Telling someone that you’re going to write some financials for a business may be enough to put them to sleep. If you just think of it as columns of numbers, then you might as well use it to help cure insomnia. However, the financial plan section of your business plan is so much more than that. In fact, let me encourage you to get excited about your financial plan. Let it motivate and inspire you.
A good financial plan should first look at the financials that you have done so far in your business, if you are writing a business plan for an existing business. If you are looking for more funding or you want to add another partner to your business, anyone who is going to have a stake in the business is going to want to see your financials. Of course you don’t have to provide detailed analyses as part of your business plan. It’s likely that they will request to see them, but your business plan is not about looking back for the sake of looking back. Instead, you should draw from the information you can glean from past financials and use those to help you interpret the future.
Do you notice that your business is highly seasonal? Take that into consideration when you’re planning the future income of your business. Some good, sound, overall numbers are appropriate here to review past performance and likely a notation for additional reports available upon request (or added as an appendix) are all that’s really necessary. After all, a business plan is meant to give the reader a general idea about what they can expect the business to do in the future.
Now comes the exciting part! The financial segment of your business plan should project about 5 years into the future. If you have a new business (and thus no historical financials to draw from), look at industry trends to inform you. Don’t expect your business to grow exactly the same over time, but rather expect it to fluctuate with many factors. You should make notations to provide an explanation as to why you think your business’ expenses and income might go up or down over time. The more detailed the explanation, the more it will look like you know what you are talking about. And whether you’re writing to get funding, find a partner, or simply give yourself some direction, the more you know what you’re talking about, the more successful you will likely be. So this is not the stage to cut the research short!
Finally, if you are writing this business plan for someone else to see (other than just as a roadmap for yourself) you will probably want to have an accountant put the numbers together. Expect these numbers to be scrutinized – (the more money you’re looking for, the more closely they will be scrutinized) so a plan prepared by an accountant is more likely to stand up to that kind of intense scrutiny.
Your business plan is a roadmap for your success. Don’t ignore the critical financial planning stage because it seems dull. Let it excite you and motivate you.
