Business Plan Outline

The purpose of the financial plan is to provide the reader with vital financial information about your business. The financial plan should include projections for two to five years minimum. Projections, as realistic as possible, are vital for the success of a new business. If you have not had experience in preparing financial information, you may need to obtain professional assistance with this section of your business plan. This section should include:

• Projected start-up costs that include the cost of equipment, inventory and real estate, as well as operating expenses until the business is profitable
• A description of the type of loan/financing you desire, including the amount, the length of the loan, desired terms, how you will use the money, how you are going to pay it back, available collateral and how you will pay it back if something goes wrong
• A list of your capital equipment, including equipment used to manufacture or delivery our product or service (not the equipment or merchandise you sell directly to a customer), such as manufacturing machinery and delivery fleets; and permanent fixtures(i.e. special lighting, air conditioning, office equipment, computers, etc.). If financing will be used to purchase some of this equipment, list it separately from the equipment you already own
• A balance sheet provides a snapshot of what you own and what you owe at a particular point in time. It contains the same categories of information, regardless of the type of business. Assets should be ranked in a decreasing order of liquidity, while liabilities should be listed in decreasing order beginning with the most immediate due. A balance sheet is in balance when Total Assets = Total Liabilities + Total Equity.
• A breakeven analysis allows you to demonstrate when your business will reach its breakeven point – when sales will reach a level to cover expenses. A breakeven analysis can tell you quickly if your costs are too high or if the price of your product or service is too low. A basic breakeven formula is:
  
  BE = FC/(P-VC)
  
  BE = Breakeven: The point where total costs equal total revenue
  FC = Fixed Costs: Costs that remain constant over time such as rent insurance, interest, salaries, etc.
  P = Price: Money received for a product or service
  VC = Variable Costs per unit: The per unit costs that vary directly with sales volume such as manufacturing labor, materials, sales costs, etc.
  
  

• Financial projections demonstrate what your business will look like at a certain future period of time. Projections should be prepared on a month-by-month basis for the first year and by quarters for the second and third years. They should be organized in a summary type financial format and should cover your company’s sales revenues, costs and income (Income Statement) and cashflows (Statements of Cash Flows).

• A deviation analysis recalculates your financial projections from the aforementioned based on changes in your income, cash flow, etc. Typically, this analysis is performed for two situations. First, based on a 50 percent increase in your projections, and second based on a 50 percent decrease.

• Historical financial reports should be included for an existing business, such as balance sheets, income statements and tax returns for the past three years if available.