The financial segment should be the last section (before the appendix) in the small business plan. This section is especially important if investors or lenders are reviewing the plan and a funding request is included in the report. This article looks at what type of financial data should be included in this section of the business plan and how the data may differ between an existing or startup business.
Historical Financial Data for an Existing Business
For an existing business, financial data should be included for the current fiscal year, as well as the previous year. If the business has a long history, past financial data up to five years should also be included. The first part of this section should include the company?s regular financial statements including:
Balance Sheets
Income Statements
Statement of Cash Flow
Creditors will want to look at the balance sheet to determine the amount of assets that can be used for collateral. The net worth is also an important factor for investors and lenders. The income statement and statement of cash flows is also a good indicator for creditors to determine the company?s ability to repay their debt. Likewise, investors want to get an idea the company?s ability to pay dividends on their investment.
Historical Financial Statements for a New Startup Business
Naturally a new business won?t have historical data to include in the business plan. Instead, the entrepreneur should provide estimated financial statements. Similar to historical data for an existing business, the estimated statements should be provided for the first five years.
The other sections in the business plan should coincide with the estimated financial statements. As an example, the market analysis that?s included in the plan should support the projected expenses and sales reported in the income statement. The funding request should also coincide with the estimated data report in the financial statements.
Sales Forecast, Budget and Other Financial Data
Besides the inclusion of the company?s financial statements, other financial data should also be included. Providing sales forecasts is important to demonstrate future revenue expectations. Sales forecasts data should be backed up with other areas of the business plan like the market analysis, organization and sales management sections. Providing budget information that?s derived from the forecast should also be included.
Providing charts and graphs is also a professional method to demonstrate financial data. All financial data whether it?s statements, charts, graphs, forecast and budget should coincide with other elements of the business plan. Inconsistencies between historical or projected financial data and other areas of the business plan can result in a loss of confidence by investors and lenders.
Source:
sba.gov