These are called "pro forma" statements, and they are based on your assumptions about how your business will perform. Investors vary in their standards, but most like to see positive cash flow within the first year of operation, particularly if this if your first venture.
Additional Financial Information In addition to financial statements, prospective lenders or investors will also want to see a Sales Forecast and, how we run our business plan your business will have employees, a Personnel Plan.
For example, your assets will include cash, accounts receivable, inventory and equipment. Your liabilities will include accounts payable, wages and salaries, taxes, rent and utilities, and loan balances.
Be aware that lenders do not count the full value of your collateral, and each lender may count a different percentage. For a grocery store, the sales forecast might list projected sales of fruits, vegetables, dairy, meat, seafood, packaged goods and hot prepared meals.
Your financial statements should show both a long- and short-term vision for your business.
What will your exit strategy be if the business is failing? Your one-year projections should be broken down by month, while your more distant projections can be broken down by year. Personnel Plan If your business will have employees and not just managers, you will need a Personnel Plan showing what types of employees you will have for example, cashiers, butchers, drivers, stockers and cooksalong with what they will cost in terms of salary and wages, health insuranceretirement-plan contributionsworkers compensation insuranceunemployment insuranceand Social Security and Medicare taxes.
Whatever their form, financial statements must be complete, accurate and thorough. Potential investors will want to know when their investment will pay off and how much of a return to expect.
Remember, no one has to lend you any money or invest in your company. Your projections should be neither overly optimistic best-case scenarios, nor overly cautious worst-case scenarios, but realistic in-between projections that you can support.
Lenders may want your statements presented in a certain way, so ask before you draw them up. Sales Forecast The Sales Forecast is a chart that breaks down how much your business expects to sell in various categories by month for the next year and by year for the following two to four years.
In business plans, three-year and five-year projections are considered long term, and your plan will be expected to cover at least three years. Your balance sheet must balance at the end of every period.
If your business sells a product, your sales forecast should include the cost of goods sold. For a cleaning service business, the sales forecast might list one-time cleanings, monthly cleaning contracts and annual cleaning contracts and further break those down by houses, condos, apartment units, entire apartment buildings and office buildings.
When they are considering doing so, they will be comparing the risk and return of working with you to the risk and return they could get from lending to or investing in other companies. Hold an initial public offering and go public? Do you need an intermediate-term loan to purchase larger assets such as real estate or equipment?
How much will these expenses be, and how often will you need to pay them? So how, exactly, do you plan to use any money that lenders or investors offer you? Even if you and all of your business partners know exactly what you are doing, you may still want to hire an unbiased, outside professional to check your work and give you a second opinion on whether your projections are realistic.
Or are you a high-risk business that needs to jump through the extra hoops required to secure a government-backed Small Business Administration loan? Within each category are numerous subcategories. In order for your projections to be accurate, you must know your business.
If your business is new, your statements will be speculative, but you can make them realistic by basing them on the published financial statements of existing businesses similar to yours.
Lenders and investors want to know what kind of numbers your company is working with and whether your company is profitable or expects to be soon.
A bank, for example, may want to see monthly projections for the first year, quarterly projections for the second year and annual projections for the third year.
Your income statement must reconcile to your cash flow statement, which reconciles to your balance sheet. If you are inexperienced in preparing these statements, hire an accountant to help you. Then lay out your goals with financial projections for the next three to five years, depending on what lenders or investors have asked for.
To learn more about what investors will be looking for, see Reading The Balance Sheet Use realistic projections.Aug 06, · Whether your objective is to find an investor, get a business loan or just improve the way you run your business, your business plan must answer these key questions.
Remember, there is no right or.
Oct 03, · While every business owner should have an ongoing planning process to help them run their business, not every business owner needs a complete, formal business plan suitable for submitting to a potential /5(). Then check out these 10 practical ways to expand your business.
Prepare a complete business plan for a new location. we then broadened our product base with two line extensions, 'raising a. Oct 23, · Second, your business plan should be a tool you use to run and grow your business, something you continue to use and refine over time.
An excessively long business plan is a huge hassle to deal with and guarantees that your plan will be relegated to a desk drawer, never to be seen again/5(). The financial part of a business plan includes various financial statements that show where your company currently stands and where it expects to be in the near future.
This information helps you. Jan 20, · Reader Approved How to Write a Business Plan. Four Parts: Doing Your Homework Structuring Your Business Writing the Business Plan Sample Business Plans Community Q&A Creating a business plan will help you achieve your entrepreneurial goals.
A clear and compelling business plan provides you with a guide for building a successful enterprise focused on achieving your 95%(22).Download