Business Financial Plan Is a Key Part of the Overall Business Plan

The business financial plan is an important part of your overall business plan, even if you are a new business that has not yet made its first dollar. If you are submitting your business plan to lenders in order to secure loans for the business—start up business or ongoing business—make sure you submit three financial statements in this section. They include a balance statement or balance sheet, income statement and cash flow statement. 

For the new firm, your business financial plan should include these statements projecting out for a period of one year. The bankers will have a lot of questions on how you came up with these numbers so be prepared to discuss your marketing research and marketing plan in depth when you meet with them.

For the firm that has been in business for some time, the banks will want to see three years worth of these statements. For many businesses that we have visited with lately, this is a real problem due to the recent recession. Virtually everyone has at least one of the past three years with less than profitable numbers. Entrepreneurs say that a good away to work around this is to develop a great narrative about the situation in which you found yourself at the beginning of 2009 and how your worked your way out of it. Do the bankers need more convincing? You are here! You have survived!

For both the new and existing company, lenders will want to know about sources of funding, capital equipment and forecast of income and cash flow. Typically, lenders will want to see a business tax return and the personal tax return of the owner of the existing business and the personal tax return of the entrepreneur who is starting a new business (no tax returns have yet been filed for the business).

For the existing company and for the new company, the business financial plan statements are an interrelation of six key elements of the business that the typical entrepreneur spends an ungodly amount of his or her time focused on -- revenue, expense, profit (loss), assets, liabilities and the all important net worth. 

Business Financial Statements Defined

Let’s define each of the above-mentioned statements to determine what is involved in putting them together.

What is a balance statement? The balance statement represents the basic accounting equation … Assets - Liabilities = Net Worth. This number measures the value of a business at a given point in time. There are templates available to create a balance statement for your business.

What is an income statement? The business’s income statement details how it has performed over a period of time—perhaps the last six months or one year. It is also called a profit and loss statement or income and expense statement. It measures business performance over specific period of time. The equation is: Revenue – Expenses = Profit (Loss).

What is a cash flow statement? The cash flow statement is used to monitor incoming and outgoing cash on a monthly basis. If your cash flow statement is negative, there is more money going out than coming in…an unsustainable condition for your business.

Parts of a Business Plan Here are the typical sections of a business plan that you should consider including in your document:

  1. Introduction
  2. Business Plan Cover
  3. Purpose of the Plan
  4. Table of Contents
  5. Executive Summary
  6. Description/Location of the Business
  7. Market Analysis
  8. Products and Services
  9. Organization and Management
  10. Marketing and Sales Management
  11. The Financials of the Business
  12. Appendices of Supporting Documents