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Write a Business Plan
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Step 9:
Prepare a financial plan
Unless you're an accountant, the financial plan is probably going to be the most difficult part of the overall business plan. It must include detailed spreadsheets, as well as text that summarizes and explains the numbers (for example, any assumptions you make about business projections). You should definitely consider seeking help from a professional accountant or business consultant when preparing your financial plan.
Don't overestimate income or underestimate costs, and be ready to provide verbal explanations for every number, even if you received help from a third party. Finally, develop an accounting system to ensure accurate financial reporting to both you and the lender. Required elements include:
Past income statements (which include both income and expenses) and balance sheets (total assets vs. total liabilities) if you're already in business
Projected income and balance sheets for each month of the first year, then quarterly and annually for years two and three
Projected cash flow statements for each month of the first year, then quarterly and annually for years two and three (your investors want to be sure you have the cash to meet payroll and other expenses)
If possible, make three versions of each of these plans: best-case, expected-case, and worst-case scenarios. It's also important to show what these numbers mean for the investor, so provide analysis that explains the following:
Gross and operating margins: What total profits or losses can investors expect (gross margin)? What percentage of total revenues ends up as profit?
Break-even date: When will income meet expenses?
Return on investment: When can investors expect to get their money back? How much profit will they make?
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