position at a specific point in time. It includes Joe's initial capital investment of $50,000, his assets like coffee machines, furniture, and inventory, and his liabilities, which might include any loans he took to start the business and accounts payable.

The income statement and balance sheet not only reflect the financial health of Joe's coffee shop but also serve as essential tools for making informed business decisions and strategies. By continually monitoring and updating these statements, Joe can keep his finger on the pulse of his business's financial performance and make necessary adjustments to ensure sustained profitability and growth.

Best Practices in Business Financial Planning

While crafting a business financial plan, consider the following best practices:

• Realistic Projections : Ensure your forecasts are realistic, based on solid data and reasonable assumptions.
• Scenario Planning : Plan for best-case, worst-case, and most likely scenarios. This will help you prepare for different eventualities.
• Regular Reviews : Regularly review and update your plan to reflect changes in business conditions.
• Seek Professional Help : If you are unfamiliar with financial planning, consider seeking assistance from a financial consultant.

The importance of a meticulously prepared business financial plan cannot be overstated. It forms the backbone of any successful business, steering it towards a secure financial future. Creating a solid financial plan requires a blend of careful analysis, precise forecasting, clear and measurable goal setting, prudent budgeting, and efficient cash flow management. The process may seem overwhelming at first, especially for budding entrepreneurs. However, it's crucial to understand that financial planning is not an event, but rather an ongoing process. This process involves constant monitoring, evaluation, and continuous updating of the financial plan as the business grows and market conditions change.

The strategies and best practices outlined in this article offer an invaluable framework for any entrepreneur or business owner embarking on the journey of creating a financial plan. It provides insights into essential elements such as setting clear financial goals, creating a sales forecast, preparing an expense budget, developing a cash flow statement, and preparing income statements and balance sheets. Moreover, the example of Joe and his coffee shop gives a practical, real-world illustration of how these elements come together to form a coherent and effective financial plan. This example demonstrates how a robust financial plan can help manage resources more efficiently, make better-informed decisions, and ultimately lead to financial success.

Remember, every grand journey begins with a single step. In the realm of business, this step is creating a well-crafted, comprehensive, and realistic business financial plan. By following the guidelines and practices suggested in this article, you are laying the foundation for financial stability, profitability, and long-term success for your business. Start your journey today, and let the road to financial success unfold.

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Financial Aspects of Business

Finance is a business function that uses numbers and analytical tools to help managers make better decisions. Every business owner must learn at least basic finance principles to effectively run his company. Finance helps management gain a clear understanding of the company's current financial position, particularly whether the business is profitable or not. Companies of all sizes benefit from thorough financial planning to guide the business steadily down the path to future growth.

Forecasting And Planning

During the planning process, management determines numerical goals for the upcoming 12 months, or in the case of a long-range plan, for three years or more. Company management then maps out the actions that need to be taken, and the time frame, for the goals to be reached. Finance comes into play when the action steps are converted to forecast numbers for revenues and expenses.

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Managers with financial planning expertise are able to create forecasts that are attainable yet aggressive. They must also have sufficient understanding about company operations to build spreadsheet financial models based on assumptions that are realistic.

More For You

Importance of planning in a business project, the role of accounting in corporate governance, responsibility of a financial controller, role of hr in achieving business goals, what is conventional management accounting, accounting and measuring results.

Accounting is the branch of finance responsible for recording financial data and generating financial statements that show the company's operating results, as well as other critical functions such as tax compliance. Accounting has its own set of rules and standards for the recording of financial information and the presentation of results, called Generally Accepted Accounting Principles, or GAAP. Strict compliance with the standards allows company management to be assured the statements they receive are complete and accurate.

Finance goes one step further and interprets the results. Variance analysis is done to compare actual results to forecast and uncover the reasons for negative or positive deviations. Finance staff members compare the company's financial results to those of other companies in the industry to see whether the company is performing above or below average, compared with its peers.

Monitoring Cash Position

All businesses, particularly smaller ones that do not have large cash reserves or borrowing capacity, must always keep an eye on their cash position – the inflows and outflows of cash. The finance department is charged with forecasting cash flow to prevent potentially disruptive shortages of cash. In a small company this can mean serious problems, such as not being able to pay employees at the end of the week.

Investing surplus cash to achieve a maximum return is also part of the finance function. In larger companies these investment activities take place on a daily basis and involve constant monitoring of the financial markets to select the best investments for such things as the company's employee retirement plan.

Analysis for Decision Making

Finance can be likened to a toolbox for company management to use. The tools help answer questions that management must address when making small and large decisions. A small decision might be whether to lease or buy a new copy machine. A large decision for which finance provides guidance could be whether to acquire a competitor in order to grow the company more quickly.

The goal of the data gathering and sometimes complex financial modeling utilized in finance is to ensure the company makes the most efficient use of its finite resources, including the capital, human resources and productive capacity.

• Investopedia: Financial Analysis

Brian Hill is the author of four popular business and finance books: "The Making of a Bestseller," "Inside Secrets to Venture Capital," "Attracting Capital from Angels" and his latest book, published in 2013, "The Pocket Small Business Owner's Guide to Business Plans."

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The Complete Financial Section of the Business Plan with Examples

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FINANCIAL SECTION OF YOUR BUSINESS PLAN

The Financial Section, in many cases, is the most scrutinized section of your business plan. In short, it provides details on how potentially profitable the business will be, how much debt and equity capital is required for the business venture, when debts are scheduled to be repaid to investors, your financial statement forecasts, and the assumptions made when creating your financial projections.

The Financial Section of your business plan relies on Forecasted Financial Statements. Forecasted financial statements help an entrepreneur determine the feasibility of his/her business venture and help to estimate the amount of money an entrepreneur will need in order to successfully launch and operate the proposed endeavor. In addition, these statement help investors in determining the plan's feasibility and its potential profitability. It is for these reasons that many refer the financial section as the "heart of a business plan". All other sections of the plan (operations section, management section, marketing section, etc) show an investor whether or not an entrepreneurs' financial projections can materialize as envisioned.

The financial section of the business plan can be developed by you or an accountant. At any rate, the structure of the financial section generally includes the following items;

• A.    Introduction to the Financial Plan
• B.    Forecasted Financial Statements
• C.    Notes to the Forecasted Financial Statements

Below further explains each of the above components; beginning with the "Introduction to the Financial Plan".

PART A.  -   INTRODUCTION TO THE FINANCIAL PLAN

The Financial section of your business plan will begin with an introduction to the Financial Plan. The actual structure and details provided in the introduction is left up to the entrepreneur. Moreover, some entrepreneurs (business plan writers) feel its imperative to give the reader a quick summary of each forecasted statement, while others only tell the reader how the financial plan section has been organized. The following example of an Introduction to the Financial Plan supports the latter.

Example of J&B Incorporated's Introduction to the Financial Plan

INTRODUCTION TO THE FINANCIAL PLAN

The Financial Plan outlines J&B's forecasted financial statements and the assumptions made when developing them. The Company's capital requirements, how the capital is to be used and our repayment plan is also illustrated here.

The following financial statements and analysis have been forecasted over a three year period.

The above financial statements assume that the Product Development Phase will begin January 1, 1998 and end on April 30, 1998. In May, J&B will begin its operations. The fiscal year end has been set for April 30 so that a full year of operation can be shown each year for the three year forecasted period.

Following the forecasted statements and analysis are "Notes to the Financial Statements". These Notes explain how we arrived at the account balances.

Notice, the above example tells the reader what he/she is expected to see under the Financial Plan. It does not go into details on how the Company plans to repay its debt nor how it will obtain its start-up capital. Rather the Introduction suggests that readers refer to the "Notes to the Financial Statements" for further information. If your Notes to the Financial Statements do not fully explain the "higher points" of your forecasted income statement, balance sheet, your loan repayment schedule, capital requirements, or how the capital will be used, we suggest you develop a in-depth Introduction. On the other end of the continuum, if your notes to the financial statements fully explain these items, you may elect to develop and Introduction similar to J&B Incorporated.

PART B FORECASTED FINANCIAL STATEMENTS

The next part of the Financial Plan is the Forecasted Financial Statements. You will include the following forecasted statements and analysis in your Financial Plan.

Below briefly explains the above statements and analysis and depicts how each should appear in Part B of your Financial Plan.

1.   -  THE FORECASTED INCOME STATEMENT

The first statement appearing in the financial plan is your Forecasted Income Statement. An Income Statement is a financial tool used to determine whether a company earned a profit or incurred a loss within a given time frame. An income statement is developed by listing all revenues (sales) within a specific time frame, listing all expenses within the same time frame and subtracting the expenses from the revenues to arrive at Earnings Before Taxes (EBT) for that time frame. Income taxes are then calculated and subtracted from earnings before taxes to arrive at a company's Net Income after taxes or what many people refer to as - THE BOTTOM LINE.

If you plan to open a new business or plan on expanding an existing one, you will not have actual revenues or expenses. In this case, you will be required to anticipate (forecast) revenues and expenses over a one year period, for a minimum of three years. In other words, you will have to construct what is known as an annual forecasted income statement for three years. The forecasted Income statement will show investors such as banks, governments, and private entities if and when your business plans to make a profit.

The forecasted income statements for three years should appear on One Page. Moreover, the one page will consist of three columns - one column for your first year forecasted income statement, one column for the second year forecasted income statement, and one column for your third year forecasted income statement. Below provides an example of how your forecasted incomes should appear.

Notice after each account item that a note and a number is stated. These numbers refer to the Notes to the Financial Statements and allows readers (investors) the opportunity to see how J&B arrived at each account balance or value. This will become more apparent later on as we discuss Part C of the Financial Plan entitled "Notes to the Forecasted Financial Statements".

Also, notice J&B's three year Forecasted Income Statement is one page in length. The revenue and expense "items" are listed on the left hand side, while each year's forecasted revenues and expenses ("values") are shown in a column to the right. Your forecasted income statement for a three year period should appear in a similar fashion. Moreover, it is more professional and investors can compare your expected revenue and expense projections from year to year.

This concludes our discussion on how your forecasted income statements should appear in your Financial Plan. Remember it is imperative to understand the theory behind the income statement before attempting to forecast your own. To learn more about this statement, please refer to the section entitled " The Income Statement ". When you understand the theory behind each financial statement and analysis, you will be equipped with the tools necessary tools needed in Forecasting Your Own Forecasted Financial Statements .

2. THE FORECASTED BALANCE SHEETS

The next statement to appear in the financial plan is your Forecasted Balance Sheets. Three, annual (year end) Forecasted Balance Sheets should follow your three year projected income statements. These forecasted balance sheets show investors the items your business anticipates to own at the beginning and end of each forecasted year. In addition, these statements will show investors how much your business anticipates to owe at the beginning and end of each forecasted period. By developing a forecasted annual balance sheet for three years into the future, you and investors will be able to determine if your proposed business provides an opportunity (IE profitable).

In addition to the three year forecasted balance sheets, investors will want to see an opening balance sheet. An opening balance sheet generally shows the businesses' assets, liabilities, and owner's investments into the business.

The three year forecasted balance sheets should be placed on one page. Moreover, the one page will consist of four columns - one column for your opening balance sheet, one column for the first year forecasted balance sheet, one column for the second year forecasted balance sheet, and one column for your third year forecasted balance sheet. Below provides an example of J&B Incorporated's forecasted Balance Sheet.

Notice J&B's three year Forecasted Balance is one page in length. The Asset, Liability, and Equity "items" are listed on the left hand side, while each year's forecasted account balances (values) are shown in a column to the right. Your forecasted balance sheet for a year three period should appear in a similar fashion. It is more tidy and investors can compare your expected financial position from year to year.

Also, notice after each account item that a note and a number is stated. These numbers refer to the Notes to the Financial Statements and allows readers (investors) the opportunity to see how J&B arrived at each account balance or value. This will become more apparent later on as we discuss Part C of the Financial Plan entitled "Notes to the Forecasted Financial Statements".

This concludes our discussion on how your projected balance sheet should appear in your Financial Plan. Remember it is imperative to understand the theory behind the Balance Sheet before attempting to forecast your own. To learn more about this statement, please refer to the section entitled " The Balance Sheet ". When you understand the theory behind each financial statement and analysis, you will be equipped with the tools necessary tools needed in Forecasting Your Own Forecasted Financial Statements .

3. FORECASTED CASH FLOW STATEMENTS

The next statement to appear in the financial plan is your Forecasted Cash-flow Statements. The Cash Flow Statement is a tool used to forecast the movement of cash into and out-off the business. The movement of cash into a company may result from sales to customers, cash from investors, cash from bank loans, cash from the owners, cash from interest earned, cash from commission sales, or from any other source that provides cash to the business. The movement of cash out-off the company might include items such as advertising, wages and salaries, inventory purchases, payment on taxes, payment on business loans, utilities, owner withdrawals, rent, dividends, and so on.

Without the necessary cash, a business will not survive. Therefore, a forecasted cash flow statement is constructed to determine if an entrepreneur's business will have enough cash to carry out the day to day (month to month) operations.

A cash flow statement can be organized on a daily, weekly, monthly or quarterly bases. Most bankers and other investors, however, prefer see a monthly cash flow statement for a three year period. In other words, you will be required to develop three forecasted cashflow statements, each consisting of a twelve month period.

This may seem overwhelming at first, but with the aid of a spreadsheet program such as Lotus 123 or Excel, the task becomes rather simple. If you do not have a spreadsheet program, you are advised to purchase one and learn how it operates - It is an invaluable business tool that will save you lots of time and money. Below provides an example of J&B's forecasted cashflow statement for a three year period. (please note: normally each annual cashflow statement is constructed in a spreadsheet program and consist of a twelve month forecasted period. Due to the margins of this program, we are unable to place twelve columns on one page. As a result, we have used two pages for each year to illustrate J&B's annual forecasted cash flow statement).

The remaining five (5) months of J&B's first year Forecasted Cashflow Statement is presented below. Recall this is not the correct format - the first year cashflow statement should be developed in a spreadsheet program and should appear on one page.

The remaining five (5) months of J&B's second year Forecasted Cashflow Statement is presented below. Recall this is not the correct format - the second year cashflow statement should be developed in a spreadsheet program and should appear on one page.

The remaining five (5) months of J&B's third year Forecasted Cashflow Statement is presented below. Recall this is not the correct procedure - the third year cashflow statement should be developed in a spreadsheet program and should appear on one page.

As you can see, the above forecasted cash flow statements project J&B's cash inflows (from customers, from a bank loan and investors) and all expected cash outflow (from purchases of inventory, for advertising, for rent etc,) each month for thirty-six months. The inflows and outflows are subtracted and the difference is known as the Net Cash Flow (Deficiency). The cash at the beginning of the month is then added to the Net Cash Flow (Deficiency) to produce the Ending Cash Balance for the month.

Notice at the beginning of each cash flow statement, an ASSUMPTION section has been used. This assists the reader (investor) in understanding how the entrepreneur arrived at various values throughout the Cash Flow Statement (optional).

Also notice, after some of the account items, a note and a number is stated. These numbers refer to the Notes to the Financial Statements and allows readers (investors) the opportunity to see how J&B arrived at each account balance or value. This will become more apparent later on as we discuss Part C of the Financial Plan entitled "Notes to the Forecasted Financial Statements".

We can not stress enough that you should have three cash flow statements; one for each forecasted year. In addition, each cash flow statement will consist of a twelve month forecasted period; for a total of thirty-six months.

This concludes our discussion on how your forecasted cash flow statement should appear in your Financial Plan. Remember, it is imperative to understand the theory behind the cash flow statement before attempting to forecast your own. To learn more about this statement, please refer to the section entitled " The Cash-Flow Statement ". When you understand the theory behind each financial statement and analysis, you will be equipped with the tools necessary tools needed in Forecasting Your Own Forecasted Financial Statements .

4. FORECASTED BREAK-EVEN ANALYSIS

The next analysis to appear in your financial plan is the Forecasted Break-even Analysis. A Break Even Analysis, in its simplest form, is a tool used to determine the level of sales a business must earn in order to achieve neither a profit nor a loss. In other words, the point at which a business' Net Income is ZERO (revenues - expenses = 0).

The break-even analysis focuses mainly on the items included in a company's income statement (revenues and expenses). Moreover, the Break-even Analysis relies on your forecasted Fixed Costs, your forecasted Variable Costs and your forecasted Selling Price(s). Forecasted Fixed Costs are costs and expenses that do not fluctuate with sales increases or decreases. Forecasted Variable Costs are costs and expenses that do fluctuate with sales increases or decreases. A Forecasted Selling Price (s) is the price or prices you plan to sell your product at.

Your Forecasted Break-even analysis can consist of one page or two pages; depending upon how much detail you decide to offer. For example, J&B Incorporated's forecasted break-even analysis, presented below, consists of two parts. PART A. provides the reader with all information required in making the break-even calculation, and PART B shows the actual break-even calculation.

In the above example, notice that J&B calculates its break-even point and provides an indication of how many units it plans to sell above its break-even point. To do this, J&B simply subtracts each years' forecasted break-even point from the number units it plans to sell in each forecasted year.

Also notice, J&B provides readers with all figures needed to calculate the break-even point. You may elect to use this format or you may decide to only provide the break-even calculations. Whichever format you decide, be sure your break-even point is calculated over a three year period - one column for each forecasted year. You may also decide to provide the reader with an explanation on why your forecasted break-even point is increasing or decreasing. For example, J&B's break-even point is increasing due to the company's planned decrease in its selling price, its estimated increase in variable costs, and its planned increase in fixed costs. As a result, the company is earning a lower contribution margin on each sale made during year two and three. Thus less "money" is contributing to their higher fixed costs.

This concludes our discussion on how your projected break-even analysis should appear in your Financial Plan. Remember, it is imperative to understand the theory behind the break-even analysis before attempting to forecast your own. To learn more about this financial analysis, please refer to the section entitled " The Break-even Analysis ". When you understand the theory behind each financial statement and analysis, you will be equipped with the tools necessary tools needed in Forecasting Your Own Forecasted Financial Statements .

5. SENSITIVITY ANALYSIS

A sensitivity analysis shows the effects on Net Income when forecasted sales are increased or decreased by various percentages. Since your forecasted sales will NEVER be one hundred percent accurate, the sensitivity analysis shows investors how your net income will change if your original sales forecast increases by 30%, 20% and 15% or if your original sales forecast decreases and a 15% or 20 %, for example. The percentages chosen for your sensitivity analysis is up to you, however, avoid percentages of 14% or lower.

Many entrepreneurs develop only one sensitivity analysis ( for their first year operation). Others develop three sensitivity analysis; one for each forecasted year of operation. Whichever format you plan to use is not important, what is important, however, is that you include this analysis in your business plan. It shows the investor that you understand; 1) the forecasting process and 2)that your original sales forecasts generally do NOT materialize as envisioned.

Like Break-even Analysis, the Sensitivity Analysis uses your forecasted income statement as its starting point. The analysis relies on distinguishing between Forecasted Fixed Costs and Forecasted Variable Costs. Recall, Forecasted Fixed Costs are costs and expenses that do not fluctuate with sales increases or decreases. Forecasted Variable Costs are costs and expenses that do fluctuate with sales increases or decreases.

Below provides an example of J&B's sensitivity analysis for its first forecasted year of operations. Notice, J&B has chosen a sales percentage increase of 15% of its original sales forecast and a sales percentage decrease of 20% of its original sales forecast.

Notice, J&B's forecasted Operating Expenses are considered to be Fixed Costs (they do not fluctuate with sales increases or decreases. Also, the company's Variable Costs, in this example, include only the Cost of Goods Sold (COGS will always fluctuate with sales increases or decreases and therefore will always be considered variable). The only other item, in the above example, that fluctuates with sales is Sales itself! In other words, if you increase the original forecasted sales by a certain percentage, then sales will have to increase by that amount (in units sold and in dollars). Alternatively if you decrease the original sales forecast by any amount, then SALES in units sold and in dollar will certainly change by that amount or percentage.

This concludes our discussion on how your projected sensitivity analysis should appear in your Financial Plan. Remember, it is imperative to understand the theory behind the sensitivity analysis before attempting to forecast your own. To learn more about this financial analysis, please refer to the section entitled " The Sensitivity Analysis ". When you understand the theory behind each financial statement and analysis, you will be equipped with the tools necessary tools needed in Forecasting Your Own Forecasted Financial Statements .

6. RATIO ANALYSIS

The next analysis appearing in the financial plan should be your Forecasted Ratio Analysis. In a nutshell, Ratio Analysis is a general technique for analyzing the performance of an existing or potential business.

Ratios involve dividing numbers from the Balance Sheet and Income Statement to create percentages and decimals. When aspiring entrepreneurs and existing business owners apply for a loan, for example, bankers usually look at their forecasted ratios and compare them to ratios of other businesses operating within the same industry.

Your projected ratios should be calculated over a three year forecasted period. Many business plan writers calculate the ratios and provide a narrative discussion, depicting how each has changed over the three year forecasted period. Others calculate the ratios and provide a footnote stating "a complete analysis regarding the forecasted ratios is available upon request. Yet other business plan writers feel the need to calculate various ratios and compare them to ratios of other businesses within the industry. The later approach can be time consuming and may not be "cost effective". Below provides an example of J&B's forecasted Ratio Calculations.

Notice the information provided in the above example. The name of each ratio, the formula required in calculating each ratio, the dollar amounts for each formula item, and the ratio calculation for each of the forecasted years. It is important to stress that these dollar amounts have been taking from J&B's forecasted Balance Sheet and Forecasted Income Statement. Therefore, the forecasted balance sheet and income statement must be complete before ratios can be calculated.

Also notice that J&B decided to calculate the ratios without providing any narrative discussion. Moreover, the company states that a "complete analysis is available upon request". If you want to impress the investor, it might in your best interest to provide the ratio analysis (narrative discussion) in your business plan. To do this, simply calculate each ratio for the three year forecasted period and then briefly discuss the variables attributing to change in ratio value.

This concludes our discussion on how your projected ratio analysis should appear in your Financial Plan. Remember, it is imperative to understand the theory behind the ratio analysis before attempting to forecast your own. To learn more about how to read or determine the meaning behind ratios, please refer to the section entitled " Ratio Analysis ". This section will also provide you with other ratio formulas which you may decide to include in your analysis.

This concludes PART B of the financial plan entitled "Forecasted Financial Statements".The purpose of this section was not to show you how to develop forecasted financial statements, rather the purpose was to show you how the statements generally appear in the Financial Plan.

To learn the theory behind each financial statement, please refer to the section entitled " Learning and Understanding Financial Statements ". To learn how to forecast your own financial statements, please refer to the section entitled " Forecasting your Own Financial Statements ".

In summary, be sure your forecasted financial statements and analysis provide for a three year forecasted period and include the following;

Please Note: as mentioned earlier, you will save yourself time and money if you develop the above financial items using a spreadsheet program.

PART C  -   NOTES TO THE FINANCIAL STATEMENTS

The third and final part of the financial section of the Business Plan is known as the notes to the forecasted financial statements. Notes to the Forecasted Financial Statements summarize the "activities" and "assumptions" made when creating the forecasted financial statements.. The Notes will give the readers (bankers, investors, and other readers) the necessary information needed to understand and comprehend your forecasts and projections. It also alleviates any guessing or questioning a reader may have when analyzing the financial section of the business plan. NOTE: never, ever, ever, create the notes to the forecasted financial statements until you have" fully completed" all forecasted statements and analysis.

There is no set structure nor specific guideline that dictate which topics should be included in the notes to the financial statements. Rather it is left up to the individual to decide which items warrant a "note" and which items are self explanatory. The following list provides some suggestions you may use when creating your notes section.

Your notes should provide details on each of the required three year forecasted periods.  Below provides a link to J&B's Notes to the Forecasted Financial Statements.  BUT FIRST - recall from above, the word "note" and a "number" followed several account items on J&B's forecasted income statement, balance sheet and cash flow statement, etc. For instance, on the company's income statement, an account called revenue from sales is present. Following the revenue from sales account is a "note 1". This refers to the first note under the Notes to the Forecasted Financial Statements. When investors read J&B's income statement and see note 1 beside the account item entitled "Total Revenue From Sales", they can quickly refer to the Notes section for information on how the entrepreneur arrived at these dollars amounts. As a result, the investor better understands the financial statements and the assumptions used when creating them. . Try is yourself - print off all J&B's financial statements and refer to the Notes below. You'll find your understanding of the financial statements as well as the company's initiatives is much better. Remember, when investors understand your financial projections, it reduces their risk, and in many cases, it increases your chances of receiving financing.

Link to:     J&B Incorporated's Notes to their Forecasted Financial Statements

For additional information on this topic, please refer to the section entitled " Notes to the Financial Statements ".

CONCLUSION OF THE FINANCIAL PLAN

This concludes our discussion on the Financial Plan section of a business plan. Remember the Financial Plan generally consists of three parts:

Below provides examples of how your Financial Plan should appear in its entirety. (Please note, the financial statements and analysis for two of the examples below; namely The Internet Company and Scholarship Information Services provide forecasts for a two year period. Your financial statements and analysis, however, generally provide projections for at least a three year period.

EXAMPLES OF THE FINANCIAL PLAN SECTION OF A BUSINESS PLAN J&B Incorporated Scholarship Information Services The Internet Company

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Business Plan Example and Template

Learn how to create a business plan

What is a Business Plan?

A business plan is a document that contains the operational and financial plan of a business, and details how its objectives will be achieved. It serves as a road map for the business and can be used when pitching investors or financial institutions for debt or equity financing .

A business plan should follow a standard format and contain all the important business plan elements. Typically, it should present whatever information an investor or financial institution expects to see before providing financing to a business.

Contents of a Business Plan

A business plan should be structured in a way that it contains all the important information that investors are looking for. Here are the main sections of a business plan:

1. Title Page

The title page captures the legal information of the business, which includes the registered business name, physical address, phone number, email address, date, and the company logo.

2. Executive Summary

The executive summary is the most important section because it is the first section that investors and bankers see when they open the business plan. It provides a summary of the entire business plan. It should be written last to ensure that you don’t leave any details out. It must be short and to the point, and it should capture the reader’s attention. The executive summary should not exceed two pages.

3. Industry Overview

The industry overview section provides information about the specific industry that the business operates in. Some of the information provided in this section includes major competitors, industry trends, and estimated revenues. It also shows the company’s position in the industry and how it will compete in the market against other major players.

4. Market Analysis and Competition

The market analysis section details the target market for the company’s product offerings. This section confirms that the company understands the market and that it has already analyzed the existing market to determine that there is adequate demand to support its proposed business model.

Market analysis includes information about the target market’s demographics , geographical location, consumer behavior, and market needs. The company can present numbers and sources to give an overview of the target market size.

A business can choose to consolidate the market analysis and competition analysis into one section or present them as two separate sections.

5. Sales and Marketing Plan

The sales and marketing plan details how the company plans to sell its products to the target market. It attempts to present the business’s unique selling proposition and the channels it will use to sell its goods and services. It details the company’s advertising and promotion activities, pricing strategy, sales and distribution methods, and after-sales support.

6. Management Plan

The management plan provides an outline of the company’s legal structure, its management team, and internal and external human resource requirements. It should list the number of employees that will be needed and the remuneration to be paid to each of the employees.

Any external professionals, such as lawyers, valuers, architects, and consultants, that the company will need should also be included. If the company intends to use the business plan to source funding from investors, it should list the members of the executive team, as well as the members of the advisory board.

7. Operating Plan

The operating plan provides an overview of the company’s physical requirements, such as office space, machinery, labor, supplies, and inventory . For a business that requires custom warehouses and specialized equipment, the operating plan will be more detailed, as compared to, say, a home-based consulting business. If the business plan is for a manufacturing company, it will include information on raw material requirements and the supply chain.

8. Financial Plan

The financial plan is an important section that will often determine whether the business will obtain required financing from financial institutions, investors, or venture capitalists. It should demonstrate that the proposed business is viable and will return enough revenues to be able to meet its financial obligations. Some of the information contained in the financial plan includes a projected income statement , balance sheet, and cash flow.

9. Appendices and Exhibits

The appendices and exhibits part is the last section of a business plan. It includes any additional information that banks and investors may be interested in or that adds credibility to the business. Some of the information that may be included in the appendices section includes office/building plans, detailed market research , products/services offering information, marketing brochures, and credit histories of the promoters.

Business Plan Template

Here is a basic template that any business can use when developing its business plan:

Section 1: Executive Summary

• Present the company’s mission.
• Describe the company’s product and/or service offerings.
• Give a summary of the target market and its demographics.
• Summarize the industry competition and how the company will capture a share of the available market.
• Give a summary of the operational plan, such as inventory, office and labor, and equipment requirements.

Section 2: Industry Overview

• Describe the company’s position in the industry.
• Describe the existing competition and the major players in the industry.
• Provide information about the industry that the business will operate in, estimated revenues, industry trends, government influences, as well as the demographics of the target market.

Section 3: Market Analysis and Competition

• Define your target market, their needs, and their geographical location.
• Describe the size of the market, the units of the company’s products that potential customers may buy, and the market changes that may occur due to overall economic changes.
• Give an overview of the estimated sales volume vis-à-vis what competitors sell.
• Give a plan on how the company plans to combat the existing competition to gain and retain market share.

Section 4: Sales and Marketing Plan

• Describe the products that the company will offer for sale and its unique selling proposition.
• List the different advertising platforms that the business will use to get its message to customers.
• Describe how the business plans to price its products in a way that allows it to make a profit.
• Give details on how the company’s products will be distributed to the target market and the shipping method.

Section 5: Management Plan

• Describe the organizational structure of the company.
• List the owners of the company and their ownership percentages.
• List the key executives, their roles, and remuneration.
• List any internal and external professionals that the company plans to hire, and how they will be compensated.
• Include a list of the members of the advisory board, if available.

Section 6: Operating Plan

• Describe the location of the business, including office and warehouse requirements.
• Describe the labor requirement of the company. Outline the number of staff that the company needs, their roles, skills training needed, and employee tenures (full-time or part-time).
• Describe the manufacturing process, and the time it will take to produce one unit of a product.
• Describe the equipment and machinery requirements, and if the company will lease or purchase equipment and machinery, and the related costs that the company estimates it will incur.
• Provide a list of raw material requirements, how they will be sourced, and the main suppliers that will supply the required inputs.

Section 7: Financial Plan

• Describe the financial projections of the company, by including the projected income statement, projected cash flow statement, and the balance sheet projection.

Section 8: Appendices and Exhibits

• Quotes of building and machinery leases
• Proposed office and warehouse plan
• Market research and a summary of the target market
• Credit information of the owners
• List of product and/or services

Related Readings

Thank you for reading CFI’s guide to Business Plans. To keep learning and advancing your career, the following CFI resources will be helpful:

• Corporate Structure
• Three Financial Statements
• Business Model Canvas Examples
• See all management & strategy resources
• Share this article

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Financial Forecast in a Business Plan

Written by True Tamplin, BSc, CEPF®

Reviewed by subject matter experts.

Updated on September 12, 2024

Are You Retirement Ready?

Table of contents, what is a financial forecast in a business plan.

A financial forecast in a business plan is a projection of the expected financial performance of a company over a specific period, often annually or quarterly. It provides insights into anticipated revenues, expenses, capital investments, and cash flows.

Rooted in both historical data and assumptions about future market conditions, this forecast helps stakeholders, including investors, lenders, and company leaders, gauge the business's potential profitability and financial health.

By comparing actual financial results with the forecast, businesses can identify gaps, make informed decisions, and adjust strategies accordingly.

Moreover, a well-constructed financial forecast demonstrates the company's understanding of its market and adds credibility to the business plan, increasing the likelihood of securing investments or loans.

In essence, it's a vital tool for planning, budgeting, and ensuring that a business remains on a sustainable financial trajectory.

Components of a Financial Forecast in a Business Plan

Sales and revenue forecast.

Businesses thrive on sales. Projecting future sales provides a cornerstone to any financial forecast. By analyzing market trends, past sales data, and growth strategies, businesses can predict revenue inflows.

This, in turn, dictates everything from inventory purchases to hiring strategies. In the ever-evolving marketplace, an accurate sales forecast is integral for optimal resource allocation and to prevent overhead costs that can cripple an enterprise.

Expense Forecast

As businesses strategize for growth, understanding expenditures becomes crucial. These can be both fixed, like rents and salaries, and variable, such as utility bills or raw material costs.

External factors like inflation, geopolitical scenarios, and supply chain disruptions can also influence business expenses. Therefore, an accurate expense forecast not only ensures sustainability but also charts out profitability margins.

Profit and Loss Statement (P&L Forecast)

Herein lies the essence of any business—profits. The P&L forecast provides a clear picture of the company's anticipated net profit or loss over a set period.

Distinguishing between gross profit, operational profit, and net profit helps streamline operations and understand where the bulk of revenues or costs stem from. A keen eye on this forecast can lead to timely interventions, ensuring financial stability.

Cash Flow Forecast

Cash is the lifeblood of a business. The cash flow forecast paints a picture of a business's liquidity by tracking both incoming and outgoing cash.

A well-managed cash flow ensures operational sustainability. A business might be profitable on paper, but if it lacks the liquidity to manage its immediate expenses, it can face significant hurdles.

Balance Sheet Forecast

A forward-looking balance sheet gives stakeholders a snapshot of a company's projected financial health, encompassing assets, liabilities, and owner’s equity.

Regularly updating and reviewing the balance sheet forecast can assist businesses in making informed financial decisions, whether it's taking on debt or making significant investments.

Capital Expenditure Forecast

For businesses looking towards expansion or major investments, the capital expenditure forecast is indispensable. It involves predictions related to expenses on assets that will benefit the business in the long run, like machinery, buildings, or technology.

Crucially, evaluating the potential return on these investments ensures that they generate value over time.

Importance of Financial Forecast in a Business Plan

Guide business strategies.

Financial forecasts are not just passive documents; they drive action. The insights derived from these forecasts shape a company's tactical and strategic decisions, ensuring alignment with financial expectations and goals.

Secure External Funding

For startups or businesses looking to expand, external funding often becomes essential. A robust financial forecast showcases the business's potential to prospective investors or lenders, bolstering its credibility and signaling its viability.

Risk Management

Financial projections serve as an early warning system. They highlight potential financial pitfalls, allowing businesses to devise countermeasures.

Whether it's diversifying sources of income, cutting down on non-essential expenses, or hedging against market volatility, these forecasts empower businesses to navigate challenges proactively.

Monitor Business Health

By juxtaposing actual financial outcomes with forecasts, businesses can gauge their performance. Discrepancies can lead to course corrections, ensuring that the business remains aligned with its broader financial and operational objectives.

Methods and Tools for Creating a Financial Forecast in a Business Plan

Quantitative methods.

Numbers often tell a compelling story. Time series analysis, econometric models, and other statistical tools provide a quantitative means to chart out a business's future. These rely heavily on historical data and established market trends to make informed predictions.

Qualitative Methods

Sometimes, numbers need a human touch. Techniques like the Delphi method or expert judgment pool insights from professionals to make predictions, especially when historical data might not be a reliable indicator.

While these methods might lack the objective precision of quantitative models, they provide valuable subjective insights, especially in rapidly evolving industries.

Modern Forecasting Tools

The digital age has democratized forecasting. Several software solutions, from simplistic spreadsheet templates to sophisticated AI-driven models, empower businesses to automate their financial forecasting processes.

Integration capabilities, real-time data processing, and advanced analytics further enhance their efficacy.

Challenges of Financial Forecast in a Business Plan

External economic factors.

While businesses can control their operations, external factors often remain unpredictable. Market volatilities, geopolitical events, or global crises can disrupt even the most meticulous forecasts, underscoring the importance of adaptability.

Internal Business Changes

Organizational restructuring, strategy pivots, or product launches can significantly alter a company's financial trajectory. Such internal changes necessitate regular revisions of the financial forecast to ensure it remains reflective of the business's evolving landscape.

Inherent Uncertainty

The future remains, by nature, uncertain. Even the most sophisticated forecasting models rely on assumptions and estimates.

Recognizing this inherent unpredictability, businesses should adopt a flexible approach, regularly revisiting their forecasts and adjusting them in light of new data or changing circumstances.

A financial forecast in a business plan is an indispensable tool that projects a company's future financial performance, derived from both historical data and future assumptions.

Essential components include sales and revenue predictions, expense projections, and comprehensive statements like the P&L and balance sheet forecasts.

The objective is not just to track figures but to guide strategy, secure funding, manage risks, and constantly monitor the company's financial health.

While modern tools and quantitative methods provide precision, qualitative insights capture the nuances of rapidly changing industries.

Challenges like external economic shifts, internal business alterations, and the inherent uncertainty of predicting the future underline the importance of flexibility and adaptability.

In essence, a robust financial forecast not only charts a course for a company's growth but also ensures it remains agile in the face of both expected and unforeseen challenges.

Financial Forecast in a Business Plan FAQs

Why is a financial forecast in a business plan crucial for startups.

A Financial Forecast in a Business Plan helps startups anticipate revenues and expenses, allowing them to strategize operations, secure funding, and ensure financial sustainability from the onset.

How often should a company update its Financial Forecast in a Business Plan?

While the frequency may vary depending on the industry and market dynamics, it's generally recommended to revisit and update the Financial Forecast in a Business Plan at least annually or when significant internal or external changes occur.

Can I create a Financial Forecast in a Business Plan without prior financial data?

Yes, startups and new businesses often rely on industry benchmarks, market research, and qualitative methods to create a Financial Forecast in a Business Plan, even without historical financial data.

How accurate is the Financial Forecast in a Business Plan?

While every effort is made to ensure accuracy, a Financial Forecast in a Business Plan is based on assumptions, projections, and available data. External factors and unforeseen changes can affect outcomes, making it essential to revisit and adjust forecasts regularly.

What tools can I use to automate the Financial Forecast in a Business Plan?

There are various software solutions, ranging from spreadsheet templates to sophisticated AI-driven platforms, designed to help businesses automate and enhance the accuracy of their Financial Forecast in a Business.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon , Nasdaq and Forbes .

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• Getting out of debt
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• Tax planning expertise
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12 Key Elements of a Business Plan (Top Components Explained)

Starting and running a successful business requires proper planning and execution of effective business tactics and strategies .

You need to prepare many essential business documents when starting a business for maximum success; the business plan is one such document.

When creating a business, you want to achieve business objectives and financial goals like productivity, profitability, and business growth. You need an effective business plan to help you get to your desired business destination.

Even if you are already running a business, the proper understanding and review of the key elements of a business plan help you navigate potential crises and obstacles.

This article will teach you why the business document is at the core of any successful business and its key elements you can not avoid.

Let’s get started.

Why Are Business Plans Important?

Business plans are practical steps or guidelines that usually outline what companies need to do to reach their goals. They are essential documents for any business wanting to grow and thrive in a highly-competitive business environment .

1. Proves Your Business Viability

A business plan gives companies an idea of how viable they are and what actions they need to take to grow and reach their financial targets. With a well-written and clearly defined business plan, your business is better positioned to meet its goals.

2. Guides You Throughout the Business Cycle

A business plan is not just important at the start of a business. As a business owner, you must draw up a business plan to remain relevant throughout the business cycle .

During the starting phase of your business, a business plan helps bring your ideas into reality. A solid business plan can secure funding from lenders and investors.

After successfully setting up your business, the next phase is management. Your business plan still has a role to play in this phase, as it assists in communicating your business vision to employees and external partners.

Essentially, your business plan needs to be flexible enough to adapt to changes in the needs of your business.

3. Helps You Make Better Business Decisions

As a business owner, you are involved in an endless decision-making cycle. Your business plan helps you find answers to your most crucial business decisions.

A robust business plan helps you settle your major business components before you launch your product, such as your marketing and sales strategy and competitive advantage.

4. Eliminates Big Mistakes

Many small businesses fail within their first five years for several reasons: lack of financing, stiff competition, low market need, inadequate teams, and inefficient pricing strategy.

Creating an effective plan helps you eliminate these big mistakes that lead to businesses' decline. Every business plan element is crucial for helping you avoid potential mistakes before they happen.

5. Secures Financing and Attracts Top Talents

Having an effective plan increases your chances of securing business loans. One of the essential requirements many lenders ask for to grant your loan request is your business plan.

A business plan helps investors feel confident that your business can attract a significant return on investments ( ROI ).

You can attract and retain top-quality talents with a clear business plan. It inspires your employees and keeps them aligned to achieve your strategic business goals.

Key Elements of Business Plan

Starting and running a successful business requires well-laid actions and supporting documents that better position a company to achieve its business goals and maximize success.

A business plan is a written document with relevant information detailing business objectives and how it intends to achieve its goals.

With an effective business plan, investors, lenders, and potential partners understand your organizational structure and goals, usually around profitability, productivity, and growth.

Every successful business plan is made up of key components that help solidify the efficacy of the business plan in delivering on what it was created to do.

Here are some of the components of an effective business plan.

1. Executive Summary

One of the key elements of a business plan is the executive summary. Write the executive summary as part of the concluding topics in the business plan. Creating an executive summary with all the facts and information available is easier.

In the overall business plan document, the executive summary should be at the forefront of the business plan. It helps set the tone for readers on what to expect from the business plan.

A well-written executive summary includes all vital information about the organization's operations, making it easy for a reader to understand.

The key points that need to be acted upon are highlighted in the executive summary. They should be well spelled out to make decisions easy for the management team.

A good and compelling executive summary points out a company's mission statement and a brief description of its products and services.

An executive summary summarizes a business's expected value proposition to distinct customer segments. It highlights the other key elements to be discussed during the rest of the business plan.

Including your prior experiences as an entrepreneur is a good idea in drawing up an executive summary for your business. A brief but detailed explanation of why you decided to start the business in the first place is essential.

Adding your company's mission statement in your executive summary cannot be overemphasized. It creates a culture that defines how employees and all individuals associated with your company abide when carrying out its related processes and operations.

Your executive summary should be brief and detailed to catch readers' attention and encourage them to learn more about your company.

Components of an Executive Summary

Here are some of the information that makes up an executive summary:

• The name and location of your company
• Products and services offered by your company
• Mission and vision statements
• Success factors of your business plan

2. Business Description

Your business description needs to be exciting and captivating as it is the formal introduction a reader gets about your company.

What your company aims to provide, its products and services, goals and objectives, target audience , and potential customers it plans to serve need to be highlighted in your business description.

A company description helps point out notable qualities that make your company stand out from other businesses in the industry. It details its unique strengths and the competitive advantages that give it an edge to succeed over its direct and indirect competitors.

Spell out how your business aims to deliver on the particular needs and wants of identified customers in your company description, as well as the particular industry and target market of the particular focus of the company.

Include trends and significant competitors within your particular industry in your company description. Your business description should contain what sets your company apart from other businesses and provides it with the needed competitive advantage.

In essence, if there is any area in your business plan where you need to brag about your business, your company description provides that unique opportunity as readers look to get a high-level overview.

Components of a Business Description

Your business description needs to contain these categories of information.

• Business location
• The legal structure of your business
• Summary of your business’s short and long-term goals

3. Market Analysis

The market analysis section should be solely based on analytical research as it details trends particular to the market you want to penetrate.

Graphs, spreadsheets, and histograms are handy data and statistical tools you need to utilize in your market analysis. They make it easy to understand the relationship between your current ideas and the future goals you have for the business.

All details about the target customers you plan to sell products or services should be in the market analysis section. It helps readers with a helpful overview of the market.

In your market analysis, you provide the needed data and statistics about industry and market share, the identified strengths in your company description, and compare them against other businesses in the same industry.

The market analysis section aims to define your target audience and estimate how your product or service would fare with these identified audiences.

Market analysis helps visualize a target market by researching and identifying the primary target audience of your company and detailing steps and plans based on your audience location.

Obtaining this information through market research is essential as it helps shape how your business achieves its short-term and long-term goals.

Market Analysis Factors

Here are some of the factors to be included in your market analysis.

• The geographical location of your target market
• Needs of your target market and how your products and services can meet those needs
• Demographics of your target audience

Components of the Market Analysis Section

Here is some of the information to be included in your market analysis.

• Industry description and statistics
• Demographics and profile of target customers
• Marketing data for your products and services
• Detailed evaluation of your competitors

4. Marketing Plan

A marketing plan defines how your business aims to reach its target customers, generate sales leads, and, ultimately, make sales.

Promotion is at the center of any successful marketing plan. It is a series of steps to pitch a product or service to a larger audience to generate engagement. Note that the marketing strategy for a business should not be stagnant and must evolve depending on its outcome.

Include the budgetary requirement for successfully implementing your marketing plan in this section to make it easy for readers to measure your marketing plan's impact in terms of numbers.

The information to include in your marketing plan includes marketing and promotion strategies, pricing plans and strategies , and sales proposals. You need to include how you intend to get customers to return and make repeat purchases in your business plan.

5. Sales Strategy

Sales strategy defines how you intend to get your product or service to your target customers and works hand in hand with your business marketing strategy.

Your sales strategy approach should not be complex. Break it down into simple and understandable steps to promote your product or service to target customers.

Apart from the steps to promote your product or service, define the budget you need to implement your sales strategies and the number of sales reps needed to help the business assist in direct sales.

Your sales strategy should be specific on what you need and how you intend to deliver on your sales targets, where numbers are reflected to make it easier for readers to understand and relate better.

6. Competitive Analysis

Providing transparent and honest information, even with direct and indirect competitors, defines a good business plan. Provide the reader with a clear picture of your rank against major competitors.

Identifying your competitors' weaknesses and strengths is useful in drawing up a market analysis. It is one information investors look out for when assessing business plans.

The competitive analysis section clearly defines the notable differences between your company and your competitors as measured against their strengths and weaknesses.

This section should define the following:

• Your competitors' identified advantages in the market
• How do you plan to set up your company to challenge your competitors’ advantage and gain grounds from them?
• The standout qualities that distinguish you from other companies
• Potential bottlenecks you have identified that have plagued competitors in the same industry and how you intend to overcome these bottlenecks

In your business plan, you need to prove your industry knowledge to anyone who reads your business plan. The competitive analysis section is designed for that purpose.

7. Management and Organization

Management and organization are key components of a business plan. They define its structure and how it is positioned to run.

Whether you intend to run a sole proprietorship, general or limited partnership, or corporation, the legal structure of your business needs to be clearly defined in your business plan.

Use an organizational chart that illustrates the hierarchy of operations of your company and spells out separate departments and their roles and functions in this business plan section.

The management and organization section includes profiles of advisors, board of directors, and executive team members and their roles and responsibilities in guaranteeing the company's success.

Apparent factors that influence your company's corporate culture, such as human resources requirements and legal structure, should be well defined in the management and organization section.

Defining the business's chain of command if you are not a sole proprietor is necessary. It leaves room for little or no confusion about who is in charge or responsible during business operations.

This section provides relevant information on how the management team intends to help employees maximize their strengths and address their identified weaknesses to help all quarters improve for the business's success.

8. Products and Services

This business plan section describes what a company has to offer regarding products and services to the maximum benefit and satisfaction of its target market.

Boldly spell out pending patents or copyright products and intellectual property in this section alongside costs, expected sales revenue, research and development, and competitors' advantage as an overview.

At this stage of your business plan, the reader needs to know what your business plans to produce and sell and the benefits these products offer in meeting customers' needs.

The supply network of your business product, production costs, and how you intend to sell the products are crucial components of the products and services section.

Investors are always keen on this information to help them reach a balanced assessment of if investing in your business is risky or offer benefits to them.

You need to create a link in this section on how your products or services are designed to meet the market's needs and how you intend to keep those customers and carve out a market share for your company.

Repeat purchases are the backing that a successful business relies on and measure how much customers are into what your company is offering.

This section is more like an expansion of the executive summary section. You need to analyze each product or service under the business.

9. Operating Plan

An operations plan describes how you plan to carry out your business operations and processes.

The operating plan for your business should include:

• Information about how your company plans to carry out its operations.
• The base location from which your company intends to operate.
• The number of employees to be utilized and other information about your company's operations.
• Key business processes.

This section should highlight how your organization is set up to run. You can also introduce your company's management team in this section, alongside their skills, roles, and responsibilities in the company.

The best way to introduce the company team is by drawing up an organizational chart that effectively maps out an organization's rank and chain of command.

What should be spelled out to readers when they come across this business plan section is how the business plans to operate day-in and day-out successfully.

10. Financial Projections and Assumptions

Bringing your great business ideas into reality is why business plans are important. They help create a sustainable and viable business.

The financial section of your business plan offers significant value. A business uses a financial plan to solve all its financial concerns, which usually involves startup costs, labor expenses, financial projections, and funding and investor pitches.

All key assumptions about the business finances need to be listed alongside the business financial projection, and changes to be made on the assumptions side until it balances with the projection for the business.

The financial plan should also include how the business plans to generate income and the capital expenditure budgets that tend to eat into the budget to arrive at an accurate cash flow projection for the business.

Base your financial goals and expectations on extensive market research backed with relevant financial statements for the relevant period.

Examples of financial statements you can include in the financial projections and assumptions section of your business plan include:

• Projected income statements
• Cash flow statements
• Balance sheets
• Income statements

Revealing the financial goals and potentials of the business is what the financial projection and assumption section of your business plan is all about. It needs to be purely based on facts that can be measurable and attainable.

11. Request For Funding

The request for funding section focuses on the amount of money needed to set up your business and underlying plans for raising the money required. This section includes plans for utilizing the funds for your business's operational and manufacturing processes.

When seeking funding, a reasonable timeline is required alongside it. If the need arises for additional funding to complete other business-related projects, you are not left scampering and desperate for funds.

If you do not have the funds to start up your business, then you should devote a whole section of your business plan to explaining the amount of money you need and how you plan to utilize every penny of the funds. You need to explain it in detail for a future funding request.

When an investor picks up your business plan to analyze it, with all your plans for the funds well spelled out, they are motivated to invest as they have gotten a backing guarantee from your funding request section.

Include timelines and plans for how you intend to repay the loans received in your funding request section. This addition keeps investors assured that they could recoup their investment in the business.

12. Exhibits and Appendices

Exhibits and appendices comprise the final section of your business plan and contain all supporting documents for other sections of the business plan.

Some of the documents that comprise the exhibits and appendices section includes:

• Legal documents
• Licenses and permits
• Credit histories
• Customer lists

The choice of what additional document to include in your business plan to support your statements depends mainly on the intended audience of your business plan. Hence, it is better to play it safe and not leave anything out when drawing up the appendix and exhibit section.

Supporting documentation is particularly helpful when you need funding or support for your business. This section provides investors with a clearer understanding of the research that backs the claims made in your business plan.

There are key points to include in the appendix and exhibits section of your business plan.

• The management team and other stakeholders resume
• Marketing research
• Permits and relevant legal documents
• Financial documents

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Martin luenendonk.

Martin loves entrepreneurship and has helped dozens of entrepreneurs by validating the business idea, finding scalable customer acquisition channels, and building a data-driven organization. During his time working in investment banking, tech startups, and industry-leading companies he gained extensive knowledge in using different software tools to optimize business processes.

This insights and his love for researching SaaS products enables him to provide in-depth, fact-based software reviews to enable software buyers make better decisions.

How To Write A Business Plan (2024 Guide)

Updated: Apr 17, 2024, 11:59am

Table of Contents

Brainstorm an executive summary, create a company description, brainstorm your business goals, describe your services or products, conduct market research, create financial plans, bottom line, frequently asked questions.

Every business starts with a vision, which is distilled and communicated through a business plan. In addition to your high-level hopes and dreams, a strong business plan outlines short-term and long-term goals, budget and whatever else you might need to get started. In this guide, we’ll walk you through how to write a business plan that you can stick to and help guide your operations as you get started.

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Drafting the Summary

An executive summary is an extremely important first step in your business. You have to be able to put the basic facts of your business in an elevator pitch-style sentence to grab investors’ attention and keep their interest. This should communicate your business’s name, what the products or services you’re selling are and what marketplace you’re entering.

Ask for Help

When drafting the executive summary, you should have a few different options. Enlist a few thought partners to review your executive summary possibilities to determine which one is best.

After you have the executive summary in place, you can work on the company description, which contains more specific information. In the description, you’ll need to include your business’s registered name , your business address and any key employees involved in the business. 

The business description should also include the structure of your business, such as sole proprietorship , limited liability company (LLC) , partnership or corporation. This is the time to specify how much of an ownership stake everyone has in the company. Finally, include a section that outlines the history of the company and how it has evolved over time.

Wherever you are on the business journey, you return to your goals and assess where you are in meeting your in-progress targets and setting new goals to work toward.

Numbers-based Goals

Goals can cover a variety of sections of your business. Financial and profit goals are a given for when you’re establishing your business, but there are other goals to take into account as well with regard to brand awareness and growth. For example, you might want to hit a certain number of followers across social channels or raise your engagement rates.

Another goal could be to attract new investors or find grants if you’re a nonprofit business. If you’re looking to grow, you’ll want to set revenue targets to make that happen as well.

Intangible Goals

Goals unrelated to traceable numbers are important as well. These can include seeing your business’s advertisement reach the general public or receiving a terrific client review. These goals are important for the direction you take your business and the direction you want it to go in the future.

The business plan should have a section that explains the services or products that you’re offering. This is the part where you can also describe how they fit in the current market or are providing something necessary or entirely new. If you have any patents or trademarks, this is where you can include those too.

If you have any visual aids, they should be included here as well. This would also be a good place to include pricing strategy and explain your materials.

This is the part of the business plan where you can explain your expertise and different approach in greater depth. Show how what you’re offering is vital to the market and fills an important gap.

You can also situate your business in your industry and compare it to other ones and how you have a competitive advantage in the marketplace.

Other than financial goals, you want to have a budget and set your planned weekly, monthly and annual spending. There are several different costs to consider, such as operational costs.

Business Operations Costs

Rent for your business is the first big cost to factor into your budget. If your business is remote, the cost that replaces rent will be the software that maintains your virtual operations.

Marketing and sales costs should be next on your list. Devoting money to making sure people know about your business is as important as making sure it functions.

Other Costs

Although you can’t anticipate disasters, there are likely to be unanticipated costs that come up at some point in your business’s existence. It’s important to factor these possible costs into your financial plans so you’re not caught totally unaware.

Business plans are important for businesses of all sizes so that you can define where your business is and where you want it to go. Growing your business requires a vision, and giving yourself a roadmap in the form of a business plan will set you up for success.

How do I write a simple business plan?

When you’re working on a business plan, make sure you have as much information as possible so that you can simplify it to the most relevant information. A simple business plan still needs all of the parts included in this article, but you can be very clear and direct.

What are some common mistakes in a business plan?

The most common mistakes in a business plan are common writing issues like grammar errors or misspellings. It’s important to be clear in your sentence structure and proofread your business plan before sending it to any investors or partners.

What basic items should be included in a business plan?

When writing out a business plan, you want to make sure that you cover everything related to your concept for the business,  an analysis of the industry―including potential customers and an overview of the market for your goods or services―how you plan to execute your vision for the business, how you plan to grow the business if it becomes successful and all financial data around the business, including current cash on hand, potential investors and budget plans for the next few years.

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Julia is a writer in New York and started covering tech and business during the pandemic. She also covers books and the publishing industry.

The Financial Aspects of a Business

by Devra Gartenstein

Published on 11 Mar 2019

Businesses run on money, so the financial aspect of your business determines whether you can pay your staff and your suppliers and whether you earn a profit at the end of the day. Even if you're a craftsperson who is more concerned with making shoes or cakes than evaluating numbers, you'll find yourself with fewer obstacles to pursuing your craft if you get your financials in order.

The financial aspects of a company include building a strong business model, keeping up-to-date books and securing adequate financing.

Your Financial Business Plan

In addition to its text-based company description and marketing plan, a business plan should include financial history and projections based on company activity. Bankers will find these documents invaluable when evaluating your loan worthiness, and the process of creating them will help you to think through potential scenarios.

• Profit and Loss: Your profit and loss statement summarizes your company's financial activity during a period of time, such as a month or a year. It lists all of your revenue at the top and all of your expenditures in the lower section, breaking these into variable expenses, such as materials and production payroll, and fixed costs such as rent. The bottom line of your income statement shows how much you earned or lost during that financial period.
• Balance Sheet: Your balance sheet is an overview of your financial situation at a particular moment in time, showing how much you own and how much you owe. It also shows how these assets and liabilities are distributed and how much of your cash is liquid and easily available for emergencies.
• Pro Forma Cash Flow: This document lays out your financial projections for an upcoming period, specifically showing how much cash you expect to be flowing in and out of your operation during this time. By figuring out when cash will be abundant and when it will be tight, you can develop a plan for saving proactively and also bridging the gaps.

Management Accounting Considerations

In addition to the standard financial statements that you prepare for banks, tax returns and board meetings, financial considerations affect all aspects of a company. By developing systems to track and evaluate data, you can make observations and implement improvements that directly affect your bottom line.

• Tracking Productivity: The more your business can make during its dedicated production hours, the more profitable your operation will be, assuming your sales are strong enough to work through the inventory you're producing. Implement systems for tracking productivity over time, such as recording how many hours are spent on particular tasks and how many units are completed during those hours.
• Monitoring Inventory: Keeping a close eye on inventory can ensure that you have what you need when you need it to avoid costly work interruptions. Inventory management also shows whether you're cycling through stock quickly enough to maintain a healthy cash flow.
• Categorizing Expenses: It's necessary to break down expenditures into general categories such as materials and payroll for the sake of tax reporting. However, if you financially categorize expenses for all aspects of a business, you'll be in an especially advantageous position to assess profitability and make adjustments based on these observations.

Managing Financial Systems

Whether or not you do your own bookkeeping, it's important as a business owner that you have a basic understanding of the financial aspects of your business. Even if you're more concerned with craftsmanship, doing good in the world or just earning enough to sustain other aspects of your life, making friends with business finances will position you to better achieve these goals.

Take an introductory bookkeeping class, have a conversation with your accountant and spend time familiarizing yourself with financial statements. Be scrupulous about tracking money flowing in and out of your business, and build a company culture where employees do their part to maintain your financial systems as well.

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Financial Planning: What It Is and How to Make a Plan

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• Financial and Investment Planning
• How to Create a Plan

Investment Planning 101

• Benefits of Making a Plan
• When to Create a Plan

The Bottom Line

Liz Manning has researched, written, and edited trading, investing, and personal finance content for years, following her time working in institutional sales, commercial banking, retail investing, hedging strategies, futures, and day trading. 

Gordon Scott has been an active investor and technical analyst or 20+ years. He is a Chartered Market Technician (CMT).

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What Is Investment Planning?

An investment plan starts with a financial plan. Both identify your financial goals and address the financial resources you have available to meet them.

A financial plan is a document that details a person’s current financial circumstances, their short- and long-term monetary goals, and their strategies to achieve those goals. It can help you to establish and plan for income and spending, debt reduction, and fundamental needs such as managing life's risks such as those involving health or disability.

A financial plan can provide financial guidance so you're prepared to meet your obligations and objectives. It can also help you track your progress throughout the years toward financial well-being.

Investment planning involves a thorough evaluation of your money situation including income, spending, debt, saving, and expectations for the future. It can be created independently or with the help of a certified financial planner.

Key Takeaways

• An investment plan documents an individual’s short- and long-term financial goals and includes a strategy to achieve them.
• The plan should be comprehensive and highly customized.
• It should reflect an individual’s personal and family financial needs, investment risk tolerance, and a plan for saving and investing.
• Planning in finance starts with a calculation of one’s current net worth and cash flow.
• A solid investment plan provides guidance over time and serves as a way to track progress toward your goals.

The Fundamentals of Financial Plans

How to create an investment plan.

Certain steps are necessary to create a financial plan and an investment plan .

1. Do It Yourself or Get Professional Help

Decide whether you'll create your financial and investment plans on your own or with the help of a licensed financial planner . You can certainly build a financial plan but a financial pro can help ensure that your plan covers all the essentials.

2. Build an Emergency Cash Fund

Start setting aside money in a liquid account based on what your cash flow allows. Your goal should be to save enough to cover all your expenses for three to six months at a minimum but preferably for longer in case you find yourself without income due to unexpected events.

3. Plan to Reduce Debt and Manage Expenses

The faster and more effectively you can eliminate debt, the better for the growth of your savings, your standard of living, and for the achievement of your specific investment objectives.

Make it a habit to cut expenses whenever and wherever possible so you can add to your savings. Stay on top of those that you know you'll have, such as taxes, so you always meet those obligations on time.

4. Manage Potential Risks

Your financial well-being can be affected when accidents, health problems, or the death of a loved one strike. Plan to put into place the appropriate insurance coverage that will protect your financial security at such times. This coverage can include home, property , health, auto, disability, personal liability , and life insurance.

5. Begin to Invest

Take part in a retirement plan at work that automatically deducts contributions from your paychecks. Plan to maximize your tax-advantaged investing with a personal IRA if and when your income allows.

Consider how you might allocate any other available income to a taxable investment account that can add to your net worth over time. Your plan for investing should take into account your investment risk tolerance and future income needs.

6. Include a Tax Strategy

Address the goal of reducing your income taxes with tax deductions, tax credits, tax loss harvesting, and any other opportunities that are legally available to taxpayers.

7. Consider an Estate Plan

It's important to make arrangements for the benefit and protection of your heirs with an estate plan . The details will depend on your stage in life and whether you're married, have children, or have other legacy goals. Again, a professional such as an attorney can help here.

8. Monitor and Adjust Your Plan

Revisit your plan at least yearly on your own or with a financial professional. Do it more often if a change in circumstances affects your financial situation. Keep it working efficiently and effectively by adjusting it as necessary.

Investopedia / Nez Riaz

Whether you’re going it alone or with a financial planner, it's necessary to understand how important financial and investment plans can be to your financial future. They can provide the guidance that assures your financial success.

Start your planning effort by gathering information from your various financial accounts into a document or spreadsheet. Then make some basic calculations that establish where you stand financially.

1. Calculate Your Net Worth

To calculate your current net worth , subtract the total of your liabilities from the total of your assets. Begin by listing and adding up all of the following:

• Your assets : An asset is property of value that you own. Assets may include a home, a car, cash in the bank, money invested in a 401(k) plan , and other investment accounts.
• Your liabilities : A liability is something you owe. Liabilities may include outstanding bills, credit card debt, student debt, a mortgage, and a car loan.

2. Determine Your Cash Flow

Cash flow is the money you take in measured against the money you spend. You must know your income as well as how and when your money is spent to create a financial plan and then an investment plan. Documenting your cash flow will help you determine how much you need every month for necessities, how much is available for saving and investing, and where you can cut back on spending.

Review your checking account and credit card statements. They should provide a fairly complete history of your income and spending in a wide range of spending categories.

Document how much you’ve paid during the year for housing expenses like rent or mortgage payments, utilities, and credit card interest. Other categories include food, household and clothing, transportation, medical insurance, and non-covered medical expenses. Still others can include your spending on miscellaneous entertainment, dining out, and vacation travel.

You’ll know what your monthly cash flow has been and where you can improve it when you've added up all these numbers for a year and divided the total by 12.

Don’t overlook cash withdrawals that may have been used on sundries like shampoo. ATM withdrawals can also highlight where you can cut unnecessary spending.

3. Establish Your Goals

A major part of an investment plan is your clearly defined goals . They might include funding a college education for the children, buying a larger home, starting a business, retiring on time, or leaving a legacy.

No one can tell you how to prioritize these goals but a professional financial planner should be able to help you finalize a detailed savings plan and specific investing that can help you reach them one by one.

The main elements of a financial plan include a retirement strategy, a risk management plan, a long-term investment plan, a tax reduction strategy, and an estate plan.

Benefits of Making a Financial Plan

• A financial plan involves a thorough examination of your income and spending.
• It can improve your understanding of your financial circumstances at all times.
• It establishes important short- and long-term financial goals upon which you can base your investment planning.
• It clarifies the actions required to achieve your various financial goals.
• A financial plan can focus your attention on important immediate steps such as reducing debt and building your savings for emergencies.
• It enhances the probability that you'll achieve financial milestones and overall financial success.
• It can guide your efforts over time and provide a means to monitor your progress.
• It can keep you out of financial trouble and reduce any stress and worry you might have experienced in the past.

Financial planning is a smart way to keep your financial house in order. It's a money tool regardless of your age, earnings, net worth, or financial dreams. It provides a way to document your financial goals and corresponding investment goals.

When to Create a Financial Plan

A financial plan is always an advantage for those who want to make sure they manage their finances in ways that are best suited for them. You can create one at any time whether you've just joined the workforce or you've been working for years.

Some circumstances can call for the creation and use of a financial plan, however. They can also serve as signals to adjust existing plans.

• A new job that results in added income, new expenses, or new opportunities
• An income change that can affect your ability to pay expenses, pay off debt, or save
• Major life events such as marriage, children, or divorce that can change financial objectives, spending needs, and obligations
• Health adversities that result in redirecting income and spending away from existing goals
• An income windfall such as an inheritance or insurance payment that can affect your efforts to reach your financial goals, such as by providing more money for investing

What Is the Purpose of a Financial Plan?

A financial plan should help you make the best use of your money and achieve long-term financial goals such as investments, sending your children to college, buying a bigger home, leaving a legacy, or enjoying a comfortable retirement.

How Do I Create an Investment Plan?

You can write an investment plan yourself or enlist the help of a professional planner. Begin with a financial plan. The first step is to calculate your net worth and identify your spending habits. Consider your longer-term objectives and decide on ways to achieve them when this has been accomplished and documented.

What Are the Key Components of a Financial Plan?

Financial plans aren't one-size-fits-all but the good ones tend to focus on the same things. You can explore your financial goals and ways to achieve them after you've calculated your net worth and spending habits. This usually involves some form of budgeting , saving, and investing each month.

Your goal is to ensure that you live comfortably and financially stress-free for the rest of your life. Areas to focus on include an emergency savings plan, a retirement plan, risk management, a tax minimization plan, and then a long-term investment strategy.

What Are the Five Key Areas of Financial Planning?

The five key areas of financial planning are estate planning, retirement planning, self-protection/risk management such as insurance, tax planning, and investment planning.

A financial plan is an essential tool for your financial well-being, both now and into the future. It involves setting down the current state of your finances, your various financial goals, and methods that can help you achieve them.

It's never too early or too late to create a financial plan. It can help you to determine the best way to put it to work so that you can meet your financial needs through all of your life stages, no matter the amount of money you might have.

Yahoo! Finance. " How Much Money Should I Have in an Emergency Savings Account? "

Forbes Advisor. " Estate Planning Checklist: Get Your Affairs in Order ."

Fidelity Investments. " What Is Net Worth? "

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Businessing Magazine

Strategizing     Logan    March 5, 2019     6 min read

10 Important Aspects of a Successful Business Plan

Every business needs to have a business plan, no matter the size. The main reason so many startups don’t survive past the first five years is because they didn’t set a strong business plan. You may have a great business idea, but then after setting out a plan and crunching the numbers, you find out it’s not such a great idea.

Your business plan is the roadmap for your business; it’ll contain future milestones, your budget and finances, marketing and sales strategy, and will help you overcome future obstacles. Whether your business plan is for bankers, venture capitalists, or just your employees, there are main elements set by the Small Business Administration ( www.sba.gov ) that should be included in every business plan.

What Are the Elements of a Business Plan?

• The Executive Summary This is the first section of the business plan. It can be from 1 to 5 pages. It serves as the table of content for your plan.
• Company Profile In this section, you explain what your business is, what your goals are, your vision, and mission, why you’re special and unique. Some companies mention the management and team members with short descriptions.
• Market Analysis Before starting a business, you need to learn about the market. Study your competitors. Find out their profit range, what they’re known for, and what technologies are used in the industry. Every detail matters and can give you an advantage in your business.
• Product/ Service Explain your products, different types or packages, your selling points, and answer all the questions a customer/ investor may have. Whoever reads your business plan should fully understand what you’re offering.
• Marketing and Sales Strategy The best product in the world wouldn’t sell if it has a poor marketing plan. Get into detail with how you’ll advertise your product. Detail your target audience, prices, and any promotional discounts.
• Funding This is the most important section in your plan because it states your initial budget, the funds you’ll need for the next five years, what you plan on doing with the funds, the creditors’ or investors’ return, and all business expenses such as salaries and equipment.
• Financial Forecast If you’re using your business plan for a loan or funds, you need to have the documents to back up your claim. You need to include all your financial statements and balance sheets, and any sources of income from the past few years.
• Business Overview Give a general overview of your business with info like the legal structure, operations plan, business address , whether it’s an online or physical business, number of employees, specific roles, etc.

What Are the Aspects of a Successful Business Plan?

Now that we’ve stated the main elements that should be included in a business plan, let’s get to the points you should focus on to create a successful business plan and not just a boring, lengthy one.

Use a Template or Hire Someone with Experience

You can write your business plan yourself, but with all the elements that need to be added, it can get complicated. If your business plan is short, then you might not need a template. If your plan is lengthy, you can find templates with a prepared structure online. In order to have a professional, well-written business plan, you can look into hiring someone with experience to get the job done. They would be able to better structure your plan and add charts and graphs when needed.

Do Your Research

Before jumping into writing your business plan, you need to ensure you’ve done an efficient amount of research. It’s your responsibility to have the answers to the questions that creditors or investors would ask. Whether it’s researching the market, competitors, or the industry, you need to know every small detail that can be an advantage or disadvantage to your business.

Define the Purpose of Your Business Plan

Your business plan will be your guide throughout the years, working as your roadmap, but you need to define why you’re creating it from the start. For example, are you making a plan for personal needs, as a guide for your employees, or are you planning on using it for investors and funding? If for funding, you’ll need to be very precise and clear with your targets and overall writing.

A Modified Business Plan

Your business plan is going to be read by various types of people from bankers, investors, and venture capitalists, to employees and yourself. Each audience type has certain points they’re looking for in your plan and you need to address those points accordingly. Make sure your plan can easily be modified according to your target audience. For example, banks would focus on balance sheets and statements while your employees will be focused on business goals or market research. You need to be able to make small alterations to serve different purposes.

Don’t Make It Too Long

The truth is no one is actually going to read your whole business plan. An executive summary is important so readers can easily find the sections they need. A typical business plan usually ranges from 20 to 50 pages. For example, venture capitalists are usually time restricted, so they’d want to find things like the financial forecast and investors’ return quickly. Knowing this, you should place this information in the beginning.

Regularly Update Your Business Plan

Your business plan needs to be updated as your business evolves and grows. Not all the sections will need updating, but the objectives set at the start of your business will change and your financial records will need to be up-to-date, especially if you’re still looking for funding. As mentioned before, your business plan is your roadmap, so don’t neglect it down the line.

Stand Out, but Don’t Overdo It

Your business plan is mostly stating the facts about your business but you need to capture the reader’s attention, mention why you’re different from your competitors, what makes you better. But sometimes businesses tend to oversell themselves, explain your passion, how much you care for your business, and the problems you want to solve but without unnecessary exaggeration.

Don’t Undersell Your Competitors

Every business has competitors and you need to clearly acknowledge these competitors in your business plan. Some startups think that not mentioning their competitors or underselling them helps their case, when in fact, it does the complete opposite.

You need to highlight what your competitors are good at, and state how you can do better. This will give you an edge with investors. Never talk bad about competitors or imply they’re not worthy of mentioning, this will lessen your credibility and make you look unprofessional.

Set Long-term and Short-term Goals

Every business plan should include five-year goals, but most importantly, it should include short-term goals such as annual and quarterly goals. It’s great to know where you want your business to be in the future, but investors need to know you have a clear plan to get there.

Back Up Your Plan with Documents, Charts, or Graphs

A business plan shouldn’t just be blocks of text; you need to make your plan appealing by adding images, charts, or graphs whenever possible. It won’t only improve your overall design; it can simplify and explain complicated sections. In order to strengthen your plan, you need to add supporting documents like articles about your business, financial statements, or contracts.

These were 10 important aspects that will help you create a successful and polished business plan. A great business plan from the start can change the trajectory of your whole business so giving it the right amount of work, focus, and dedication is vital for your business.

Logan is a passionate content creator, specializing in the business solutions sector. He loves to share his experience about technology, startups, entrepreneurs, and business-related updates.

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Voya Financial to acquire Indianapolis-based OneAmerica Financial’s retirement plan business

Indianapolis-based OneAmerica Financial will be acquired by New York City-based Voya Financial. Photo courtesy of OneAmerica Financial.

News Release

INDIANAPOLIS — Voya Financial, Inc. and OneAmerica Financial, Inc., a diversified mutual insurance organization, announced that the companies have entered into a definitive agreement for Voya to acquire OneAmerica Financial’s full-service retirement plan business.

In a press release, Voya Financial stated the acquisition adds strategically attractive scale to Voya’s full-service retirement business within Wealth Solutions, providing Voya with a broader set of capabilities that complement its existing product suite, including competitive employee stock ownership plan administration, and new opportunities to expand Voya’s distribution footprint and deepen its existing advisor relationships.

OneAmerica Financial’s full-service retirement plan business comprises 401(k), 403(b), 457, non-qualified deferred compensation plans and employee stock ownership plans. The transaction adds approximately $47 billion of assets to Voya’s strategically important full-service Emerging and Mid-Market segments and extends the firm’s leadership position in the Large Market by adding approximately $15 billion of recordkeeping assets.   As a result of the acquisition, Voya’s Wealth Solutions Defined Contribution client assets will grow to $580 billion, with total retirement plan and participant count reaching 60,000 and 7.9 million, respectively.

“This announcement is an exciting opportunity to add scale and new capabilities to our Wealth Solutions business that will help advance our growth strategy by offering workplace benefits and savings solutions to more individuals,” said Heather Lavallee, CEO, Voya Financial. “Voya is a purpose-driven company focused on supporting improved financial outcomes for our customers. OneAmerica is equally passionate about enabling financial security for their customers, making them a strong fit for Voya.”

“OneAmerica Financial is placing its retirement business in the hands of an organization that can deliver industry-leading offerings,” said Scott Davison, chairman, president and CEO of OneAmerica Financial, Inc. “For 60 years, we have been committed to serving the retirement market by helping our customers face every day with greater certainty. Voya is the firm to deliver on that commitment. We see this as a great opportunity for our customers and the OneAmerica Financial associates that will continue to grow with Voya, while we will focus on our remaining core product lines where we see tremendous growth potential.”

With the ability to serve employers and plans of all segments and sizes, including startup, Emerging and Mid, Large and Mega market plans, the acquisition of OneAmerica Financial’s full-service retirement plan business reflects Voya’s commitment to growing its Workplace Solutions businesses, supporting more participants with their workplace benefits and savings needs.

“This acquisition fully aligns with Voya’s relentless focus on customer satisfaction, leveraging the strength and expertise of two dedicated organizations who deliver a variety of workplace benefits and savings solutions,” said Rob Grubka, CEO, Workplace Solutions, Voya Financial. “OneAmerica’s broad range of retirement capabilities, combined with our existing product suite and digital solutions, provides an opportunity to extend Voya’s reach across all market segments to deliver health, wealth and investment solutions through the workplace and institutions.”

The transaction expands the services Voya provides to workplace benefits and savings plans it serves across all markets, tax codes and employer sizes. This includes OneAmerica Financial’s competitive employee stock ownership program and the benefits of its broad reach across the advisor community, bringing new and increased intermediary relationships to help expand Voya’s footprint.

“OneAmerica is centered around the people we serve, and we are deeply passionate about what we do,” said Sandy McCarthy, president of Retirement Services at OneAmerica Financial. “Our goal has always been to take our business to the next level to continuously improve our clients’ experiences to better optimize their outcomes. Voya shares this vision, and we are excited to see how our customers and associates will benefit in this new chapter.”

The transaction is expected to close on Jan. 1, 2025, subject to customary closing conditions, including regulatory approvals. Additional information on the transaction and its financial impact has been made available in a supplemental investor presentation on Voya’s investor relations website at  investors.voya.com . Voya intends to provide more details on the transaction during its third-quarter 2024 earnings call.

Citi is serving as financial advisor and Eversheds Sutherland LLP is serving as legal counsel to Voya in connection with this transaction.

Goldman Sachs & Co. LLC is serving as financial advisor and Sidley Austin, LLP is serving as legal counsel to OneAmerica Financial Partners in connection with this transaction.

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