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How to Write the Financial Section of a Business Plan

An outline of your company's growth strategy is essential to a business plan, but it just isn't complete without the numbers to back it up. here's some advice on how to include things like a sales forecast, expense budget, and cash-flow statement..

Hands pointing to a engineer's drawing

A business plan is all conceptual until you start filling in the numbers and terms. The sections about your marketing plan and strategy are interesting to read, but they don't mean a thing if you can't justify your business with good figures on the bottom line. You do this in a distinct section of your business plan for financial forecasts and statements. The financial section of a business plan is one of the most essential components of the plan, as you will need it if you have any hope of winning over investors or obtaining a bank loan. Even if you don't need financing, you should compile a financial forecast in order to simply be successful in steering your business. "This is what will tell you whether the business will be viable or whether you are wasting your time and/or money," says Linda Pinson, author of Automate Your Business Plan for Windows  (Out of Your Mind 2008) and Anatomy of a Business Plan (Out of Your Mind 2008), who runs a publishing and software business Out of Your Mind and Into the Marketplace . "In many instances, it will tell you that you should not be going into this business." The following will cover what the financial section of a business plan is, what it should include, and how you should use it to not only win financing but to better manage your business.

Dig Deeper: Generating an Accurate Sales Forecast

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How to Write the Financial Section of a Business Plan: The Purpose of the Financial Section Let's start by explaining what the financial section of a business plan is not. Realize that the financial section is not the same as accounting. Many people get confused about this because the financial projections that you include--profit and loss, balance sheet, and cash flow--look similar to accounting statements your business generates. But accounting looks back in time, starting today and taking a historical view. Business planning or forecasting is a forward-looking view, starting today and going into the future. "You don't do financials in a business plan the same way you calculate the details in your accounting reports," says Tim Berry, president and founder of Palo Alto Software, who blogs at Bplans.com and is writing a book, The Plan-As-You-Go Business Plan. "It's not tax reporting. It's an elaborate educated guess." What this means, says Berry, is that you summarize and aggregate more than you might with accounting, which deals more in detail. "You don't have to imagine all future asset purchases with hypothetical dates and hypothetical depreciation schedules to estimate future depreciation," he says. "You can just guess based on past results. And you don't spend a lot of time on minute details in a financial forecast that depends on an educated guess for sales." The purpose of the financial section of a business plan is two-fold. You're going to need it if you are seeking investment from venture capitalists, angel investors, or even smart family members. They are going to want to see numbers that say your business will grow--and quickly--and that there is an exit strategy for them on the horizon, during which they can make a profit. Any bank or lender will also ask to see these numbers as well to make sure you can repay your loan. But the most important reason to compile this financial forecast is for your own benefit, so you understand how you project your business will do. "This is an ongoing, living document. It should be a guide to running your business," Pinson says. "And at any particular time you feel you need funding or financing, then you are prepared to go with your documents." If there is a rule of thumb when filling in the numbers in the financial section of your business plan, it's this: Be realistic. "There is a tremendous problem with the hockey-stick forecast" that projects growth as steady until it shoots up like the end of a hockey stick, Berry says. "They really aren't credible." Berry, who acts as an angel investor with the Willamette Angel Conference, says that while a startling growth trajectory is something that would-be investors would love to see, it's most often not a believable growth forecast. "Everyone wants to get involved in the next Google or Twitter, but every plan seems to have this hockey stick forecast," he says. "Sales are going along flat, but six months from now there is a huge turn and everything gets amazing, assuming they get the investors' money."  The way you come up a credible financial section for your business plan is to demonstrate that it's realistic. One way, Berry says, is to break the figures into components, by sales channel or target market segment, and provide realistic estimates for sales and revenue. "It's not exactly data, because you're still guessing the future. But if you break the guess into component guesses and look at each one individually, it somehow feels better," Berry says. "Nobody wins by overly optimistic or overly pessimistic forecasts."

Dig Deeper: What Angel Investors Look For

How to Write the Financial Section of a Business Plan: The Components of a Financial Section

A financial forecast isn't necessarily compiled in sequence. And you most likely won't present it in the final document in the same sequence you compile the figures and documents. Berry says that it's typical to start in one place and jump back and forth. For example, what you see in the cash-flow plan might mean going back to change estimates for sales and expenses.  Still, he says that it's easier to explain in sequence, as long as you understand that you don't start at step one and go to step six without looking back--a lot--in between.

  • Start with a sales forecast. Set up a spreadsheet projecting your sales over the course of three years. Set up different sections for different lines of sales and columns for every month for the first year and either on a monthly or quarterly basis for the second and third years. "Ideally you want to project in spreadsheet blocks that include one block for unit sales, one block for pricing, a third block that multiplies units times price to calculate sales, a fourth block that has unit costs, and a fifth that multiplies units times unit cost to calculate cost of sales (also called COGS or direct costs)," Berry says. "Why do you want cost of sales in a sales forecast? Because you want to calculate gross margin. Gross margin is sales less cost of sales, and it's a useful number for comparing with different standard industry ratios." If it's a new product or a new line of business, you have to make an educated guess. The best way to do that, Berry says, is to look at past results.
  • Create an expenses budget. You're going to need to understand how much it's going to cost you to actually make the sales you have forecast. Berry likes to differentiate between fixed costs (i.e., rent and payroll) and variable costs (i.e., most advertising and promotional expenses), because it's a good thing for a business to know. "Lower fixed costs mean less risk, which might be theoretical in business schools but are very concrete when you have rent and payroll checks to sign," Berry says. "Most of your variable costs are in those direct costs that belong in your sales forecast, but there are also some variable expenses, like ads and rebates and such." Once again, this is a forecast, not accounting, and you're going to have to estimate things like interest and taxes. Berry recommends you go with simple math. He says multiply estimated profits times your best-guess tax percentage rate to estimate taxes. And then multiply your estimated debts balance times an estimated interest rate to estimate interest.
  • Develop a cash-flow statement. This is the statement that shows physical dollars moving in and out of the business. "Cash flow is king," Pinson says. You base this partly on your sales forecasts, balance sheet items, and other assumptions. If you are operating an existing business, you should have historical documents, such as profit and loss statements and balance sheets from years past to base these forecasts on. If you are starting a new business and do not have these historical financial statements, you start by projecting a cash-flow statement broken down into 12 months. Pinson says that it's important to understand when compiling this cash-flow projection that you need to choose a realistic ratio for how many of your invoices will be paid in cash, 30 days, 60 days, 90 days and so on. You don't want to be surprised that you only collect 80 percent of your invoices in the first 30 days when you are counting on 100 percent to pay your expenses, she says. Some business planning software programs will have these formulas built in to help you make these projections.
  • Income projections. This is your pro forma profit and loss statement, detailing forecasts for your business for the coming three years. Use the numbers that you put in your sales forecast, expense projections, and cash flow statement. "Sales, lest cost of sales, is gross margin," Berry says. "Gross margin, less expenses, interest, and taxes, is net profit."
  • Deal with assets and liabilities. You also need a projected balance sheet. You have to deal with assets and liabilities that aren't in the profits and loss statement and project the net worth of your business at the end of the fiscal year. Some of those are obvious and affect you at only the beginning, like startup assets. A lot are not obvious. "Interest is in the profit and loss, but repayment of principle isn't," Berry says. "Taking out a loan, giving out a loan, and inventory show up only in assets--until you pay for them." So the way to compile this is to start with assets, and estimate what you'll have on hand, month by month for cash, accounts receivable (money owed to you), inventory if you have it, and substantial assets like land, buildings, and equipment. Then figure out what you have as liabilities--meaning debts. That's money you owe because you haven't paid bills (which is called accounts payable) and the debts you have because of outstanding loans.
  • Breakeven analysis. The breakeven point, Pinson says, is when your business's expenses match your sales or service volume. The three-year income projection will enable you to undertake this analysis. "If your business is viable, at a certain period of time your overall revenue will exceed your overall expenses, including interest." This is an important analysis for potential investors, who want to know that they are investing in a fast-growing business with an exit strategy.

Dig Deeper: How to Price Business Services

How to Write the Financial Section of a Business Plan: How to Use the Financial Section One of the biggest mistakes business people make is to look at their business plan, and particularly the financial section, only once a year. "I like to quote former President Dwight D. Eisenhower," says Berry. "'The plan is useless, but planning is essential.' What people do wrong is focus on the plan, and once the plan is done, it's forgotten. It's really a shame, because they could have used it as a tool for managing the company." In fact, Berry recommends that business executives sit down with the business plan once a month and fill in the actual numbers in the profit and loss statement and compare those numbers with projections. And then use those comparisons to revise projections in the future. Pinson also recommends that you undertake a financial statement analysis to develop a study of relationships and compare items in your financial statements, compare financial statements over time, and even compare your statements to those of other businesses. Part of this is a ratio analysis. She recommends you do some homework and find out some of the prevailing ratios used in your industry for liquidity analysis, profitability analysis, and debt and compare those standard ratios with your own. "This is all for your benefit," she says. "That's what financial statements are for. You should be utilizing your financial statements to measure your business against what you did in prior years or to measure your business against another business like yours."  If you are using your business plan to attract investment or get a loan, you may also include a business financial history as part of the financial section. This is a summary of your business from its start to the present. Sometimes a bank might have a section like this on a loan application. If you are seeking a loan, you may need to add supplementary documents to the financial section, such as the owner's financial statements, listing assets and liabilities. All of the various calculations you need to assemble the financial section of a business plan are a good reason to look for business planning software, so you can have this on your computer and make sure you get this right. Software programs also let you use some of your projections in the financial section to create pie charts or bar graphs that you can use elsewhere in your business plan to highlight your financials, your sales history, or your projected income over three years. "It's a pretty well-known fact that if you are going to seek equity investment from venture capitalists or angel investors," Pinson says, "they do like visuals."

Dig Deeper: How to Protect Your Margins in a Downturn

Related Links: Making It All Add Up: The Financial Section of a Business Plan One of the major benefits of creating a business plan is that it forces entrepreneurs to confront their company's finances squarely. Persuasive Projections You can avoid some of the most common mistakes by following this list of dos and don'ts. Making Your Financials Add Up No business plan is complete until it contains a set of financial projections that are not only inspiring but also logical and defensible. How many years should my financial projections cover for a new business? Some guidelines on what to include. Recommended Resources: Bplans.com More than 100 free sample business plans, plus articles, tips, and tools for developing your plan. Planning, Startups, Stories: Basic Business Numbers An online video in author Tim Berry's blog, outlining what you really need to know about basic business numbers. Out of Your Mind and Into the Marketplace Linda Pinson's business selling books and software for business planning. Palo Alto Software Business-planning tools and information from the maker of the Business Plan Pro software. U.S. Small Business Administration Government-sponsored website aiding small and midsize businesses. Financial Statement Section of a Business Plan for Start-Ups A guide to writing the financial section of a business plan developed by SCORE of northeastern Massachusetts.

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Free Financial Templates for a Business Plan

By Andy Marker | July 29, 2020

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In this article, we’ve rounded up expert-tested financial templates for your business plan, all of which are free to download in Excel, Google Sheets, and PDF formats.

Included on this page, you’ll find the essential financial statement templates, including income statement templates , cash flow statement templates , and balance sheet templates . Plus, we cover the key elements of the financial section of a business plan .

Financial Plan Templates

Download and prepare these financial plan templates to include in your business plan. Use historical data and future projections to produce an overview of the financial health of your organization to support your business plan and gain buy-in from stakeholders

Business Financial Plan Template

Business Financial Plan Template

Use this financial plan template to organize and prepare the financial section of your business plan. This customizable template has room to provide a financial overview, any important assumptions, key financial indicators and ratios, a break-even analysis, and pro forma financial statements to share key financial data with potential investors.

Download Financial Plan Template

Word | PDF | Smartsheet

Financial Plan Projections Template for Startups

Startup Financial Projections Template

This financial plan projections template comes as a set of pro forma templates designed to help startups. The template set includes a 12-month profit and loss statement, a balance sheet, and a cash flow statement for you to detail the current and projected financial position of a business.

‌ Download Startup Financial Projections Template

Excel | Smartsheet

Income Statement Templates for Business Plan

Also called profit and loss statements , these income statement templates will empower you to make critical business decisions by providing insight into your company, as well as illustrating the projected profitability associated with business activities. The numbers prepared in your income statement directly influence the cash flow and balance sheet forecasts.

Pro Forma Income Statement/Profit and Loss Sample

financial requirements business plan

Use this pro forma income statement template to project income and expenses over a three-year time period. Pro forma income statements consider historical or market analysis data to calculate the estimated sales, cost of sales, profits, and more.

‌ Download Pro Forma Income Statement Sample - Excel

Small Business Profit and Loss Statement

Small Business Profit and Loss Template

Small businesses can use this simple profit and loss statement template to project income and expenses for a specific time period. Enter expected income, cost of goods sold, and business expenses, and the built-in formulas will automatically calculate the net income.

‌ Download Small Business Profit and Loss Template - Excel

3-Year Income Statement Template

3 Year Income Statement Template

Use this income statement template to calculate and assess the profit and loss generated by your business over three years. This template provides room to enter revenue and expenses associated with operating your business and allows you to track performance over time.

Download 3-Year Income Statement Template

For additional resources, including how to use profit and loss statements, visit “ Download Free Profit and Loss Templates .”

Cash Flow Statement Templates for Business Plan

Use these free cash flow statement templates to convey how efficiently your company manages the inflow and outflow of money. Use a cash flow statement to analyze the availability of liquid assets and your company’s ability to grow and sustain itself long term.

Simple Cash Flow Template

financial requirements business plan

Use this basic cash flow template to compare your business cash flows against different time periods. Enter the beginning balance of cash on hand, and then detail itemized cash receipts, payments, costs of goods sold, and expenses. Once you enter those values, the built-in formulas will calculate total cash payments, net cash change, and the month ending cash position.

Download Simple Cash Flow Template

12-Month Cash Flow Forecast Template

financial requirements business plan

Use this cash flow forecast template, also called a pro forma cash flow template, to track and compare expected and actual cash flow outcomes on a monthly and yearly basis. Enter the cash on hand at the beginning of each month, and then add the cash receipts (from customers, issuance of stock, and other operations). Finally, add the cash paid out (purchases made, wage expenses, and other cash outflow). Once you enter those values, the built-in formulas will calculate your cash position for each month with.

‌ Download 12-Month Cash Flow Forecast

3-Year Cash Flow Statement Template Set

3 Year Cash Flow Statement Template

Use this cash flow statement template set to analyze the amount of cash your company has compared to its expenses and liabilities. This template set contains a tab to create a monthly cash flow statement, a yearly cash flow statement, and a three-year cash flow statement to track cash flow for the operating, investing, and financing activities of your business.

Download 3-Year Cash Flow Statement Template

For additional information on managing your cash flow, including how to create a cash flow forecast, visit “ Free Cash Flow Statement Templates .”

Balance Sheet Templates for a Business Plan

Use these free balance sheet templates to convey the financial position of your business during a specific time period to potential investors and stakeholders.

Small Business Pro Forma Balance Sheet

financial requirements business plan

Small businesses can use this pro forma balance sheet template to project account balances for assets, liabilities, and equity for a designated period. Established businesses can use this template (and its built-in formulas) to calculate key financial ratios, including working capital.

Download Pro Forma Balance Sheet Template

Monthly and Quarterly Balance Sheet Template

financial requirements business plan

Use this balance sheet template to evaluate your company’s financial health on a monthly, quarterly, and annual basis. You can also use this template to project your financial position for a specified time in the future. Once you complete the balance sheet, you can compare and analyze your assets, liabilities, and equity on a quarter-over-quarter or year-over-year basis.

Download Monthly/Quarterly Balance Sheet Template - Excel

Yearly Balance Sheet Template

financial requirements business plan

Use this balance sheet template to compare your company’s short and long-term assets, liabilities, and equity year-over-year. This template also provides calculations for common financial ratios with built-in formulas, so you can use it to evaluate account balances annually.

Download Yearly Balance Sheet Template - Excel

For more downloadable resources for a wide range of organizations, visit “ Free Balance Sheet Templates .”

Sales Forecast Templates for Business Plan

Sales projections are a fundamental part of a business plan, and should support all other components of your plan, including your market analysis, product offerings, and marketing plan . Use these sales forecast templates to estimate future sales, and ensure the numbers align with the sales numbers provided in your income statement.

Basic Sales Forecast Sample Template

Basic Sales Forecast Template

Use this basic forecast template to project the sales of a specific product. Gather historical and industry sales data to generate monthly and yearly estimates of the number of units sold and the price per unit. Then, the pre-built formulas will calculate percentages automatically. You’ll also find details about which months provide the highest sales percentage, and the percentage change in sales month-over-month. 

Download Basic Sales Forecast Sample Template

12-Month Sales Forecast Template for Multiple Products

financial requirements business plan

Use this sales forecast template to project the future sales of a business across multiple products or services over the course of a year. Enter your estimated monthly sales, and the built-in formulas will calculate annual totals. There is also space to record and track year-over-year sales, so you can pinpoint sales trends.

Download 12-Month Sales Forecasting Template for Multiple Products

3-Year Sales Forecast Template for Multiple Products

3 Year Sales Forecast Template

Use this sales forecast template to estimate the monthly and yearly sales for multiple products over a three-year period. Enter the monthly units sold, unit costs, and unit price. Once you enter those values, built-in formulas will automatically calculate revenue, margin per unit, and gross profit. This template also provides bar charts and line graphs to visually display sales and gross profit year over year.

Download 3-Year Sales Forecast Template - Excel

For a wider selection of resources to project your sales, visit “ Free Sales Forecasting Templates .”

Break-Even Analysis Template for Business Plan

A break-even analysis will help you ascertain the point at which a business, product, or service will become profitable. This analysis uses a calculation to pinpoint the number of service or unit sales you need to make to cover costs and make a profit.

Break-Even Analysis Template

Break Even Analysis

Use this break-even analysis template to calculate the number of sales needed to become profitable. Enter the product's selling price at the top of the template, and then add the fixed and variable costs. Once you enter those values, the built-in formulas will calculate the total variable cost, the contribution margin, and break-even units and sales values.

Download Break-Even Analysis Template

For additional resources, visit, “ Free Financial Planning Templates .”

Business Budget Templates for Business Plan

These business budget templates will help you track costs (e.g., fixed and variable) and expenses (e.g., one-time and recurring) associated with starting and running a business. Having a detailed budget enables you to make sound strategic decisions, and should align with the expense values listed on your income statement.

Startup Budget Template

financial requirements business plan

Use this startup budget template to track estimated and actual costs and expenses for various business categories, including administrative, marketing, labor, and other office costs. There is also room to provide funding estimates from investors, banks, and other sources to get a detailed view of the resources you need to start and operate your business.

Download Startup Budget Template

Small Business Budget Template

financial requirements business plan

This business budget template is ideal for small businesses that want to record estimated revenue and expenditures on a monthly and yearly basis. This customizable template comes with a tab to list income, expenses, and a cash flow recording to track cash transactions and balances.

Download Small Business Budget Template

Professional Business Budget Template

financial requirements business plan

Established organizations will appreciate this customizable business budget template, which  contains a separate tab to track projected business expenses, actual business expenses, variances, and an expense analysis. Once you enter projected and actual expenses, the built-in formulas will automatically calculate expense variances and populate the included visual charts. 

‌ Download Professional Business Budget Template

For additional resources to plan and track your business costs and expenses, visit “ Free Business Budget Templates for Any Company .”

Other Financial Templates for Business Plan

In this section, you’ll find additional financial templates that you may want to include as part of your larger business plan.

Startup Funding Requirements Template

Startup Funding Requirements Template

This simple startup funding requirements template is useful for startups and small businesses that require funding to get business off the ground. The numbers generated in this template should align with those in your financial projections, and should detail the allocation of acquired capital to various startup expenses.

Download Startup Funding Requirements Template - Excel

Personnel Plan Template

Personnel Plan Template

Use this customizable personnel plan template to map out the current and future staff needed to get — and keep — the business running. This information belongs in the personnel section of a business plan, and details the job title, amount of pay, and hiring timeline for each position. This template calculates the monthly and yearly expenses associated with each role using built-in formulas. Additionally, you can add an organizational chart to provide a visual overview of the company’s structure. 

Download Personnel Plan Template - Excel

Elements of the Financial Section of a Business Plan

Whether your organization is a startup, a small business, or an enterprise, the financial plan is the cornerstone of any business plan. The financial section should demonstrate the feasibility and profitability of your idea and should support all other aspects of the business plan. 

Below, you’ll find a quick overview of the components of a solid financial plan.

  • Financial Overview: This section provides a brief summary of the financial section, and includes key takeaways of the financial statements. If you prefer, you can also add a brief description of each statement in the respective statement’s section.
  • Key Assumptions: This component details the basis for your financial projections, including tax and interest rates, economic climate, and other critical, underlying factors.
  • Break-Even Analysis: This calculation helps establish the selling price of a product or service, and determines when a product or service should become profitable.
  • Pro Forma Income Statement: Also known as a profit and loss statement, this section details the sales, cost of sales, profitability, and other vital financial information to stakeholders.
  • Pro Forma Cash Flow Statement: This area outlines the projected cash inflows and outflows the business expects to generate from operating, financing, and investing activities during a specific timeframe.
  • Pro Forma Balance Sheet: This document conveys how your business plans to manage assets, including receivables and inventory.
  • Key Financial Indicators and Ratios: In this section, highlight key financial indicators and ratios extracted from financial statements that bankers, analysts, and investors can use to evaluate the financial health and position of your business.

Need help putting together the rest of your business plan? Check out our free simple business plan templates to get started. You can learn how to write a successful simple business plan  here . 

Visit this  free non-profit business plan template roundup  or download a  fill-in-the-blank business plan template  to make things easy. If you are looking for a business plan template by file type, visit our pages dedicated specifically to  Microsoft Excel ,  Microsoft Word , and  Adobe PDF  business plan templates. Read our articles offering  startup business plan templates  or  free 30-60-90-day business plan templates  to find more tailored options.

Discover a Better Way to Manage Business Plan Financials and Finance Operations

Empower your people to go above and beyond with a flexible platform designed to match the needs of your team — and adapt as those needs change. 

The Smartsheet platform makes it easy to plan, capture, manage, and report on work from anywhere, helping your team be more effective and get more done. Report on key metrics and get real-time visibility into work as it happens with roll-up reports, dashboards, and automated workflows built to keep your team connected and informed. 

When teams have clarity into the work getting done, there’s no telling how much more they can accomplish in the same amount of time.  Try Smartsheet for free, today.

Discover why over 90% of Fortune 100 companies trust Smartsheet to get work done.

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How to Prepare a Financial Plan for Startup Business (w/ example)

Financial Statements Template

Free Financial Statements Template

Ajay Jagtap

  • December 7, 2023

13 Min Read

financial plan for startup business

If someone were to ask you about your business financials, could you give them a detailed answer?

Let’s say they ask—how do you allocate your operating expenses? What is your cash flow situation like? What is your exit strategy? And a series of similar other questions.

Instead of mumbling what to answer or shooting in the dark, as a founder, you must prepare yourself to answer this line of questioning—and creating a financial plan for your startup is the best way to do it.

A business plan’s financial plan section is no easy task—we get that.

But, you know what—this in-depth guide and financial plan example can make forecasting as simple as counting on your fingertips.

Ready to get started? Let’s begin by discussing startup financial planning.

What is Startup Financial Planning?

Startup financial planning, in simple terms, is a process of planning the financial aspects of a new business. It’s an integral part of a business plan and comprises its three major components: balance sheet, income statement, and cash-flow statement.

Apart from these statements, your financial section may also include revenue and sales forecasts, assets & liabilities, break-even analysis , and more. Your first financial plan may not be very detailed, but you can tweak and update it as your company grows.

Key Takeaways

  • Realistic assumptions, thorough research, and a clear understanding of the market are the key to reliable financial projections.
  • Cash flow projection, balance sheet, and income statement are three major components of a financial plan.
  • Preparing a financial plan is easier and faster when you use a financial planning tool.
  • Exploring “what-if” scenarios is an ideal method to understand the potential risks and opportunities involved in the business operations.

Why is Financial Planning Important to Your Startup?

Poor financial planning is one of the biggest reasons why most startups fail. In fact, a recent CNBC study reported that running out of cash was the reason behind 44% of startup failures in 2022.

A well-prepared financial plan provides a clear financial direction for your business, helps you set realistic financial objectives, create accurate forecasts, and shows your business is committed to its financial objectives.

It’s a key element of your business plan for winning potential investors. In fact, YC considered recent financial statements and projections to be critical elements of their Series A due diligence checklist .

Your financial plan demonstrates how your business manages expenses and generates revenue and helps them understand where your business stands today and in 5 years.

Makes sense why financial planning is important to your startup, doesn’t it? Let’s cut to the chase and discuss the key components of a startup’s financial plan.

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financial requirements business plan

Key Components of a Startup Financial Plan

Whether creating a financial plan from scratch for a business venture or just modifying it for an existing one, here are the key components to consider including in your startup’s financial planning process.

Income Statement

An Income statement , also known as a profit-and-loss statement(P&L), shows your company’s income and expenditures. It also demonstrates how your business experienced any profit or loss over a given time.

Consider it as a snapshot of your business that shows the feasibility of your business idea. An income statement can be generated considering three scenarios: worst, expected, and best.

Your income or P&L statement must list the following:

  • Cost of goods or cost of sale
  • Gross margin
  • Operating expenses
  • Revenue streams
  • EBITDA (Earnings before interest, tax, depreciation , & amortization )

Established businesses can prepare annual income statements, whereas new businesses and startups should consider preparing monthly statements.

Cash flow Statement

A cash flow statement is one of the most critical financial statements for startups that summarize your business’s cash in-and-out flows over a given time.

This section provides details on the cash position of your business and its ability to meet monetary commitments on a timely basis.

Your cash flow projection consists of the following three components:

✅ Cash revenue projection: Here, you must enter each month’s estimated or expected sales figures.

✅ Cash disbursements: List expenditures that you expect to pay in cash for each month over one year.

✅ Cash flow reconciliation: Cash flow reconciliation is a process used to ensure the accuracy of cash flow projections. The adjusted amount is the cash flow balance carried over to the next month.

Furthermore, a company’s cash flow projections can be crucial while assessing liquidity, its ability to generate positive cash flows and pay off debts, and invest in growth initiatives.

Balance Sheet

Your balance sheet is a financial statement that reports your company’s assets, liabilities, and shareholder equity at a given time.

Consider it as a snapshot of what your business owns and owes, as well as the amount invested by the shareholders.

This statement consists of three parts: assets , liabilities, and the balance calculated by the difference between the first two. The final numbers on this sheet reflect the business owner’s equity or value.

Balance sheets follow the following accounting equation with assets on one side and liabilities plus Owner’s equity on the other:

Here is what’s the core purpose of having a balance-sheet:

  • Indicates the capital need of the business
  • It helps to identify the allocation of resources
  • It calculates the requirement of seed money you put up, and
  • How much finance is required?

Since it helps investors understand the condition of your business on a given date, it’s a financial statement you can’t miss out on.

Break-even Analysis

Break-even analysis is a startup or small business accounting practice used to determine when a company, product, or service will become profitable.

For instance, a break-even analysis could help you understand how many candles you need to sell to cover your warehousing and manufacturing costs and start making profits.

Remember, anything you sell beyond the break-even point will result in profit.

You must be aware of your fixed and variable costs to accurately determine your startup’s break-even point.

  • Fixed costs: fixed expenses that stay the same no matter what.
  • Variable costs: expenses that fluctuate over time depending on production or sales.

A break-even point helps you smartly price your goods or services, cover fixed costs, catch missing expenses, and set sales targets while helping investors gain confidence in your business. No brainer—why it’s a key component of your startup’s financial plan.

Having covered all the key elements of a financial plan, let’s discuss how you can create a financial plan for your startup.

How to Create a Financial Section of a Startup Business Plan?

1. determine your financial needs.

You can’t start financial planning without understanding your financial requirements, can you? Get your notepad or simply open a notion doc; it’s time for some critical thinking.

Start by assessing your current situation by—calculating your income, expenses , assets, and liabilities, what the startup costs are, how much you have against them, and how much financing you need.

Assessing your current financial situation and health will help determine how much capital you need for your startup and help plan fundraising activities and outreach.

Furthermore, determining financial needs helps prioritize operational activities and expenses, effectively allocate resources, and increase the viability and sustainability of a business in the long run.

Having learned to determine financial needs, let’s head straight to setting financial goals.

2. Define Your Financial Goals

Setting realistic financial goals is fundamental in preparing an effective financial plan. So, it would help to outline your long-term strategies and goals at the beginning of your financial planning process.

Let’s understand it this way—if you are a SaaS startup pursuing VC financing rounds, you may ask investors about what matters to them the most and prepare your financial plan accordingly.

However, a coffee shop owner seeking a business loan may need to create a plan that appeals to banks, not investors. At the same time, an internal financial plan designed to offer financial direction and resource allocation may not be the same as previous examples, seeing its different use case.

Feeling overwhelmed? Just define your financial goals—you’ll be fine.

You can start by identifying your business KPIs (key performance indicators); it would be an ideal starting point.

3. Choose the Right Financial Planning Tool

Let’s face it—preparing a financial plan using Excel is no joke. One would only use this method if they had all the time in the world.

Having the right financial planning software will simplify and speed up the process and guide you through creating accurate financial forecasts.

Many financial planning software and tools claim to be the ideal solution, but it’s you who will identify and choose a tool that is best for your financial planning needs.

financial requirements business plan

Create a Financial Plan with Upmetrics in no time

Enter your Financial Assumptions, and we’ll calculate your monthly/quarterly and yearly financial projections.

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Start Forecasting

4. Make Assumptions Before Projecting Financials

Once you have a financial planning tool, you can move forward to the next step— making financial assumptions for your plan based on your company’s current performance and past financial records.

You’re just making predictions about your company’s financial future, so there’s no need to overthink or complicate the process.

You can gather your business’ historical financial data, market trends, and other relevant documents to help create a base for accurate financial projections.

After you have developed rough assumptions and a good understanding of your business finances, you can move forward to the next step—projecting financials.

5. Prepare Realistic Financial Projections

It’s a no-brainer—financial forecasting is the most critical yet challenging aspect of financial planning. However, it’s effortless if you’re using a financial planning software.

Upmetrics’ forecasting feature can help you project financials for up to 7 years. However, new startups usually consider planning for the next five years. Although it can be contradictory considering your financial goals and investor specifications.

Following are the two key aspects of your financial projections:

Revenue Projections

In simple terms, revenue projections help investors determine how much revenue your business plans to generate in years to come.

It generally involves conducting market research, determining pricing strategy , and cash flow analysis—which we’ve already discussed in the previous steps.

The following are the key components of an accurate revenue projection report:

  • Market analysis
  • Sales forecast
  • Pricing strategy
  • Growth assumptions
  • Seasonal variations

This is a critical section for pre-revenue startups, so ensure your projections accurately align with your startup’s financial model and revenue goals.

Expense Projections

Both revenue and expense projections are correlated to each other. As revenue forecasts projected revenue assumptions, expense projections will estimate expenses associated with operating your business.

Accurately estimating your expenses will help in effective cash flow analysis and proper resource allocation.

These are the most common costs to consider while projecting expenses:

  • Fixed costs
  • Variable costs
  • Employee costs or payroll expenses
  • Operational expenses
  • Marketing and advertising expenses
  • Emergency fund

Remember, realistic assumptions, thorough research, and a clear understanding of your market are the key to reliable financial projections.

6. Consider “What if” Scenarios

After you project your financials, it’s time to test your assumptions with what-if analysis, also known as sensitivity analysis.

Using what-if analysis with different scenarios while projecting your financials will increase transparency and help investors better understand your startup’s future with its best, expected, and worst-case scenarios.

Exploring “what-if” scenarios is the best way to better understand the potential risks and opportunities involved in business operations. This proactive exercise will help you make strategic decisions and necessary adjustments to your financial plan.

7. Build a Visual Report

If you’ve closely followed the steps leading to this, you know how to research for financial projections, create a financial plan, and test assumptions using “what-if” scenarios.

Now, we’ll prepare visual reports to present your numbers in a visually appealing and easily digestible format.

Don’t worry—it’s no extra effort. You’ve already made a visual report while creating your financial plan and forecasting financials.

Check the dashboard to see the visual presentation of your projections and reports, and use the necessary financial data, diagrams, and graphs in the final draft of your financial plan.

Here’s what Upmetrics’ dashboard looks like:

Upmetrics financial projections visual report

8. Monitor and Adjust Your Financial Plan

Even though it’s not a primary step in creating a good financial plan, it’s quite essential to regularly monitor and adjust your financial plan to ensure the assumptions you made are still relevant, and you are heading in the right direction.

There are multiple ways to monitor your financial plan.

For instance, you can compare your assumptions with actual results to ensure accurate projections based on metrics like new customers acquired and acquisition costs, net profit, and gross margin.

Consider making necessary adjustments if your assumptions are not resonating with actual numbers.

Also, keep an eye on whether the changes you’ve identified are having the desired effect by monitoring their implementation.

And that was the last step in our financial planning guide. However, it’s not the end. Have a look at this financial plan example.

Startup Financial Plan Example

Having learned about financial planning, let’s quickly discuss a coffee shop startup financial plan example prepared using Upmetrics.

Important Assumptions

  • The sales forecast is conservative and assumes a 5% increase in Year 2 and a 10% in Year 3.
  • The analysis accounts for economic seasonality – wherein some months revenues peak (such as holidays ) and wanes in slower months.
  • The analysis assumes the owner will not withdraw any salary till the 3rd year; at any time it is assumed that the owner’s withdrawal is available at his discretion.
  • Sales are cash basis – nonaccrual accounting
  • Moderate ramp- up in staff over the 5 years forecast
  • Barista salary in the forecast is $36,000 in 2023.
  • In general, most cafes have an 85% gross profit margin
  • In general, most cafes have a 3% net profit margin

Projected Balance Sheet

Projected Balance Sheet

Projected Cash-Flow Statement

Cash-Flow Statement

Projected Profit & Loss Statement

Profit & Loss Statement

Break Even Analysis

Break Even Analysis

Start Preparing Your Financial Plan

We covered everything about financial planning in this guide, didn’t we? Although it doesn’t fulfill our objective to the fullest—we want you to finish your financial plan.

Sounds like a tough job? We have an easy way out for you—Upmetrics’ financial forecasting feature. Simply enter your financial assumptions, and let it do the rest.

So what are you waiting for? Try Upmetrics and create your financial plan in a snap.

Build your Business Plan Faster

with step-by-step Guidance & AI Assistance.

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Frequently Asked Questions

How often should i update my financial projections.

Well, there is no particular rule about it. However, reviewing and updating your financial plan once a year is considered an ideal practice as it ensures that the financial aspirations you started and the projections you made are still relevant.

How do I estimate startup costs accurately?

You can estimate your startup costs by identifying and factoring various one-time, recurring, and hidden expenses. However, using a financial forecasting tool like Upmetrics will ensure accurate costs while speeding up the process.

What financial ratios should startups pay attention to?

Here’s a list of financial ratios every startup owner should keep an eye on:

  • Net profit margin
  • Current ratio
  • Quick ratio
  • Working capital
  • Return on equity
  • Debt-to-equity ratio
  • Return on assets
  • Debt-to-asset ratio

What are the 3 different scenarios in scenario analysis?

As discussed earlier, Scenario analysis is the process of ascertaining and analyzing possible events that can occur in the future. Startups or businesses often consider analyzing these three scenarios:

  • base-case (expected) scenario
  • Worst-case scenario
  • best case scenario.

About the Author

financial requirements business plan

Ajay is a SaaS writer and personal finance blogger who has been active in the space for over three years, writing about startups, business planning, budgeting, credit cards, and other topics related to personal finance. If not writing, he’s probably having a power nap. Read more

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How to Write a Business Plan, Step by Step

Rosalie Murphy

Rosalie Murphy is a small-business writer at NerdWallet. Since 2021, she has covered business insurance, banking, credit cards and e-commerce software, and her reporting has been featured by The Associated Press, MarketWatch, Entrepreneur and many other publications. Rosalie holds a graduate certificate in Quantitative Business Management from Kent State University and is now pursuing an MBA. She is based in Chicago.

Ryan Lane

Ryan Lane is an editor on NerdWallet’s small-business team. He joined NerdWallet in 2019 as a student loans writer, serving as an authority on that topic after spending more than a decade at student loan guarantor American Student Assistance. In that role, Ryan co-authored the Student Loan Ranger blog in partnership with U.S. News & World Report, as well as wrote and edited content about education financing and financial literacy for multiple online properties, e-courses and more. Ryan also previously oversaw the production of life science journals as a managing editor for publisher Cell Press. Ryan is located in Rochester, New York.

financial requirements business plan

Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money .

What is a business plan?

1. write an executive summary, 2. describe your company, 3. state your business goals, 4. describe your products and services, 5. do your market research, 6. outline your marketing and sales plan, 7. perform a business financial analysis, 8. make financial projections, 9. summarize how your company operates, 10. add any additional information to an appendix, business plan tips and resources.

A business plan outlines your business’s financial goals and explains how you’ll achieve them over the next three to five years. Here’s a step-by-step guide to writing a business plan that will offer a strong, detailed road map for your business.

ZenBusiness

ZenBusiness

A business plan is a document that explains what your business does, how it makes money and who its customers are. Internally, writing a business plan should help you clarify your vision and organize your operations. Externally, you can share it with potential lenders and investors to show them you’re on the right track.

Business plans are living documents; it’s OK for them to change over time. Startups may update their business plans often as they figure out who their customers are and what products and services fit them best. Mature companies might only revisit their business plan every few years. Regardless of your business’s age, brush up this document before you apply for a business loan .

» Need help writing? Learn about the best business plan software .

This is your elevator pitch. It should include a mission statement, a brief description of the products or services your business offers and a broad summary of your financial growth plans.

Though the executive summary is the first thing your investors will read, it can be easier to write it last. That way, you can highlight information you’ve identified while writing other sections that go into more detail.

» MORE: How to write an executive summary in 6 steps

Next up is your company description. This should contain basic information like:

Your business’s registered name.

Address of your business location .

Names of key people in the business. Make sure to highlight unique skills or technical expertise among members of your team.

Your company description should also define your business structure — such as a sole proprietorship, partnership or corporation — and include the percent ownership that each owner has and the extent of each owner’s involvement in the company.

Lastly, write a little about the history of your company and the nature of your business now. This prepares the reader to learn about your goals in the next section.

» MORE: How to write a company overview for a business plan

financial requirements business plan

The third part of a business plan is an objective statement. This section spells out what you’d like to accomplish, both in the near term and over the coming years.

If you’re looking for a business loan or outside investment, you can use this section to explain how the financing will help your business grow and how you plan to achieve those growth targets. The key is to provide a clear explanation of the opportunity your business presents to the lender.

For example, if your business is launching a second product line, you might explain how the loan will help your company launch that new product and how much you think sales will increase over the next three years as a result.

» MORE: How to write a successful business plan for a loan

In this section, go into detail about the products or services you offer or plan to offer.

You should include the following:

An explanation of how your product or service works.

The pricing model for your product or service.

The typical customers you serve.

Your supply chain and order fulfillment strategy.

You can also discuss current or pending trademarks and patents associated with your product or service.

Lenders and investors will want to know what sets your product apart from your competition. In your market analysis section , explain who your competitors are. Discuss what they do well, and point out what you can do better. If you’re serving a different or underserved market, explain that.

Here, you can address how you plan to persuade customers to buy your products or services, or how you will develop customer loyalty that will lead to repeat business.

Include details about your sales and distribution strategies, including the costs involved in selling each product .

» MORE: R e a d our complete guide to small business marketing

If you’re a startup, you may not have much information on your business financials yet. However, if you’re an existing business, you’ll want to include income or profit-and-loss statements, a balance sheet that lists your assets and debts, and a cash flow statement that shows how cash comes into and goes out of the company.

Accounting software may be able to generate these reports for you. It may also help you calculate metrics such as:

Net profit margin: the percentage of revenue you keep as net income.

Current ratio: the measurement of your liquidity and ability to repay debts.

Accounts receivable turnover ratio: a measurement of how frequently you collect on receivables per year.

This is a great place to include charts and graphs that make it easy for those reading your plan to understand the financial health of your business.

This is a critical part of your business plan if you’re seeking financing or investors. It outlines how your business will generate enough profit to repay the loan or how you will earn a decent return for investors.

Here, you’ll provide your business’s monthly or quarterly sales, expenses and profit estimates over at least a three-year period — with the future numbers assuming you’ve obtained a new loan.

Accuracy is key, so carefully analyze your past financial statements before giving projections. Your goals may be aggressive, but they should also be realistic.

NerdWallet’s picks for setting up your business finances:

The best business checking accounts .

The best business credit cards .

The best accounting software .

Before the end of your business plan, summarize how your business is structured and outline each team’s responsibilities. This will help your readers understand who performs each of the functions you’ve described above — making and selling your products or services — and how much each of those functions cost.

If any of your employees have exceptional skills, you may want to include their resumes to help explain the competitive advantage they give you.

Finally, attach any supporting information or additional materials that you couldn’t fit in elsewhere. That might include:

Licenses and permits.

Equipment leases.

Bank statements.

Details of your personal and business credit history, if you’re seeking financing.

If the appendix is long, you may want to consider adding a table of contents at the beginning of this section.

How much do you need?

with Fundera by NerdWallet

We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

Here are some tips to write a detailed, convincing business plan:

Avoid over-optimism: If you’re applying for a business bank loan or professional investment, someone will be reading your business plan closely. Providing unreasonable sales estimates can hurt your chances of approval.

Proofread: Spelling, punctuation and grammatical errors can jump off the page and turn off lenders and prospective investors. If writing and editing aren't your strong suit, you may want to hire a professional business plan writer, copy editor or proofreader.

Use free resources: SCORE is a nonprofit association that offers a large network of volunteer business mentors and experts who can help you write or edit your business plan. The U.S. Small Business Administration’s Small Business Development Centers , which provide free business consulting and help with business plan development, can also be a resource.

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Business Plan Example and Template

Learn how to create a business plan

What is a Business Plan?

A business plan is a document that contains the operational and financial plan of a business, and details how its objectives will be achieved. It serves as a road map for the business and can be used when pitching investors or financial institutions for debt or equity financing .

Business Plan - Document with the words Business Plan on the title

A business plan should follow a standard format and contain all the important business plan elements. Typically, it should present whatever information an investor or financial institution expects to see before providing financing to a business.

Contents of a Business Plan

A business plan should be structured in a way that it contains all the important information that investors are looking for. Here are the main sections of a business plan:

1. Title Page

The title page captures the legal information of the business, which includes the registered business name, physical address, phone number, email address, date, and the company logo.

2. Executive Summary

The executive summary is the most important section because it is the first section that investors and bankers see when they open the business plan. It provides a summary of the entire business plan. It should be written last to ensure that you don’t leave any details out. It must be short and to the point, and it should capture the reader’s attention. The executive summary should not exceed two pages.

3. Industry Overview

The industry overview section provides information about the specific industry that the business operates in. Some of the information provided in this section includes major competitors, industry trends, and estimated revenues. It also shows the company’s position in the industry and how it will compete in the market against other major players.

4. Market Analysis and Competition

The market analysis section details the target market for the company’s product offerings. This section confirms that the company understands the market and that it has already analyzed the existing market to determine that there is adequate demand to support its proposed business model.

Market analysis includes information about the target market’s demographics , geographical location, consumer behavior, and market needs. The company can present numbers and sources to give an overview of the target market size.

A business can choose to consolidate the market analysis and competition analysis into one section or present them as two separate sections.

5. Sales and Marketing Plan

The sales and marketing plan details how the company plans to sell its products to the target market. It attempts to present the business’s unique selling proposition and the channels it will use to sell its goods and services. It details the company’s advertising and promotion activities, pricing strategy, sales and distribution methods, and after-sales support.

6. Management Plan

The management plan provides an outline of the company’s legal structure, its management team, and internal and external human resource requirements. It should list the number of employees that will be needed and the remuneration to be paid to each of the employees.

Any external professionals, such as lawyers, valuers, architects, and consultants, that the company will need should also be included. If the company intends to use the business plan to source funding from investors, it should list the members of the executive team, as well as the members of the advisory board.

7. Operating Plan

The operating plan provides an overview of the company’s physical requirements, such as office space, machinery, labor, supplies, and inventory . For a business that requires custom warehouses and specialized equipment, the operating plan will be more detailed, as compared to, say, a home-based consulting business. If the business plan is for a manufacturing company, it will include information on raw material requirements and the supply chain.

8. Financial Plan

The financial plan is an important section that will often determine whether the business will obtain required financing from financial institutions, investors, or venture capitalists. It should demonstrate that the proposed business is viable and will return enough revenues to be able to meet its financial obligations. Some of the information contained in the financial plan includes a projected income statement , balance sheet, and cash flow.

9. Appendices and Exhibits

The appendices and exhibits part is the last section of a business plan. It includes any additional information that banks and investors may be interested in or that adds credibility to the business. Some of the information that may be included in the appendices section includes office/building plans, detailed market research , products/services offering information, marketing brochures, and credit histories of the promoters.

Business Plan Template - Components

Business Plan Template

Here is a basic template that any business can use when developing its business plan:

Section 1: Executive Summary

  • Present the company’s mission.
  • Describe the company’s product and/or service offerings.
  • Give a summary of the target market and its demographics.
  • Summarize the industry competition and how the company will capture a share of the available market.
  • Give a summary of the operational plan, such as inventory, office and labor, and equipment requirements.

Section 2: Industry Overview

  • Describe the company’s position in the industry.
  • Describe the existing competition and the major players in the industry.
  • Provide information about the industry that the business will operate in, estimated revenues, industry trends, government influences, as well as the demographics of the target market.

Section 3: Market Analysis and Competition

  • Define your target market, their needs, and their geographical location.
  • Describe the size of the market, the units of the company’s products that potential customers may buy, and the market changes that may occur due to overall economic changes.
  • Give an overview of the estimated sales volume vis-à-vis what competitors sell.
  • Give a plan on how the company plans to combat the existing competition to gain and retain market share.

Section 4: Sales and Marketing Plan

  • Describe the products that the company will offer for sale and its unique selling proposition.
  • List the different advertising platforms that the business will use to get its message to customers.
  • Describe how the business plans to price its products in a way that allows it to make a profit.
  • Give details on how the company’s products will be distributed to the target market and the shipping method.

Section 5: Management Plan

  • Describe the organizational structure of the company.
  • List the owners of the company and their ownership percentages.
  • List the key executives, their roles, and remuneration.
  • List any internal and external professionals that the company plans to hire, and how they will be compensated.
  • Include a list of the members of the advisory board, if available.

Section 6: Operating Plan

  • Describe the location of the business, including office and warehouse requirements.
  • Describe the labor requirement of the company. Outline the number of staff that the company needs, their roles, skills training needed, and employee tenures (full-time or part-time).
  • Describe the manufacturing process, and the time it will take to produce one unit of a product.
  • Describe the equipment and machinery requirements, and if the company will lease or purchase equipment and machinery, and the related costs that the company estimates it will incur.
  • Provide a list of raw material requirements, how they will be sourced, and the main suppliers that will supply the required inputs.

Section 7: Financial Plan

  • Describe the financial projections of the company, by including the projected income statement, projected cash flow statement, and the balance sheet projection.

Section 8: Appendices and Exhibits

  • Quotes of building and machinery leases
  • Proposed office and warehouse plan
  • Market research and a summary of the target market
  • Credit information of the owners
  • List of product and/or services

Related Readings

Thank you for reading CFI’s guide to Business Plans. To keep learning and advancing your career, the following CFI resources will be helpful:

  • Corporate Structure
  • Three Financial Statements
  • Business Model Canvas Examples
  • See all management & strategy resources
  • Share this article

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Simple Business Plan Template for Startups, Small Businesses & Entrepreneurs

Financial plan, what is a financial plan.

A business’ financial plan is the part of your business plan that details how your company will achieve its financial goals. It includes information on your company’s projected income, expenses, and cash flow in the form of a 5-Year Income Statement, Balance Sheet and Cash Flow Statement. The plan should also detail how much funding your company needs and the key uses of these funds.

The financial plan is an important part of the business plan, as it provides a framework for making financial decisions. It can be used to track progress and make adjustments as needed.

Why Your Financial Plan is Important

The financial section of your business plan details the financial implications of running your company. It is important for the following two reasons:

Making Informed Decisions

A financial plan provides a framework for making decisions about how to use your money. It can help you determine whether or not you can afford to make a major purchase, such as a new piece of equipment.

It can also help you decide how much money to reinvest in your business, and how much to save for paying taxes.

A financial plan is like a roadmap for your business. It can help you track your progress and make adjustments as needed. The plan can also help you identify potential problems before they arise.

For example, if your sales are below your projections, you may need to adjust your budget accordingly.

Your financial plan helps you understand how much outside funding is required, when your levels of cash might fall low, and what sales and other goals you need to hit to become financially viable.

Securing Funding

This section of your plan is absolutely critical if you are trying to secure funding. Your financial plan should include information on your revenue, expenses, and cash flow.

This information will help potential investors or lenders understand your business’s financial situation and decide whether or not to provide funding.

Include a detailed description of how you plan to use the funds you are requesting. For example, what are the key uses of the funds (e.g., purchasing equipment, paying staff, etc.) and what are the future timings of these financial outlays.

The financial information in your business plan should be realistic and accurate. Do not overstate your projected revenues or underestimate your expenses. This can lead to problems down the road.

Potential investors and lenders will be very interested in your future projections since it indicates whether you will be able to repay your loans and/or provide a nice return on investment (ROI) upon exit.

Financial Plan Template: 4 Components to Include in Your Financial Plan

The financial section of a business plan should have the following four sub-sections:

Revenue Model

Here you will detail how your company generates revenues. Oftentimes this is very straightforward, for instance, if you sell products. Other times, your answer might be more complex, such as if you’re selling subscriptions (particularly at different price/service levels) or if you are selling multiple products and services.

Financial Overview & Highlights

In developing your financial plan, you need to create full financial forecasts including the following financial statements.

5-Year Income Statement / Profit and Loss Statement

An income statement, also known as a profit and loss statement (P&L), shows how much revenue your business has generated over a specific period of time, and how much of that revenue has turned into profits. The statement includes your company’s revenues and expenses for a given time period, such as a month, quarter, or year. It can also show your company’s net income, which is the amount of money your company has made after all expenses have been paid.

5-Year Balance Sheet

A balance sheet shows a company’s financial position at a specific point in time. The balance sheet lists a company’s assets (what it owns), its liabilities (what it owes), and its equity (the difference between its assets and its liabilities).

The balance sheet is important because it shows a company’s financial health at a specific point in time. A strong balance sheet indicates that a company has the resources it needs to grow and expand. A weak balance sheet, on the other hand, may indicate that a company is struggling to pay its bills and may be at risk of bankruptcy.

5-Year Cash Flow Statement

A cash flow statement shows how much cash a company has on hand, as well as how much cash it is generating (or losing) over a specific period of time. The statement includes both operating and non-operating activities, such as revenue from sales, expenses, investing activities, and financing activities.

While your full financial projections will go in your Appendix, highlights of your financial projections will go in the Financial Plan section.

These highlights include your Total Revenue, Direct Expenses, Gross Profit, Other Expenses, EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), and Net Income projections. Also include key assumptions used in creating these future projections such as revenue and cost growth rates.

Funding Requirements/Use of Funds

In this section, you will detail how much outside funding you require, if any, and the core uses of these funds.

For example, detail how much of the funding you need for:

  • Product Development
  • Product Manufacturing
  • Rent or Office/Building Build-Out

Exit Strategy

If you are seeking equity capital, you need to explain your “exit strategy” here or how investors will “cash out” from their investment.

To add credibility to your exit strategy, conduct market research. Specifically, find other companies in your market who have exited in the past few years. Mention how they exited and the amounts of the exit (e.g., XYZ Corp. bought ABC Corp. for $Y).  

Business Plan Financial Plan FAQs

What is a financial plan template.

A financial plan template is a pre-formatted spreadsheet that you can use to create your own financial plan. The financial plan template includes formulas that will automatically calculate your revenue, expenses, and cash flow projections.

How Can I Download a Financial Plan Template?

Download Growthink’s Ultimate Business Plan Template which includes a complete financial plan template and more to help you write a solid business plan in hours.

How Do You Make Realistic Assumptions in Your Business Plan?

When forecasting your company’s future, you need to make realistic assumptions. Conduct market research and speak with industry experts to get a better idea of the key trends affecting your business and realistic growth rates.

You should also use historical data to help inform your projections. For example, if you are launching a new product, use past sales data to estimate how many units you might sell in Year 1, Year 2, etc.

Learn more about how to make the appropriate financial assumptions for your business plan.

How Do You Make the Proper Financial Projections for Your Business Plan?

Your business plan’s financial projections should be based on your business model and your market research. The goal is to make as realistic and achievable projections as possible.

To create a good financial projection, you need to understand your revenue model and your target market. Once you have this information, you can develop assumptions around revenue growth, cost of goods sold, margins, expenses, and other key metrics.

Once you have your assumptions set, you can plug them into a financial model to generate your projections.

Learn more about how to make the proper financial projections for your business plan.

What Financials Should Be Included in a Business Plan?

There are a few key financials that should be included in a traditional business plan format. These include the Income Statement, Balance Sheet, and Cash Flow Statement.

Income Statements, also called Profit and Loss Statements, will show your company’s expected income and expense projections over a specific period of time (usually 1 year, 3 years, or 5 years). Balance Sheets will show your company’s assets, liabilities, and equity at a specific point in time. Cash Flow Statements will show how much cash your company has generated and used over a specific period of time.

Growthink's Ultimate Business Plan Template includes a complete financial plan template to easily create these financial statements and more so you can write a great business plan in hours.

BUSINESS PLAN TEMPLATE OUTLINE

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  • 1. Executive Summary
  • 2. Company Overview
  • 3. Industry Analysis
  • 4. Customer Analysis
  • 5. Competitive Analysis
  • 6. Marketing Plan
  • 7. Operations Plan
  • 8. Management Team
  • 9. Financial Plan
  • 10. Appendix
  • Business Plan Summary

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How to Craft the Financial Section of Business Plan (Hint: It’s All About the Numbers)

Writing a small business plan takes time and effort … especially when you have to dive into the numbers for the financial section. But, working on the financial section of business plan could lead to a big payoff for your business.

Read on to learn what is the financial section of a business plan, why it matters, and how to write one for your company.  

What is the financial section of business plan?

Generally, the financial section is one of the last sections in a business plan. It describes a business’s historical financial state (if applicable) and future financial projections. Businesses include supporting documents such as budgets and financial statements, as well as funding requests in this section of the plan.  

The financial part of the business plan introduces numbers. It comes after the executive summary, company description , market analysis, organization structure, product information, and marketing and sales strategies.

Businesses that are trying to get financing from lenders or investors use the financial section to make their case. This section also acts as a financial roadmap so you can budget for your business’s future income and expenses. 

Why it matters 

The financial section of the business plan is critical for moving beyond wordy aspirations and into hard data and the wonderful world of numbers. 

Through the financial section, you can:

  • Forecast your business’s future finances
  • Budget for expenses (e.g., startup costs)
  • Get financing from lenders or investors
  • Grow your business

describes how you can use the four ways to use the financial section of business plan

  • Growth : 64% of businesses with a business plan were able to grow their business, compared to 43% of businesses without a business plan.
  • Financing : 36% of businesses with a business plan secured a loan, compared to 18% of businesses without a plan.

So, if you want to possibly double your chances of securing a business loan, consider putting in a little time and effort into your business plan’s financial section. 

Writing your financial section

To write the financial section, you first need to gather some information. Keep in mind that the information you gather depends on whether you have historical financial information or if you’re a brand-new startup. 

Your financial section should detail:

  • Business expenses 

Financial projections

Financial statements, break-even point, funding requests, exit strategy, business expenses.

Whether you’ve been in business for one day or 10 years, you have expenses. These expenses might simply be startup costs for new businesses or fixed and variable costs for veteran businesses. 

Take a look at some common business expenses you may need to include in the financial section of business plan:

  • Licenses and permits
  • Cost of goods sold 
  • Rent or mortgage payments
  • Payroll costs (e.g., salaries and taxes)
  • Utilities 
  • Equipment 
  • Supplies 
  • Advertising 

Write down each type of expense and amount you currently have as well as expenses you predict you’ll have. Use a consistent time period (e.g., monthly costs). 

Indicate which expenses are fixed (unchanging month-to-month) and which are variable (subject to changes). 

How much do you anticipate earning from sales each month? 

If you operate an existing business, you can look at previous monthly revenue to make an educated estimate. Take factors into consideration, like seasonality and economic ups and downs, when basing projections on previous cash flow.

Coming up with your financial projections may be a bit trickier if you are a startup. After all, you have nothing to go off of. Come up with a reasonable monthly goal based on things like your industry, competitors, and the market. Hint : Look at your market analysis section of the business plan for guidance. 

A financial statement details your business’s finances. The three main types of financial statements are income statements, cash flow statements, and balance sheets.

Income statements summarize your business’s income and expenses during a period of time (e.g., a month). This document shows whether your business had a net profit or loss during that time period. 

Cash flow statements break down your business’s incoming and outgoing money. This document details whether your company has enough cash on hand to cover expenses.

The balance sheet summarizes your business’s assets, liabilities, and equity. Balance sheets help with debt management and business growth decisions. 

If you run a startup, you can create “pro forma financial statements,” which are statements based on projections.

If you’ve been in business for a bit, you should have financial statements in your records. You can include these in your business plan. And, include forecasted financial statements. 

financial requirements business plan

You’re just in luck. Check out our FREE guide, Use Financial Statements to Assess the Health of Your Business , to learn more about the different types of financial statements for your business.

Potential investors want to know when your business will reach its break-even point. The break-even point is when your business’s sales equal its expenses. 

Estimate when your company will reach its break-even point and detail it in the financial section of business plan.

If you’re looking for financing, detail your funding request here. Include how much you are looking for, list ideal terms (e.g., 10-year loan or 15% equity), and how long your request will cover. 

Remember to discuss why you are requesting money and what you plan on using the money for (e.g., equipment). 

Back up your funding request by emphasizing your financial projections. 

Last but not least, your financial section should also discuss your business’s exit strategy. An exit strategy is a plan that outlines what you’ll do if you need to sell or close your business, retire, etc. 

Investors and lenders want to know how their investment or loan is protected if your business doesn’t make it. The exit strategy does just that. It explains how your business will make ends meet even if it doesn’t make it. 

When you’re working on the financial section of business plan, take advantage of your accounting records to make things easier on yourself. For organized books, try Patriot’s online accounting software . Get your free trial now!

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How to Write the Financial Section of a Business Plan

Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.

financial requirements business plan

Taking Stock of Expenses

The income statement, the cash flow projection, the balance sheet.

The financial section of your business plan determines whether or not your business idea is viable and will be the focus of any investors who may be attracted to your business idea. The financial section is composed of four financial statements: the income statement, the cash flow projection, the balance sheet, and the statement of shareholders' equity. It also should include a brief explanation and analysis of these four statements.

Think of your business expenses as two cost categories: your start-up expenses and your operating expenses. All the costs of getting your business up and running should be considered start-up expenses. These may include:

  • Business registration fees
  • Business licensing and permits
  • Starting inventory
  • Rent deposits
  • Down payments on a property
  • Down payments on equipment
  • Utility setup fees

Your own list will expand as soon as you start to itemize them.

Operating expenses are the costs of keeping your business running . Think of these as your monthly expenses. Your list of operating expenses may include:

  • Salaries (including your own)
  • Rent or mortgage payments
  • Telecommunication expenses
  • Raw materials
  • Distribution
  • Loan payments
  • Office supplies
  • Maintenance

Once you have listed all of your operating expenses, the total will reflect the monthly cost of operating your business. Multiply this number by six, and you have a six-month estimate of your operating expenses. Adding this amount to your total startup expenses list, and you have a ballpark figure for your complete start-up costs.

Now you can begin to put together your financial statements for your business plan starting with the income statement.

The income statement shows your revenues, expenses, and profit for a particular period—a snapshot of your business that shows whether or not your business is profitable. Subtract expenses from your revenue to determine your profit or loss.

While established businesses normally produce an income statement each fiscal quarter or once each fiscal year, for the purposes of the business plan, an income statement should be generated monthly for the first year.

Not all of the categories in this income statement will apply to your business. Eliminate those that do not apply, and add categories where necessary to adapt this template to your business.

If you have a product-based business, the revenue section of the income statement will look different. Revenue will be called sales, and you should account for any inventory.

The cash flow projection shows how cash is expected to flow in and out of your business. It is an important tool for cash flow management because it indicates when your expenditures are too high or if you might need a short-term investment to deal with a cash flow surplus. As part of your business plan, the cash flow projection will show how  much capital investment  your business idea needs.

For investors, the cash flow projection shows whether your business is a good credit risk and if there is enough cash on hand to make your business a good candidate for a line of credit, a  short-term loan , or a longer-term investment. You should include cash flow projections for each month over one year in the financial section of your business plan.

Do not confuse the cash flow projection with the cash flow statement. The cash flow statement shows the flow of cash in and out of your business. In other words, it describes the cash flow that has occurred in the past. The cash flow projection shows the cash that is anticipated to be generated or expended over a chosen period in the future.

There are three parts to the cash flow projection:

  • Cash revenues: Enter your estimated sales figures for each month. Only enter the sales that are collectible in cash during each month you are detailing.
  • Cash disbursements: Take the various expense categories from your ledger and list the cash expenditures you actually expect to pay for each month.
  • Reconciliation of cash revenues to cash disbursements: This section shows an opening balance, which is the carryover from the previous month's operations. The current month's revenues are added to this balance, the current month's disbursements are subtracted, and the adjusted cash flow balance is carried over to the next month.

The balance sheet reports your business's net worth at a particular point in time. It summarizes all the financial data about your business in three categories:

  • Assets :  Tangible objects of financial value that are owned by the company.
  • Liabilities: Debt owed to a creditor of the company.
  • Equity: The net difference when the  total liabilities  are subtracted from the total assets.

The relationship between these elements of financial data is expressed with the equation: Assets = Liabilities + Equity .

For your  business plan , you should create a pro forma balance sheet that summarizes the information in the income statement and cash flow projections. A business typically prepares a balance sheet once a year.

Once your balance sheet is complete, write a brief analysis for each of the three financial statements. The analysis should be short with highlights rather than in-depth analysis. The financial statements themselves should be placed in your business plan's appendices.

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financial requirements business plan

How To Create Financial Projections for Your Business Plan

Building a financial projection as you write out your business plan can help you forecast how much money your business will bring in.

a white rectangle with yellow line criss-crossing across it: business plan financial projections

Planning for the future, whether it’s with growth in mind or just staying the course, is central to being a business owner. Part of this planning effort is making financial projections of sales, expenses, and—if all goes well—profits.

Even if your business is a startup that has yet to open its doors, you can still make projections. Here’s how to prepare your business plan financial projections, so your company will thrive.

What are business plan financial projections?

Business plan financial projections are a company’s estimates, or forecasts, of its financial performance at some point in the future. For existing businesses, draw on historical data to detail how your company expects metrics like revenue, expenses, profit, and cash flow to change over time.

Companies can create financial projections for any span of time, but typically they’re for between one and five years. Many companies revisit and amend these projections at least annually. 

Creating financial projections is an important part of building a business plan . That’s because realistic estimates help company leaders set business goals, execute financial decisions, manage cash flow , identify areas for operational improvement, seek funding from investors, and more.

What are financial projections used for? 

Financial forecasting serves as a useful tool for key stakeholders, both within and outside of the business. They often are used for:

Business planning

Accurate financial projections can help a company establish growth targets and other goals . They’re also used to determine whether ideas like a new product line are financially feasible. Future financial estimates are helpful tools for business contingency planning, which involves considering the monetary impact of adverse events and worst-case scenarios. They also provide a benchmark: If revenue is falling short of projections, for example, the company may need changes to keep business operations on track.

Projections may reveal potential problems—say, unexpected operating expenses that exceed cash inflows. A negative cash flow projection may suggest the business needs to secure funding through outside investments or bank loans, increase sales, improve margins, or cut costs.

When potential investors consider putting their money into a venture, they want a return on that investment. Business projections are a key tool they will use to make that decision. The projections can figure in establishing the valuation of your business, equity stakes, plans for an exit, and more. Investors may also use your projections to ensure that the business is meeting goals and benchmarks.

Loans or lines of credit 

Lenders rely on financial projections to determine whether to extend a business loan to your company. They’ll want to see historical financial data like cash flow statements, your balance sheet , and other financial statements—but they’ll also look very closely at your multi-year financial projections. Good candidates can receive higher loan amounts with lower interest rates or more flexible payment plans.

Lenders may also use the estimated value of company assets to determine the collateral to secure the loan. Like investors, lenders typically refer to your projections over time to monitor progress and financial health.

What information is included in financial projections for a business?

Before sitting down to create projections, you’ll need to collect some data. Owners of an existing business can leverage three financial statements they likely already have: a balance sheet, an annual income statement , and a cash flow statement .

A new business, however, won’t have this historical data. So market research is crucial: Review competitors’ pricing strategies, scour research reports and market analysis , and scrutinize any other publicly available data that can help inform your projections. Beginning with conservative estimates and simple calculations can help you get started, and you can always add to the projections over time.

One business’s financial projections may be more detailed than another’s, but the forecasts typically rely on and include the following:

True to its name, a cash flow statement shows the money coming into and going out of the business over time: cash outflows and inflows. Cash flows fall into three main categories:

Income statement

Projected income statements, also known as projected profit and loss statements (P&Ls), forecast the company’s revenue and expenses for a given period.

Generally, this is a table with several line items for each category. Sales projections can include the sales forecast for each individual product or service (many companies break this down by month). Expenses are a similar setup: List your expected costs by category, including recurring expenses such as salaries and rent, as well as variable expenses for raw materials and transportation.

This exercise will also provide you with a net income projection, which is the difference between your revenue and expenses, including any taxes or interest payments. That number is a forecast of your profit or loss, hence why this document is often called a P&L.

Balance sheet

A balance sheet shows a snapshot of your company’s financial position at a specific point in time. Three important elements are included as balance sheet items:

  • Assets. Assets are any tangible item of value that the company currently has on hand or will in the future, like cash, inventory, equipment, and accounts receivable. Intangible assets include copyrights, trademarks, patents and other intellectual property .
  • Liabilities. Liabilities are anything that the company owes, including taxes, wages, accounts payable, dividends, and unearned revenue, such as customer payments for goods you haven’t yet delivered.
  • Shareholder equity. The shareholder equity figure is derived by subtracting total liabilities from total assets. It reflects how much money, or capital, the company would have left over if the business paid all its liabilities at once or liquidated (this figure can be a negative number if liabilities exceed assets). Equity in business is the amount of capital that the owners and any other shareholders have tied up in the company.

They’re called balance sheets because assets always equal liabilities plus shareholder equity. 

5 steps for creating financial projections for your business

  • Identify the purpose and timeframe for your projections
  • Collect relevant historical financial data and market analysis
  • Forecast expenses
  • Forecast sales
  • Build financial projections

The following five steps can help you break down the process of developing financial projections for your company:

1. Identify the purpose and timeframe for your projections

The details of your projections may vary depending on their purpose. Are they for internal planning, pitching investors, or monitoring performance over time? Setting the time frame—monthly, quarterly, annually, or multi-year—will also inform the rest of the steps.

2. Collect relevant historical financial data and market analysis

If available, gather historical financial statements, including balance sheets, cash flow statements, and annual income statements. New companies without this historical data may have to rely on market research, analyst reports, and industry benchmarks—all things that established companies also should use to support their assumptions.

3. Forecast expenses

Identify future spending based on direct costs of producing your goods and services ( cost of goods sold, or COGS) as well as operating expenses, including any recurring and one-time costs. Factor in expected changes in expenses, because this can evolve based on business growth, time in the market, and the launch of new products.

4. Forecast sales

Project sales for each revenue stream, broken down by month. These projections may be based on historical data or market research, and they should account for anticipated or likely changes in market demand and pricing.

5. Build financial projections

Now that you have projected expenses and revenue, you can plug that information into Shopify’s cash flow calculator and cash flow statement template . This information can also be used to forecast your income statement. In turn, these steps inform your calculations on the balance sheet, on which you’ll also account for any assets and liabilities .

Business plan financial projections FAQ

What are the main components of a financial projection in a business plan.

Generally speaking, most financial forecasts include projections for income, balance sheet, and cash flow.

What’s the difference between financial projection and financial forecast?

These two terms are often used interchangeably. Depending on the context, a financial forecast may refer to a more formal and detailed document—one that might include analysis and context for several financial metrics in a more complex financial model.

Do I need accounting or planning software for financial projections?

Not necessarily. Depending on factors like the age and size of your business, you may be able to prepare financial projections using a simple spreadsheet program. Large complicated businesses, however, usually use accounting software and other types of advanced data-management systems.

What are some limitations of financial projections?

Projections are by nature based on human assumptions and, of course, humans can’t truly predict the future—even with the aid of computers and software programs. Financial projections are, at best, estimates based on the information available at the time—not ironclad guarantees of future performance.

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Plan Projections

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Home > Business Plan > Funding Requirements in a Business Plan

funding requirements

Funding Requirements in a Business Plan

… our funding requirements are …

The summary given in the funding requirement section should be consistent with the rest of the business plan. The amount needed, and when it is needed should follow from the detailed financial projections, and the purpose of the funding, sales and marketing, hire of employees, to achieve a milestone etc. should again link in with the rest of the plan,

Funding Requirements Presentation

This is part of the financial projections and Contents of a Business Plan Guide , a series of posts on what each section of a simple business plan should include. The next post in this series is the final section, and deals with the planned exit for investors.

About the Author

Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.

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6 Elements of a Successful Financial Plan for a Small Business

Improve your chances of growth by covering these bases in your plan.

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Table of Contents

Many small businesses lack a full financial plan, even though evidence shows that it is essential to the long-term success and growth of any business. 

For example, a study in the New England Journal of Entrepreneurship found that entrepreneurs with a business plan are more successful than those without one. If you’re not sure how to get started, read on to learn the six key elements of a successful small business financial plan.

What is a business financial plan, and why is it important? 

A business financial plan is an overview of a business’s financial situation and a forward-looking projection for growth. A business financial plan typically has six parts: sales forecasting, expense outlay, a statement of financial position, a cash flow projection, a break-even analysis and an operations plan.

A good financial plan helps you manage cash flow and accounts for months when revenue might be lower than expected. It also helps you budget for daily and monthly expenses and plan for taxes each year.

Importantly, a financial plan helps you focus on the long-term growth of your business. That way, you don’t get so caught up in the day-to-day activities that you lose sight of your goals. Focusing on the long-term vision helps you prioritize your financial resources. 

The 6 components of a successful financial plan for business

1. sales forecasting.

You should have an estimate of your sales revenue for every month, quarter and year. Identifying any patterns in your sales cycles helps you better understand your business, and this knowledge is invaluable as you plan marketing initiatives and growth strategies . 

For instance, a seasonal business can aim to improve sales in the off-season to eventually become a year-round venture. Another business might become better prepared by understanding how upticks and downturns in business relate to factors such as the weather or the economy.

Sales forecasting is also the foundation for setting company growth goals. For instance, you could aim to improve your sales by 10 percent over each previous period.

2. Expense outlay

A full expense plan includes regular expenses, expected future expenses and associated expenses. Regular expenses are the current ongoing costs of your business, including operational costs such as rent, utilities and payroll. 

Regular expenses relate to standard business activities that occur each year, such as conference attendance, advertising and marketing, and the office holiday party. It’s a good idea to distinguish essential expenses from expenses that can be reduced or eliminated if needed.

Expected future expenses are known future costs, such as tax rate increases, minimum wage increases or maintenance needs. Generally, a part of the budget should also be allocated to unexpected future expenses, such as damage to your business caused by fire, flood or other unexpected disasters. Planning for future expenses ensures your business is financially prepared via budget reduction, increases in sales or financial assistance.

Associated expenses are the estimated costs of various initiatives, such as acquiring and training new hires, opening a new store or expanding delivery to a new territory. An accurate estimate of associated expenses helps you properly manage growth and prevents your business from exceeding your cost capabilities. 

As with expected future expenses, understanding how much capital is required to accomplish various growth goals helps you make the right decision about financing options.

3. Statement of financial position (assets and liabilities)

Assets and liabilities are the foundation of your business’s balance sheet and the primary determinants of your business’s net worth. Tracking both allows you to maximize your business’s potential value. 

Small businesses frequently undervalue their assets (such as machinery, property or inventory) and fail to properly account for outstanding bills. Your balance sheet offers a more complete view of your business’s health than a profit-and-loss statement or a cash flow report. 

A profit-and-loss statement shows how the business performed over a specific time period, while a balance sheet shows the financial position of the business on any given day.

4. Cash flow projection

You should be able to predict your cash flow on a monthly, quarterly and annual basis. Projecting cash flow for the full year allows you to get ahead of any financial struggles or challenges. 

It can also help you identify a cash flow problem before it hurts your business. You can set the most appropriate payment terms, such as how much you charge upfront or how many days after invoicing you expect payment .

A cash flow projection gives you a clear look at how much money is expected to be left at the end of each month so you can plan a possible expansion or other investments. It also helps you budget, such as by spending less one month for the anticipated cash needs of another month.

5. Break-even analysis

A break-even analysis evaluates fixed costs relative to the profit earned by each additional unit you produce and sell. This analysis is essential to understanding your business’s revenue and potential costs versus profits of expansion or growth of your output. 

Having your expenses fully fleshed out, as described above, makes your break-even analysis more accurate and useful. A break-even analysis is also the best way to determine your pricing.

In addition, a break-even analysis can tell you how many units you need to sell at various prices to cover your costs. You should aim to set a price that gives you a comfortable margin over your expenses while allowing your business to remain competitive.

6. Operations plan

To run your business as efficiently as possible, craft a detailed overview of your operational needs. Understanding what roles are required for you to operate your business at various volumes of output, how much output or work each employee can handle, and the costs of each stage of your supply chain will aid you in making informed decisions for your business’s growth and efficiency.

It’s important to tightly control expenses, such as payroll or supply chain costs, relative to growth. An operations plan can also make it easier to determine if there is room to optimize your operations or supply chain via automation, new technology or superior supply chain vendors.

For this reason, it is imperative for a business owner to conduct due diligence and become knowledgeable about merchant services before acquiring an account. Once the owner signs a contract, it cannot be changed, unless the business owner breaks the contract and acquires a new account with a new merchant services provider. 

Tips on writing a business financial plan

Business owners should create a financial plan annually to ensure they have a clear and accurate picture of their business’s finances and a realistic view for future growth or expansion. A financial plan helps the business’s leaders make informed decisions about purchases, debt, hiring, expense control and overall operations for the year ahead. 

A business financial plan is essential if a business owner is looking to sell their business, attract investors or enter a partnership with another business. Here are some tips for writing a business financial plan.

Review the previous year’s plan.

It’s a good idea to compare the previous year’s plan against actual performance and finances to see how accurate the previous plan and forecast were. That way, you can address any discrepancies or overlooked elements in next year’s plan.

Collaborate with other departments.

A business owner or other individual charged with creating the business financial plan should collaborate with the finance department, human resources department, sales team , operations leader, and those in charge of machinery, vehicles or other significant business tools. 

Each division should provide the necessary data about projections, value and expenses. All of these elements come together to create a comprehensive financial picture of the business.

Use available resources.

The Small Business Administration (SBA) and SCORE, the SBA’s nonprofit partner, are two excellent resources for learning about financial plans. Both can teach you the elements of a comprehensive plan and how best to work with the different departments in your business to collect the necessary information. Many websites, including business.com , and service providers, such as Intuit, offer advice on this matter. 

If you have questions or encounter challenges while creating your business financial plan, seek advice from your accountant or other small business owners in your network. Your city or state has a small business office that you can contact for help.

Business financial plan templates

Many business organizations offer free information that small business owners can use to create their financial plan. For example, the SBA’s Learning Platform offers a course on how to create a business plan. It also offers worksheets and templates to help you get started. You can seek additional help and more personalized service from your local office.

SCORE is the largest volunteer network of business mentors. It began as a group of retired executives (SCORE stands for “Service Corps of Retired Executives”) but has expanded to include business owners and executives from many industries. Advice is free and available online, and there are SBA district offices in every U.S. state. In addition to participating in group or at-home learning, you can be paired with a mentor for individualized help. 

SCORE offers templates and tips for creating a small business financial plan. SCORE is an excellent resource because it addresses different levels of experience and offers individualized help.

Other templates can be found in Microsoft Office’s template library, QuickBooks’ online resources, Shopify’s blog and other places. You can also ask your accountant for guidance, since many accountants provide financial planning services in addition to their usual tax services.

Diana Wertz contributed to the writing and research in this article.

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Financial Overview Business Plan

The financial overview business plan contains the current and future financial requirements of your business, including the estimated operating expenses. 3 min read updated on February 01, 2023

The financial overview business plan contains the current and future financial requirements of your business, including the estimated operating expenses. The financial section is of specific interest to your lenders and investors. It also serves as a roadmap to plan and manage the financial requirements of your company.

What Should You Include in the Financial Analysis Section?

The financial analysis section for a new business is prepared on the basis of estimates, while for an existing one, recent data is used. It should include the following information:

  • Balance Sheet : This is a statement of assets and investments matched against loans and liabilities (including equity capital) of the company.
  • Cash Flow Analysis : It is the anticipated inward and outward flow of cash. It includes sales forecasts and anticipated cash expenses.
  • Profit and Loss Analysis : This is basically your income statement that shows your earnings remaining after meeting all the business expenses over a certain period time, usually a year or a quarter.
  • Break-Even Analysis : This analysis tells you the time required to fully recover the cost of doing business. Break-even is the point where you neither make profit nor incur any loss.
  • Personnel Expenses Forecast : This is an estimation of your managerial team members' expenses. The personnel to be considered for this forecast can be found in the Management Summary section.

In case of a startup, where the company does not have any previous financial data, many lenders may also ask for your personal financial information.

Historical data includes your balance sheet, capital, income statements for previous periods, tax returns and cash flow statements, while estimated data includes items like a projected income statement, which offers an objective overview of your financial position for the coming three to five years.

How to Write the Financial Analysis Section of a Business Plan

Make Assumptions

Make objective assumptions based on your business plan to provide estimations and forecasts of your company's financial position at a future point in time. Check the financial assumptions made in other sections of your business plan, write them down and use them in the financial analysis section. Remember that the data you provide in the financial analysis section must be consistent with the assumptions made in other sections of the plan.

Making assumptions and forecasts to provide information in terms of specific numbers can be quite challenging, especially if you are not from a financial background. Involving an experienced financial professional in the early stage of the process can relieve you from most of the stress.

Follow GAAP

GAAP, which stands for generally accepted accounting principles, is a set of conventions, rules and procedures commonly used in accounting. You should follow these accounting principles while preparing the financial analysis section.

Use Data Visualization Tools

Use graphs and charts to present complicated statistics and data so that they can be easily grasped by your audience. You can place the important visuals in the main section and include the supporting graphics in the appendix.

Use Spreadsheets

Spreadsheets are the most common tool used for presenting financial data. Make sure you learn to use them properly.

Choose an Appropriate Template

Many websites offer resources and templates for writing the financial analysis section. Choose an appropriate template to suit your industry and audience.

Sections to Include in Your Financial Projections

The term "financial data" usually refers to an income statement, balance sheet, and cash-flow statement. Investors usually request this historical data for the last three to five years of company's operations. In addition to these three statements, you should also include capital expenditure budgets and any collateral used for procuring a loan.

In case of new startups, financial forecast is presented to showcase the company's ability to pay its expenses, earn profits and manage its finances for the next three to five years. You should separate your data into monthly or quarterly projections. The expenditure projections must match up with the sources of funding.

Your financial projections should include the following sections:

  • Income statements or profit and loss statements.
  • Balance sheets or the statements of your assets and liabilities.
  • Sales and revenue forecast for the next three years.
  • Cash-flow statements.
  • Breakeven analysis to showcase the time required to recover fixed and variable costs incurred.
  • Ratio and trend analysis supported with tables, graphs, charts and other visuals.
  • Appendix to include additional information like your personal credit history.

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  • Financial Plan Sample For Small Business
  • Business Description Outline
  • Creating a Business Plan
  • How to Make a Business Plan Format
  • Parts of Business Plan and Definition
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  • Business Plan Outline: Everything You Need To Know
  • What is an Annual Report for a Corporation?
  • Contents of a Business Plan

Financial Model Excel

How to Estimate Your Startup’s Financial Requirements

Introduction.

Starting a business can be a challenging but highly rewarding experience. The key to a successful launch is having a comprehensive understanding of the financial requirements needed to ensure success. In this blog post, we'll cover the main areas to consider when estimating your startup's financial requirements, such as forming a budget, forecasting cash flow, and defining business goals.

Key Takeaways

  • Form a proper budget
  • Forecast your cash flow requirements
  • Define your business goals

How to Estimate One-time Startup Costs

The success of a startup business dependson accurately estimating the financial requirements necessary for launching. This includes one-time costs to assess the target market, obtain necessary licenses and permits, create a website, and more. Estimating these costs can be daunting, but a few key steps can help you figure out how much money you’ll need to get your startup off the ground.

Assessing the Target Market

Knowing your market is integral to getting your business started, and this process can have a cost. To assess the target market, you might need to conduct market research surveys or consult with experts. Additionally, you may need to purchase software that can help you assess the needs of your target market. Depending on the complexity of your startup’s target market, the cost of assessment may be relatively small or quite high.

Calculating Business Licenses and Permits

Permits and licenses are an integral part of getting your business started, so be sure to factor these costs into your startup’s financial plan. These costs will vary depending on industry and location, so take the time to explore the different licenses and permits you may need, and how much each license or permit will cost.

Creating the Business’s Website

Creating a website for your startup can be an important step for many businesses, and this process can also come with some significant costs. Depending on your desired design and complexity, website costs can range from relatively low to quite expensive. Additionally, be sure to factor in potential hosting costs, domain registration fees, and any additional costs required to make your website a reality.

  • Market assessment costs
  • Licenses and permits
  • Website creation costs

How to Estimate Ongoing Costs

Estimating the costs of running a successful startup involves forecasting both one-time and ongoing expenses. Knowing and accurately budgeting for these costs ahead of time is vital to guiding your company’s financial health. In this section, we will discuss the costs of rent and utilities, employees, and advertising.

Rent and Utilities

The expenses associated with office space are a part of any sizable startup’s budget. Whether you are leasing an office or working from home, it’s important to consider rent or mortgage payments, property taxes, and utility costs. You’ll also have to factor in any cleaning, security, and repair costs that may crop up.

Financial Commitment to Employees

For most startups, employee costs will be their greatest operational expense. Calculate payroll requirements including salaries, commissions, benefits, insurance, bonuses, and any one-time incentives you might offer. Don’t forget to factor in contributions for vacation and sick days, employee stock purchase plans, and any additional taxes associated with paying staff.

Advertising Costs

Marketing your startup is an essential part of a successful launch. Determine how much you’d like to invest in advertising, which could include online ads, print ads, television commercials, radio spots, and events. Additionally, you’ll need to think of the cost of creating and distributing promotional materials, a website, and any other digital assets.

Calculating the Cost of Inventory

When calculating the cost of inventory, it is important to be aware of all aspects of the costs associated with it. You need to identify the cost of raw materials, estimate costs of manufacturing or producing, and also include costs of marketing and promoting products. Being prepared and having a plan prior to starting the production process will help you to save time, money and resources.

Detail the cost of raw materials

The cost of raw materials refers to the amount of money required to purchase the materials needed to manufacture and produce the goods. It includes the labor costs associated with obtaining, preparing, and delivering the materials. To accurately estimate the cost, you should inspect the markets for raw materials that best meet the needs for your products and calculate the cost of each material.

Describe how to estimate costs of manufacturing or producing

Once you have decided on the materials needed, you need to estimate the cost of manufacturing or producing. This cost includes the labor involved in making sure the materials are properly assembled and the cost of tools and machines used in the process. Additionally, if you are using any third-party services to help with the production process, you need to include those costs as well.

Explain the cost of marketing and promoting products

In addition to the cost of raw materials and production, you need to take into account the cost of marketing and promoting your products. This could include advertising budget, costs for website design and hosting, as well as product packaging and shipping costs. Estimating these costs can help you create a realistic budget, as well as ensure that you have enough funding for all aspects of your business.

When estimating the costs for inventory, the goal should be to be as comprehensive and accurate as possible. Being aware of the cost of your inventory can make all the difference in making sure your startup is successful.

Calculating the Cost of Expansion

Before a startup can consider expanding its business, it’s important to accurately estimate the cost of doing so. Estimating the cost of expansion can help guide decision-making and minimize financial risk for the startup. Here are some key costs that should be taken into consideration when estimating financial requirements for expansion.

Cost of Launching a New Product or Service

A new product launch can require significant investments. Beyond the cost of designing and developing the product, businesses need to consider the cost of components and materials, labor, advertising, and promotion. The more complex and innovative the product, the more resources and time it will take to bring it to market successfully. Additionally, businesses should factor in the cost of quality control and testing, data storage and hosting, customer service, and product distribution.

Research and Development Costs

Research and development (R&D) can be a significant expense for startups, especially when developing complex new products or services. Additionally, startups should factor in the cost of filing patents, trademarks, and copyrights. Failing to include these costs in overhead estimates can eat away at a startup’s budget and reduce its chances of successful expansion.

Expanding into New Markets

Expanding into a new market involves costs beyond simply launching a new product or service. Businesses need to factor in the cost of marketing and advertising in the new market, as well as the cost of establishing a local presence. This can include everything from establishing a customer service team to setting up foreign offices. It’s important to consider the cost of cultural differences in a new market, as well as the cost of shipping and retail outlets.

  • Product design and development
  • Components and materials
  • Advertising and promotion
  • Quality control and testing
  • Data storage and hosting
  • Customer service
  • Product distribution
  • Research and development
  • Filing for patents, trademarks, and copyrights
  • Advertising and promotion in the new market
  • Establishing a local presence
  • Factoring in cultural differences
  • Shipping and retail outlets

Overlooking the Cost of Professional Services

For any successful startup business, having the right people to offer assistance and advice is essential. From tax advisors to legal consultants and marketing professionals, hiring the services of these professionals can play a critical role in a startup’s success. Below are some important professional services to consider when budgeting for your startup.

Hiring a Competent Accountant

Tax laws can be complicated, and having a competent accountant on staff can save your startup both time and money. They can also provide invaluable advice and assistance with tax planning, minimizing liability and avoiding costly fines. They can help you stay organized and make sure all your paperwork is in order so filings are completed in a timely manner.

Budgeting for Legal Advice

Having a lawyer on retainer is an invaluable expense when starting a business. They can advise on compliance with local laws, review contracts before signatures, provide guidance through the funding process and other legal concerns. Ultimately, their expertise will help protect your business and ensure longterm success.

The Benefits of an Experienced Marketing Team

Marketing your business is essential to its success, and having a knowledgeable marketing expert on board will help ensure your message reaches its intended audience. They can assist in crafting your marketing plan, launching campaigns, understanding the latest technology and trends, and directing your public relations efforts.

Ultimately, having experienced professionals handle the financial and legal aspects of your business will help protect you from costly mistakes and enable your startup to grow and thrive.

As you can see, estimating the financial requirements for a successful startup is necessary before getting started. Fully understanding the total financial costs you'll incur before launching your business will help you make the right decisions and set yourself up for success.

In order to properly estimate startup financial requirements, you'll want to take into account: one-time startup costs, such as legal fees, accounting fees, web development costs, and equipment costs; as well as ongoing costs including payroll, rent, insurance, infrastructure, taxes and loan payments.

Making sure that you’ve taken all startup financial requirements into account before getting started is essential to the success of your venture. This will help you avoid common pitfalls and make sure that you have enough capital to hit the ground running.

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Financial Planning in Entrepreneurship: Process, Importance, Tools, Sources

Financial planning is a critical aspect of entrepreneurship . It involves creating a comprehensive strategy for managing your business’s finances to ensure its long-term success and sustainability. Effective financial planning helps entrepreneurs make informed decisions, allocate resources efficiently, secure funding, and navigate potential challenges.

Table of Contents

  • 1.1 Budgeting
  • 1.2 Cash Flow Management
  • 1.3 Revenue Projections
  • 1.4 Expense Control
  • 1.5 Financial Forecasting
  • 1.6 Risk Assessment
  • 1.7 Funding Options
  • 1.8 Financial Records
  • 1.9 Debt Management
  • 1.10 Profitability Analysis
  • 1.11 Tax Planning
  • 1.12 Contingency Planning
  • 1.13 Long-Term Goals
  • 1.14 Review and Adapt
  • 1.15 Professional Help
  • 2 Financial Analysis of Entrepreneurial Venture
  • 3.1 Determine Feasibility
  • 3.2 Variance Analysis
  • 3.3 Forecasting Financial Requirements
  • 3.4 Obtaining Fund
  • 3.5 Cash Flow Shortages
  • 4.1 Comparative Statements
  • 4.2 Comparative Income Statement
  • 4.3 Comparative Balance Sheet
  • 4.4 Common Size Statements
  • 4.5 Trend Analysis
  • 4.6 Average Analysis
  • 4.7 Statement of Changes in Working Capital
  • 4.8 Fund Flow Analysis
  • 4.9 Cash Flow Analysis
  • 4.10 Ratio Analysis
  • 4.11 Cost Volume Profit Analysis
  • 5.1 Personal Savings
  • 5.2 Patient Capital
  • 5.3 Angel Investing
  • 5.4 Venture Capital
  • 5.5 Incubators
  • 5.6 Bank Loans
  • 5.7 Government Grants
  • 5.8 Bartering Exchanging Goods or Services
  • 5.9 Partnership
  • 5.10 Peer-to-Peer Lenders
  • 5.11 Major Customer Commitment
  • 5.12 Crowd-Funding Campaign
  • 6.1 What is the process of financial planning in entrepreneurship?

Process of Financial Planning in Entrepreneurship

Here are some key steps and considerations for financial planning in entrepreneurship :

Cash Flow Management

Revenue projections, expense control, financial forecasting, risk assessment, funding options, financial records, debt management, profitability analysis, tax planning, contingency planning, long-term goals, review and adapt, professional help.

Process of Financial Planning in Entrepreneurship

Start by creating a detailed budget that outlines your expected revenues and expenses. Be as accurate as possible in estimating costs such as rent, utilities, salaries, marketing, and materials. Regularly review and adjust your budget as your business grows and evolves.

Managing cash flow is crucial. Monitor your cash inflows and outflows to ensure you have enough liquidity to cover operational expenses. Analyze your cash flow statement to identify trends and potential issues.

Develop realistic revenue projections based on market research and historical data. Understand your sales cycle and seasonality to anticipate fluctuations in income.

Keep a close eye on your expenses. Look for cost-saving opportunities without sacrificing quality. Consider negotiating with suppliers for better terms or finding more affordable alternatives.

Create financial forecasts that extend into the future (e.g., monthly, quarterly, and annually). These forecasts can help you plan for growth, set targets, and identify potential financial gaps.

Identify and assess potential financial risks your business may face. Develop strategies to mitigate these risks, such as building an emergency fund or securing insurance coverage.

Determine your capital needs and explore various funding options , including personal savings, loans, investors, grants, or crowdfunding. Each source of capital comes with its advantages and trade-offs.

Maintain accurate financial records. Use accounting software or hire a professional accountant to track income, expenses, and taxes. Well-organized financial records are essential for tax compliance and decision-making.

If you have loans or lines of credit, manage them carefully. Make timely payments and consider refinancing options if they can reduce your interest costs.

Regularly assess your business’s profitability by calculating key financial ratios, such as gross margin, net profit margin, and return on investment (ROI). This analysis can help you make informed pricing and investment decisions.

Work with a tax professional to optimize your tax strategy. Explore tax incentives or deductions available to small businesses.

Prepare for unexpected events or downturns by building a contingency plan. This may involve setting aside reserves, diversifying revenue streams, or having a crisis management strategy in place.

Align your financial planning with your long-term business goals. Consider factors like expansion, product development, and exit strategies (e.g., selling the business or passing it on to a successor).

Regularly review your financial plan and adjust it as needed. Market conditions, competition, and internal factors may necessitate changes in your financial strategy.

Don’t hesitate to seek advice from financial professionals, such as accountants, financial advisors, or consultants. They can provide valuable insights and guidance.

Financial Analysis of Entrepreneurial Venture

Financial analysis is used to evaluate economic trends, set financial policy, build long-term plans for business activity, and identify projects or companies for investment. A financial analyst will thoroughly examine a company’s financial statements the income statement, balance sheet, and cash flow statement.

Any entrepreneurial activity before execution requires financial planning to be done. It is included in the Business Plan that is presented for approval. The plan includes a projected profit-and-loss statement for the next three to five years and a cash flow statement.

A balance sheet is sometimes included as well as a break-even analysis. The financial plan in entrepreneurship is important because it establishes the financial goals of the company.

Importance of Financial Planning in Entrepreneurship

The following are the importance of financial planning in entrepreneurship :

Determine Feasibility

Variance analysis, forecasting financial requirements, obtaining fund, cash flow shortages.

Importance of Financial Planning in Entrepreneurship

Any business idea that is presented for approval needs to have a feasibility evaluation done and once the feasibility report is attached only the business idea gets approval. Financial analysis is an effective way of determining the feasibility of any business venture.

Financial analysis helps in finding out the variance in any venture, by comparing actual performance with expected performance. Thereby enabling to take corrective measures in time.

One of the biggest points of importance for entrepreneurial finance is monitoring the actual results against the line-item budget in the financial plan to give you the opportunity to take whatever steps are necessary to get back on track. For example, if you’re not reaching the projected revenue, either the projections are wrong or the marketing program is not as effective as you thought.

Financial Analysis enables the entrepreneur to have an estimated financial requirement that is required in the future. As a result of which entrepreneurs can do perfect planning with respect to future activity and maintain financial health.

Investors and lenders request to see the entrepreneur’s business plan, including the financial plan with projections and assumptions behind the forecast.

If the financial plan is unrealistic, a common mistake with entrepreneurs, the loan or investment will not be forthcoming. Hence financial analysis will be taken into consideration before granting any amount of financial support.

Financial analysis also helps an entrepreneur to overcome any kind of cash flow shortage. Any venture despite accurate forecasts suffers from this problem of shortages, as the environmental conditions are constantly evolving and bear a direct impact on any business.

The significance of financial analysis of entrepreneurial venture can also be summed up, as:

  • Assessing the operational efficiency and managerial effectiveness of the venture.
  • Analyzing the financial strengths and weaknesses and creditworthiness of the venture.
  • Analyzing the current position of financial analysis,
  • Assessing the types of assets owned by a business enterprise and the liabilities that are due to the venture.
  • Providing information about the cash position the company is holding and how much debt the company has in relation to equity

Tools of Financial Analysis in Entrepreneurship

Financial analysis involves the process of evaluating a company’s financial performance and health by examining its financial statements, ratios, and other relevant data.

Various tools and techniques are used in financial analysis to assess a company’s profitability, liquidity, solvency, and overall financial stability. Here are some essential methods and tools of financial analysis in entrepreneurship :

Comparative Statements

Comparative income statement, comparative balance sheet, common size statements, trend analysis, average analysis, statement of changes in working capital, fund flow analysis, cash flow analysis, ratio analysis, cost volume profit analysis.

Tools of Financial Analysis in Entrepreneurship

Comparative statements deal with the comparison of different items of the Profit and Loss Account and Balance Sheets of two or more periods. Separate comparative statements are prepared for the Profit and Loss Account as Comparative Income Statements and for Balance Sheets.

Any financial statement can be presented in the form of a comparative statement such as a comparative balance sheet, comparative profit and loss account, comparative cost of production statement, comparative statement of working capital , and the like.

Comparative Income Statements are Gross Profit, Operating Profit, and Net Profit. The changes or the improvement in the profitability of the business concern is found out over a period of time. If the changes or improvement is not satisfactory, the management can find out the reasons for it and some corrective action can be taken.

The financial condition of the business concern can be found out by preparing a comparative balance sheet. The various items of the Balance sheet for two different periods are used.

The assets are classified as current assets and fixed assets for comparison & the liabilities are classified as current liabilities, long-term liabilities, and shareholder’s net worth. The term shareholder’s net worth includes Equity Share Capital, Preference Share Capital, Reserves and Surplus, and the like.

A vertical presentation of financial information is followed for preparing common-size statements. The total assets or total liabilities or sales is taken as 100 and the balance items are compared to the total assets, total liabilities, or sales in terms of percentage.

Thus, a common size statement shows the relation of each component to the whole. A separate common size statement is prepared for the profit and loss account as a Common Size Income Statement and for the balance sheet as a Common Size Balance Sheet.

The ratios of different items for various periods are found and then compared under this analysis. The analysis of the ratios over a period of years gives an idea of whether the business concern is trending upward or downward.

The trend ratios are calculated for a business concern, such ratios are compared with the industry average. These trends can be presented on graph paper in the shape of curves. This presentation of facts in the shape of pictures makes the analysis and comparison more comprehensive and impressive.

The extent of the increase or decrease of working capital is identified by preparing the statement of changes in working capital. The amount of net working capital is calculated by subtracting the sum of current liabilities from the sum of current assets. It does not detail the reasons for changes in working capital.

Fund flow analysis deals with detailed sources and application of funds of the business concern for a specific period. It indicates where funds come from and how they are used during the period under review. It highlights the changes in the financial structure of the company.

Cash flow analysis is based on the movement of cash and bank balances. In other words, the movement of cash instead of the movement of working capital would be considered in the cash flow analysis. There are two types of cash flows. They are actual cash flows and notional cash flows.

Ratio analysis is an attempt to develop a meaningful relationship between individual items (or groups of items) in the balance sheet or profit and loss account.

Ratio analysis is not only useful to internal parties of business concern but also useful to external parties. Ratio analysis highlights the liquidity, solvency, profitability, and capital gearing.

This analysis discloses the prevailing relationship between sales, cost, and profit. The cost is divided into two. They are fixed costs and variable costs. There is a constant relationship between sales and variable costs. Cost analysis enables the management to better profit planning .

Sources of Development Finance

Any entrepreneurial venture that starts needs to have good financial planning. The major issue for these ventures are arrangement or sources of funds.

Without capital, an entrepreneur won’t be able to buy inventory, cover payroll, or the many other expenses associated with launching a business’s operations. The various sources of funds for entrepreneurial ventures can be arranged through:

Personal Savings

Patient capital, angel investing, venture capital, government grants, bartering exchanging goods or services, partnership, peer-to-peer lenders, major customer commitment, crowd-funding campaign.

Sources of Development Finance

Personal savings are the safest mode of source available for entrepreneurs, this is also referred to as Bootstrapping. This is the single most common source of capital for entrepreneurs. Personal savings, however, isn’t always enough for any venture, hence entrepreneur needs to depend on other sources.

Patient capital is money loaned by the help of family or friends. The money will be repaid later as the business starts growing. When borrowing patient capital, entrepreneurs should be aware that family and friends rarely have much capital. However, this is again a limited way of funds.

Angel investing has become a popular method of funding among entrepreneurs. With angel investing, an angel provides large sums of money to an entrepreneur so that he or she can start their own business.

The angel may provide this funding in exchange for stock shares of the entrepreneur’s business, or they may require the entrepreneur to pay back the funding with interest.

Venture capital is another common way in which entrepreneurs fund their business. In many ways, venture capital is the same as angel investing. They both involve funding from a private investor or investment firm. The difference, however, is that angels typically invest more money than venture capitalists, and angels invest in early-stage businesses.

Business incubators or accelerators generally focus on the high-tech sector by providing support for new businesses in various stages of development. However, there are also local economic development incubators, which are focused on areas such as job creation, revitalization, and hosting and sharing services.

Bank loans remain a time-tested funding option for entrepreneurs. If an entrepreneur has good credit, they may be eligible for a small business loan.

Many government agencies such as SIDBI, IDBI, NABAD, etc. in the form of grants and subsidies that may be available to a start-up business. Often governmental websites provide a comprehensive listing of various government programs at the federal and state levels.

This form of sourcing as a substitute for cash can be a great way to run on a little wallet. An example would be negotiating free office space by agreeing to support the `computer systems for all the other office tenants. Another common example is exchanging equity for legal and accounting support.

A more established company may have a strategic interest in helping to develop a product – and be willing to advance funding to make it happen. Several companies develop customized social networks for large enterprises, with the expectation of using that funding and experience to compete in the consumer market someday.

This is another safe way of sourcing any venture that allows people to seek financing from other individuals.

This is not a popular mode of funding, yet some customers would be willing to cover development costs in order to be able to buy a product before the rest of the world can.

Their advantage is the control over the production process and the promise of dedicated support. Even large companies look to their best customers to fund new projects – this is the essence of good business development.

Crowd-funding is still a viable funding option used by entrepreneurs. It is a way by which funds can be arranged through the help of approaching the public via the Internet. It’s called crowdfunding because the investments come from a large “crowd” of people.

In comparison, angel investments come from a single investor or investment firm. Crowdfunding is a great platform for innovative products that could have mass appeal.

FAQs Section About the Financial Planning in Entrepreneurship

What is the process of financial planning in entrepreneurship.

These are the following steps in the process of financial planning in entrepreneurship: 1. Budgeting 2. Cash Flow Management 3. Revenue Projections 4. Expense Control 5. Financial Forecasting 6. Risk Assessment 7. Funding Options 8. Financial Records 9. Debt Management 10. Profitability Analysis.

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How To Start A Business In 11 Steps (2024 Guide)

Katherine Haan

Updated: Apr 7, 2024, 1:44pm

How To Start A Business In 11 Steps (2024 Guide)

Table of Contents

Before you begin: get in the right mindset, 1. determine your business concept, 2. research your competitors and market, 3. create your business plan, 4. choose your business structure, 5. register your business and get licenses, 6. get your finances in order, 7. fund your business, 8. apply for business insurance, 9. get the right business tools, 10. market your business, 11. scale your business, what are the best states to start a business, bottom line, frequently asked questions (faqs).

Starting a business is one of the most exciting and rewarding experiences you can have. But where do you begin? There are several ways to approach creating a business, along with many important considerations. To help take the guesswork out of the process and improve your chances of success, follow our comprehensive guide on how to start a business. We’ll walk you through each step of the process, from defining your business idea to registering, launching and growing your business .

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The public often hears about overnight successes because they make for a great headline. However, it’s rarely that simple—they don’t see the years of dreaming, building and positioning before a big public launch. For this reason, remember to focus on your business journey and don’t measure your success against someone else’s.

Consistency Is Key

New business owners tend to feed off their motivation initially but get frustrated when that motivation wanes. This is why it’s essential to create habits and follow routines that power you through when motivation goes away.

Take the Next Step

Some business owners dive in headfirst without looking and make things up as they go along. Then, there are business owners who stay stuck in analysis paralysis and never start. Perhaps you’re a mixture of the two—and that’s right where you need to be. The best way to accomplish any business or personal goal is to write out every possible step it takes to achieve the goal. Then, order those steps by what needs to happen first. Some steps may take minutes while others take a long time. The point is to always take the next step.

Most business advice tells you to monetize what you love, but it misses two other very important elements: it needs to be profitable and something you’re good at. For example, you may love music, but how viable is your business idea if you’re not a great singer or songwriter? Maybe you love making soap and want to open a soap shop in your small town that already has three close by—it won’t be easy to corner the market when you’re creating the same product as other nearby stores.

If you don’t have a firm idea of what your business will entail, ask yourself the following questions:

  • What do you love to do?
  • What do you hate to do?
  • Can you think of something that would make those things easier?
  • What are you good at?
  • What do others come to you for advice about?
  • If you were given ten minutes to give a five-minute speech on any topic, what would it be?
  • What’s something you’ve always wanted to do, but lacked resources for?

These questions can lead you to an idea for your business. If you already have an idea, they might help you expand it. Once you have your idea, measure it against whether you’re good at it and if it’s profitable.

Your business idea also doesn’t have to be the next Scrub Daddy or Squatty Potty. Instead, you can take an existing product and improve upon it. You can also sell a digital product so there’s little overhead.

What Kind of Business Should You Start?

Before you choose the type of business to start, there are some key things to consider:

  • What type of funding do you have?
  • How much time do you have to invest in your business?
  • Do you prefer to work from home or at an office or workshop?
  • What interests and passions do you have?
  • Can you sell information (such as a course), rather than a product?
  • What skills or expertise do you have?
  • How fast do you need to scale your business?
  • What kind of support do you have to start your business?
  • Are you partnering with someone else?
  • Does the franchise model make more sense to you?

Consider Popular Business Ideas

Not sure what business to start? Consider one of these popular business ideas:

  • Start a Franchise
  • Start a Blog
  • Start an Online Store
  • Start a Dropshipping Business
  • Start a Cleaning Business
  • Start a Bookkeeping Business
  • Start a Clothing Business
  • Start a Landscaping Business
  • Start a Consulting Business
  • Start a Photography Business
  • Start a Vending Machine Business

Most entrepreneurs spend more time on their products than they do getting to know the competition. If you ever apply for outside funding, the potential lender or partner wants to know: what sets you (or your business idea) apart? If market analysis indicates your product or service is saturated in your area, see if you can think of a different approach. Take housekeeping, for example—rather than general cleaning services, you might specialize in homes with pets or focus on garage cleanups.

Primary Research

The first stage of any competition study is primary research, which entails obtaining data directly from potential customers rather than basing your conclusions on past data. You can use questionnaires, surveys and interviews to learn what consumers want. Surveying friends and family isn’t recommended unless they’re your target market. People who say they’d buy something and people who do are very different. The last thing you want is to take so much stock in what they say, create the product and flop when you try to sell it because all of the people who said they’d buy it don’t because the product isn’t something they’d buy.

Secondary Research

Utilize existing sources of information, such as census data, to gather information when you do secondary research. The current data may be studied, compiled and analyzed in various ways that are appropriate for your needs but it may not be as detailed as primary research.

Conduct a SWOT Analysis

SWOT stands for strengths, weaknesses, opportunities and threats. Conducting a SWOT analysis allows you to look at the facts about how your product or idea might perform if taken to market, and it can also help you make decisions about the direction of your idea. Your business idea might have some weaknesses that you hadn’t considered or there may be some opportunities to improve on a competitor’s product.

financial requirements business plan

Asking pertinent questions during a SWOT analysis can help you identify and address weaknesses before they tank your new business.

A business plan is a dynamic document that serves as a roadmap for establishing a new business. This document makes it simple for potential investors, financial institutions and company management to understand and absorb. Even if you intend to self-finance, a business plan can help you flesh out your idea and spot potential problems. When writing a well-rounded business plan, include the following sections:

  • Executive summary: The executive summary should be the first item in the business plan, but it should be written last. It describes the proposed new business and highlights the goals of the company and the methods to achieve them.
  • Company description: The company description covers what problems your product or service solves and why your business or idea is best. For example, maybe your background is in molecular engineering, and you’ve used that background to create a new type of athletic wear—you have the proper credentials to make the best material.
  • Market analysis: This section of the business plan analyzes how well a company is positioned against its competitors. The market analysis should include target market, segmentation analysis, market size, growth rate, trends and a competitive environment assessment.
  • Organization and structure: Write about the type of business organization you expect, what risk management strategies you propose and who will staff the management team. What are their qualifications? Will your business be a single-member limited liability company (LLC) or a corporation ?
  • Mission and goals: This section should contain a brief mission statement and detail what the business wishes to accomplish and the steps to get there. These goals should be SMART (specific, measurable, action-orientated, realistic and time-bound).
  • Products or services: This section describes how your business will operate. It includes what products you’ll offer to consumers at the beginning of the business, how they compare to existing competitors, how much your products cost, who will be responsible for creating the products, how you’ll source materials and how much they cost to make.
  • Background summary: This portion of the business plan is the most time-consuming to write. Compile and summarize any data, articles and research studies on trends that could positively and negatively affect your business or industry.
  • Marketing plan: The marketing plan identifies the characteristics of your product or service, summarizes the SWOT analysis and analyzes competitors. It also discusses how you’ll promote your business, how much money will be spent on marketing and how long the campaign is expected to last.
  • Financial plan: The financial plan is perhaps the core of the business plan because, without money, the business will not move forward. Include a proposed budget in your financial plan along with projected financial statements, such as an income statement, a balance sheet and a statement of cash flows. Usually, five years of projected financial statements are acceptable. This section is also where you should include your funding request if you’re looking for outside funding.

Learn more: Download our free simple business plan template .

Come Up With an Exit Strategy

An exit strategy is important for any business that is seeking funding because it outlines how you’ll sell the company or transfer ownership if you decide to retire or move on to other projects. An exit strategy also allows you to get the most value out of your business when it’s time to sell. There are a few different options for exiting a business, and the best option for you depends on your goals and circumstances.

The most common exit strategies are:

  • Selling the business to another party
  • Passing the business down to family members
  • Liquidating the business assets
  • Closing the doors and walking away

Develop a Scalable Business Model

As your small business grows, it’s important to have a scalable business model so that you can accommodate additional customers without incurring additional costs. A scalable business model is one that can be replicated easily to serve more customers without a significant increase in expenses.

Some common scalable business models are:

  • Subscription-based businesses
  • Businesses that sell digital products
  • Franchise businesses
  • Network marketing businesses

Start Planning for Taxes

One of the most important things to do when starting a small business is to start planning for taxes. Taxes can be complex, and there are several different types of taxes you may be liable for, including income tax, self-employment tax, sales tax and property tax. Depending on the type of business you’re operating, you may also be required to pay other taxes, such as payroll tax or unemployment tax.

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When structuring your business, it’s essential to consider how each structure impacts the amount of taxes you owe, daily operations and whether your personal assets are at risk.

An LLC limits your personal liability for business debts. LLCs can be owned by one or more people or companies and must include a registered agent . These owners are referred to as members.

  • LLCs offer liability protection for the owners
  • They’re one of the easiest business entities to set up
  • You can have a single-member LLC
  • You may be required to file additional paperwork with your state on a regular basis
  • LLCs can’t issue stock
  • You’ll need to pay annual filing fees to your state

Limited Liability Partnership (LLP)

An LLP is similar to an LLC but is typically used for licensed business professionals such as an attorney or accountant. These arrangements require a partnership agreement.

  • Partners have limited liability for the debts and actions of the LLP
  • LLPs are easy to form and don’t require much paperwork
  • There’s no limit to the number of partners in an LLP
  • Partners are required to actively take part in the business
  • LLPs can’t issue stock
  • All partners are personally liable for any malpractice claims against the business

Sole Proprietorship

If you start a solo business, you might consider a sole proprietorship . The company and the owner, for legal and tax purposes, are considered the same. The business owner assumes liability for the business. So, if the business fails, the owner is personally and financially responsible for all business debts.

  • Sole proprietorships are easy to form
  • There’s no need to file additional paperwork with your state
  • You’re in complete control of the business
  • You’re personally liable for all business debts
  • It can be difficult to raise money for a sole proprietorship
  • The business may have a limited lifespan

Corporation

A corporation limits your personal liability for business debts just as an LLC does. A corporation can be taxed as a C corporation (C-corp) or an S corporation (S-corp). S-corp status offers pass-through taxation to small corporations that meet certain IRS requirements. Larger companies and startups hoping to attract venture capital are usually taxed as C-corps.

  • Corporations offer liability protection for the owners
  • The life span of a corporation is not limited
  • A corporation can have an unlimited number of shareholders
  • Corporations are subject to double taxation
  • They’re more expensive and complicated to set up than other business structures
  • The shareholders may have limited liability

Before you decide on a business structure, discuss your situation with a small business accountant and possibly an attorney, as each business type has different tax treatments that could affect your bottom line.

Helpful Resources

  • How To Set Up an LLC in 7 Steps
  • How To Start a Sole Proprietorship
  • How To Start a Corporation
  • How To Start a Nonprofit
  • How To Start a 501(c)(3)

There are several legal issues to address when starting a business after choosing the business structure. The following is a good checklist of items to consider when establishing your business:

Choose Your Business Name

Make it memorable but not too difficult. Choose the same domain name, if available, to establish your internet presence. A business name cannot be the same as another registered company in your state, nor can it infringe on another trademark or service mark that is already registered with the United States Patent and Trademark Office (USPTO).

Business Name vs. DBA

There are business names, and then there are fictitious business names known as “Doing Business As” or DBA. You may need to file a DBA if you’re operating under a name that’s different from the legal name of your business. For example, “Mike’s Bike Shop” is doing business as “Mike’s Bikes.” The legal name of the business is “Mike’s Bike Shop,” and “Mike’s Bikes” is the DBA.

You may need to file a DBA with your state, county or city government offices. The benefits of a DBA include:

  • It can help you open a business bank account under your business name
  • A DBA can be used as a “trade name” to brand your products or services
  • A DBA can be used to get a business license

Register Your Business and Obtain an EIN

You’ll officially create a corporation, LLC or other business entity by filing forms with your state’s business agency―usually the Secretary of State. As part of this process, you’ll need to choose a registered agent to accept legal documents on behalf of your business. You’ll also pay a filing fee. The state will send you a certificate that you can use to apply for licenses, a tax identification number (TIN) and business bank accounts.

Next, apply for an employer identification number (EIN) . All businesses, other than sole proprietorships with no employees, must have a federal employer identification number. Submit your application to the IRS and you’ll typically receive your number in minutes.

Get Appropriate Licenses and Permits

Legal requirements are determined by your industry and jurisdiction. Most businesses need a mixture of local, state and federal licenses to operate. Check with your local government office (and even an attorney) for licensing information tailored to your area.

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Open a Business Bank Account

Keep your business and personal finances separate. Here’s how to choose a business checking account —and why separate business accounts are essential. When you open a business bank account, you’ll need to provide your business name and your business tax identification number (EIN). This business bank account can be used for your business transactions, such as paying suppliers or invoicing customers. Most times, a bank will require a separate business bank account to issue a business loan or line of credit.

Hire a Bookkeeper or Get Accounting Software

If you sell a product, you need an inventory function in your accounting software to manage and track inventory. The software should have ledger and journal entries and the ability to generate financial statements.

Some software programs double as bookkeeping tools. These often include features such as check writing and managing receivables and payables. You can also use this software to track your income and expenses, generate invoices, run reports and calculate taxes.

There are many bookkeeping services available that can do all of this for you, and more. These services can be accessed online from any computer or mobile device and often include features such as bank reconciliation and invoicing. Check out the best accounting software for small business, or see if you want to handle the bookkeeping yourself.

Determine Your Break-Even Point

Before you fund your business, you must get an idea of your startup costs. To determine these, make a list of all the physical supplies you need, estimate the cost of any professional services you will require, determine the price of any licenses or permits required to operate and calculate the cost of office space or other real estate. Add in the costs of payroll and benefits, if applicable.

Businesses can take years to turn a profit, so it’s better to overestimate the startup costs and have too much money than too little. Many experts recommend having enough cash on hand to cover six months of operating expenses.

When you know how much you need to get started with your business, you need to know the point at which your business makes money. This figure is your break-even point.

In contrast, the contribution margin = total sales revenue – cost to make product

For example, let’s say you’re starting a small business that sells miniature birdhouses for fairy gardens. You have determined that it will cost you $500 in startup costs. Your variable costs are $0.40 per birdhouse produced, and you sell them for $1.50 each.

Let’s write these out so it’s easy to follow:

This means that you need to sell at least 456 units just to cover your costs. If you can sell more than 456 units in your first month, you will make a profit.

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There are many different ways to fund your business—some require considerable effort, while others are easier to obtain. Two categories of funding exist: internal and external.

Internal funding includes:

  • Personal savings
  • Credit cards
  • Funds from friends and family

If you finance the business with your own funds or with credit cards, you have to pay the debt on the credit cards and you’ve lost a chunk of your wealth if the business fails. By allowing your family members or friends to invest in your business, you are risking hard feelings and strained relationships if the company goes under. Business owners who want to minimize these risks may consider external funding.

External funding includes:

  • Small business loans
  • Small business grants
  • Angel investors
  • Venture capital
  • Crowdfunding

Small businesses may have to use a combination of several sources of capital. Consider how much money is needed, how long it will take before the company can repay it and how risk-tolerant you are. No matter which source you use, plan for profit. It’s far better to take home six figures than make seven figures and only keep $80,000 of it.

Funding ideas include:

  • Invoice factoring: With invoice factoring , you can sell your unpaid invoices to a third party at a discount.
  • Business lines of credit: Apply for a business line of credit , which is similar to a personal line of credit. The credit limit and interest rate will be based on your business’s revenue, credit score and financial history.
  • Equipment financing: If you need to purchase expensive equipment for your business, you can finance it with a loan or lease.
  • Small Business Administration (SBA) microloans: Microloans are up to $50,000 loans that can be used for working capital, inventory or supplies and machinery or equipment.
  • Grants: The federal government offers grants for businesses that promote innovation, export growth or are located in historically disadvantaged areas. You can also find grants through local and regional organizations.
  • Crowdfunding: With crowdfunding , you can raise money from a large group of people by soliciting donations or selling equity in your company.

Choose the right funding source for your business by considering the amount of money you need, the time frame for repayment and your tolerance for risk.

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You need to have insurance for your business , even if it’s a home-based business or you don’t have any employees. The type of insurance you need depends on your business model and what risks you face. You might need more than one type of policy, and you might need additional coverage as your business grows. In most states, workers’ compensation insurance is required by law if you have employees.

Work With an Agent To Get Insured

An insurance agent can help determine what coverages are appropriate for your business and find policies from insurers that offer the best rates. An independent insurance agent represents several different insurers, so they can shop around for the best rates and coverage options.

Basic Types of Business Insurance Coverage

  • Liability insurance protects your business against third-party claims of bodily injury, property damage and personal injury such as defamation or false advertising.
  • Property insurance covers the physical assets of your business, including your office space, equipment and inventory.
  • Business interruption insurance pays for the loss of income if your business is forced to close temporarily due to a covered event such as a natural disaster.
  • Product liability insurance protects against claims that your products caused bodily injury or property damage.
  • Employee practices liability insurance covers claims from employees alleging discrimination, sexual harassment or other wrongful termination.
  • Workers’ compensation insurance covers medical expenses and income replacement for employees who are injured on the job.
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Business tools can help make your life easier and make your business run more smoothly. The right tools can help you save time, automate tasks and make better decisions.

Consider the following tools in your arsenal:

  • Accounting software : Track your business income and expenses, prepare financial statements and file taxes. Examples include QuickBooks and FreshBooks.
  • Customer relationship management (CRM) software : This will help you manage your customer relationships, track sales and marketing data and automate tasks like customer service and follow-ups. Examples include Zoho CRM and monday.com.
  • Project management software : Plan, execute and track projects. It can also be used to manage employee tasks and allocate resources. Examples include Airtable and ClickUp.
  • Credit card processor : This will allow you to accept credit card payments from customers. Examples include Stripe and PayPal.
  • Point of sale (POS) : A system that allows you to process customer payments. Some accounting software and CRM software have POS features built-in. Examples include Clover and Lightspeed.
  • Virtual private network (VPN) : Provides a secure, private connection between your computer and the internet. This is important for businesses that handle sensitive data. Examples include NordVPN and ExpressVPN.
  • Merchant services : When customers make a purchase, the money is deposited into your business account. You can also use merchant services to set up recurring billing or subscription payments. Examples include Square and Stripe.
  • Email hosting : This allows you to create a professional email address with your own domain name. Examples include G Suite and Microsoft Office 365.

Many business owners spend so much money creating their products that there isn’t a marketing budget by the time they’ve launched. Alternatively, they’ve spent so much time developing the product that marketing is an afterthought.

Create a Website

Even if you’re a brick-and-mortar business, a web presence is essential. Creating a website doesn’t take long, either—you can have one done in as little as a weekend. You can make a standard informational website or an e-commerce site where you sell products online. If you sell products or services offline, include a page on your site where customers can find your locations and hours. Other pages to add include an “About Us” page, product or service pages, frequently asked questions (FAQs), a blog and contact information.

Optimize Your Site for SEO

After getting a website or e-commerce store, focus on optimizing it for search engines (SEO). This way, when a potential customer searches for specific keywords for your products, the search engine can point them to your site. SEO is a long-term strategy, so don’t expect a ton of traffic from search engines initially—even if you’re using all the right keywords.

Create Relevant Content

Provide quality digital content on your site that makes it easy for customers to find the correct answers to their questions. Content marketing ideas include videos, customer testimonials, blog posts and demos. Consider content marketing one of the most critical tasks on your daily to-do list. This is used in conjunction with posting on social media.

Get Listed in Online Directories

Customers use online directories like Yelp, Google My Business and Facebook to find local businesses. Some city halls and chambers of commerce have business directories too. Include your business in as many relevant directories as possible. You can also create listings for your business on specific directories that focus on your industry.

Develop a Social Media Strategy

Your potential customers are using social media every day—you need to be there too. Post content that’s interesting and relevant to your audience. Use social media to drive traffic back to your website where customers can learn more about what you do and buy your products or services.

You don’t necessarily need to be on every social media platform available. However, you should have a presence on Facebook and Instagram because they offer e-commerce features that allow you to sell directly from your social media accounts. Both of these platforms have free ad training to help you market your business.

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To scale your business, you need to grow your customer base and revenue. This can be done by expanding your marketing efforts, improving your product or service, collaborating with other creators or adding new products or services that complement what you already offer.

Think about ways you can automate or outsource certain tasks so you can focus on scaling the business. For example, if social media marketing is taking up too much of your time, consider using a platform such as Hootsuite to help you manage your accounts more efficiently. You can also consider outsourcing the time-consumer completely.

You can also use technology to automate certain business processes, including accounting, email marketing and lead generation. Doing this will give you more time to focus on other aspects of your business.

When scaling your business, it’s important to keep an eye on your finances and make sure you’re still profitable. If you’re not making enough money to cover your costs, you need to either reduce your expenses or find ways to increase your revenue.

Build a Team

As your business grows, you’ll need to delegate tasks and put together a team of people who can help you run the day-to-day operations. This might include hiring additional staff, contractors or freelancers.

Resources for building a team include:

  • Hiring platforms: To find the right candidates, hiring platforms, such as Indeed and Glassdoor, can help you post job descriptions, screen résumés and conduct video interviews.
  • Job boards: Job boards such as Craigslist and Indeed allow you to post open positions for free.
  • Social media: You can also use social media platforms such as LinkedIn and Facebook to find potential employees.
  • Freelance platforms: Using Upwork, Freelancer and Fiverr can help you find talented freelancers for one-time or short-term projects. You can also outsource certain tasks, such as customer service, social media marketing or bookkeeping.

You might also consider partnering with other businesses in your industry. For example, if you’re a wedding planner, you could partner with a florist, photographer, catering company or venue. This way, you can offer your customers a one-stop shop for all their wedding needs. Another example is an e-commerce store that partners with a fulfillment center. This type of partnership can help you save money on shipping and storage costs, and it can also help you get your products to your customers faster.

To find potential partnerships, search for businesses in your industry that complement what you do. For example, if you’re a web designer, you could partner with a digital marketing agency.

You can also search for businesses that serve the same target market as you but offer different products or services. For example, if you sell women’s clothing, you could partner with a jewelry store or a hair salon.

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To rank the best states to start a business in 2024, Forbes Advisor analyzed 18 key metrics across five categories to determine which states are the best and worst to start a business in. Our ranking takes into consideration factors that impact businesses and their ability to succeed, such as business costs, business climate, economy, workforce and financial accessibility in each state. Check out the full report .

Starting a small business takes time, effort and perseverance. But if you’re willing to put in the work, it can be a great way to achieve your dreams and goals. Be sure to do your research, create a solid business plan and pivot along the way. Once you’re operational, don’t forget to stay focused and organized so you can continue to grow your business.

How do I start a small business with no money?

There are several funding sources for brand-new businesses and most require a business plan to secure it. These include the SBA , private grants, angel investors, crowdfunding and venture capital.

What is the best business structure?

The best business structure for your business will depend entirely on what kind of company you form, your industry and what you want to accomplish. But any successful business structure will be one that will help your company set realistic goals and follow through on set tasks.

Do I need a business credit card?

You don’t need one, but a business credit card can be helpful for new small businesses. It allows you to start building business credit, which can help you down the road when you need to take out a loan or line of credit. Additionally, business credit cards often come with rewards and perks that can save you money on business expenses.

Do I need a special license or permit to start a small business?

The answer to this question will depend on the type of business you want to start and where you’re located. Some businesses, such as restaurants, will require a special permit or license to operate. Others, such as home daycare providers, may need to register with the state.

How much does it cost to create a business?

The cost of starting a business will vary depending on the size and type of company you want to create. For example, a home-based business will be less expensive to start than a brick-and-mortar store. Additionally, the cost of starting a business will increase if you need to rent or buy commercial space, hire employees or purchase inventory. You could potentially get started for free by dropshipping or selling digital goods.

How do I get a loan for a new business?

The best way to get a loan for a new business is to approach banks or other financial institutions and provide them with a business plan and your financial history. You can also look into government-backed loans, such as those offered by the SBA. Startups may also be able to get loans from alternative lenders, including online platforms such as Kiva.

Do I need a business degree to start a business?

No, you don’t need a business degree to start a business. However, acquiring a degree in business or a related field can provide you with the understanding and ability to run an effective company. Additionally, you may want to consider taking some business courses if you don’t have a degree to learn more about starting and running a business. You can find these online and at your local Small Business Administration office.

What are some easy businesses to start?

One of the easiest businesses to start also has the lowest overhead: selling digital goods. This can include items such as e-books, online courses, audio files or software. If you have expertise in a particular area or niche, this is a great option for you. Dropshipping is also a great option because you don’t have to keep inventory. You could also buy wholesale products or create your own. Once you create your product, you can sell it through your own website or third-party platforms such as Amazon or Etsy.

What is the most profitable type of business?

There is no one answer to this question because the most profitable type of business will vary depending on a number of factors, such as your industry, location, target market and business model. However, some businesses tend to be more profitable than others, such as luxury goods, high-end services, business-to-business companies and subscription-based businesses. If you’re not sure what type of business to start, consider your strengths and interests, as well as the needs of your target market, to help you choose a profitable business idea.

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Essential requirements in crafting a one-page financial advisor business plan.

August 17, 2015 07:01 am 21 Comments CATEGORY: Practice Management

Executive Summary

In a world where most advisory firms are relatively small businesses, having a formal business plan is a remarkably rare occurrence. For most advisors, they can “keep track” of the business in their head, making the process of creating a formal business plan on paper to seem unnecessary.

Yet the reality is that crafting a business plan is about more than just setting some business goals to pursue. Like financial planning, the process of thinking through the plan is still valuable, regardless of whether the final document at the end gets put to use. In fact, for many advisory firms, a simple “one-page” financial advisor business plan may be the best output of the business planning process – a single-page document with concrete goals to which the advisor can hold himself/herself accountable.

So what should the (one-page) financial advisor business plan actually cover? As the included sample template shows, there are six key areas to define for the business: who will it serve, what will you do for them, how will you reach them, how will you know if it’s working, where will you focus your time, and what must you do to strengthen (or build) the foundation to make it possible? Ideally, this should be accompanied by a second page to the business plan, which includes a budget or financial projection of the key revenue and expense areas of the business, to affirm that it is a financially viable plan (and what the financial goals really are!).

And in fact, because one of the virtues of a financial advisor business plan is the accountability it can create, advisors should not only craft the plan, but share it – with coaches and colleagues, and even with prospective or current clients. Doing so becomes an opportunity to not only to get feedback and constructive criticism about the goals, but in the process of articulating a clear plan for the business, the vetting process can also be a means to talk about the business and who it will serve, creating referral opportunities in the process!

Michael Kitces

Author: Michael Kitces

Michael Kitces is Head of Planning Strategy at Buckingham Strategic Wealth , which provides an evidence-based approach to private wealth management for near- and current retirees, and Buckingham Strategic Partners , a turnkey wealth management services provider supporting thousands of independent financial advisors through the scaling phase of growth.

In addition, he is a co-founder of the XY Planning Network , AdvicePay , fpPathfinder , and New Planner Recruiting , the former Practitioner Editor of the Journal of Financial Planning, the host of the Financial Advisor Success podcast, and the publisher of the popular financial planning industry blog Nerd’s Eye View through his website Kitces.com , dedicated to advancing knowledge in financial planning. In 2010, Michael was recognized with one of the FPA’s “Heart of Financial Planning” awards for his dedication and work in advancing the profession.

Read all of Michael’s articles here .

Why A Business Plan Matters For Financial Advisors

There’s no end to the number of articles and even entire books that have been written about how to craft a business plan , yet in practice I find that remarkably few financial advisors have ever created any kind of formal (written or unwritten) business plan. Given that the overwhelming majority of financial advisors essentially operate as solo practitioners or small partnerships, this perhaps isn’t entirely surprising – when you can keep track of the entire business in your head in the first place, is there really much value to going through a formal process of crafting a financial advisor business plan?

Having been a part of the creation and growth of numerous businesses , I have to admit that my answer to “does a[n individual] financial advisor really need a business plan?” is a resounding yes . But not because you’re just trying to figure out what the basics of your business will be, which you may well have “figured out” in your head (or as the business grows, perhaps figured out in conversations with your partner). The reason a business plan matters is all about focus , and the ability to keep focus in proceeding towards your core objectives, and accountable to achieving them, even in a dynamic real-world environment full of distractions.

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As the famous military saying goes, “ no battle plan ever survives contact with the enemy ”, because the outcomes of battle contact itself change the context, and it’s almost impossible to predict what exactly will come next. Nonetheless, crafting a battle plan in advance is a standard for military leadership. Because even if the plan will change as it’s being executed, having a clearly articulated objective allows everyone, even (and especially) in the heat of battle, to keep progressing towards a common agreed-upon goal. In other words, the objective stated in the battle plan provides a common point of focus for everyone to move towards, even as the (battle) landscape shifts around them. And the business plan serves the exact same role within a business.

Essential Elements Required In A Financial Advisor Business Plan

PDF Image Of One Page Financial Advisor Business Plan Template In Word or PDF

Because the reality is that in business – as in battle? – the real world will not likely conform perfectly to an extensively crafted business (or battle) plan written in advance, I am not a fan of crafting an extensively detailed business plan, especially for new advisors just getting started, or even a ‘typical’ solo advisory firm. While it’s valuable to think through all the elements in depth – the process of thinking through a business plan is part of what helps to crystallize the key goals to work towards – as with financial planning itself, the process of planning can actually be more valuable than “the plan” that is written out at the end .

Accordingly, for most financial advisors trying to figure out how to write a business plan, I’m an advocate of crafting a form of “one-page business plan” that captures the essential elements of the business, and provides direction about where to focus, especially focus the time of the advisor-owner in particular. In other words, the purpose for a financial advisor business plan is simply to give clear marching orders towards a clear objective, with clear metrics about what is trying to be achieved along the way, so you know where to focus your own time and energy!

Of course, the reality is that what constitutes the most important goals for an advisory firm – as well as the challenges it must surmount – will vary a lot, depending not just on the nature of the firm, but simply on its size, scope, and business stage. Financial advisors just getting started launching a new RIA face very different business and growth issues than a solo advisor who has been operating for several years but now hit a “wall” in the business , and the challenges of a solo advisor are different than those of a larger firm with multiple partners who need to find alignment in their common business goals. Nonetheless, the core essential elements that any business plan is required to cover are remarkably similar.

Requirements For An Effective Financial Advisor Business Plan

While there are many areas that can potentially be covered, the six core elements that must be considered as the template for a financial advisor business plan are:

6 Required Elements Of A (One Page) Business Plan For Financial Advisors 1) Who will you serve? This is the most basic question of all, but more complex than it may seem at first. The easy answer is “anyone who will pay me”, but in practice I find that one of the most common reasons a new advisor fails is that their initial outreach is so unfocused, there’s absolutely no possibility to gain any momentum over time. In the past, when you could cold-call your way to success by just trying to pump your products on every person who answered the phone until you found a buyer, this might have been feasible. But if you want to get paid for your advice itself, you need to be able to demonstrate your expertise. And since you can’t possibly be an expert at everything for everyone, you have to pick someone for whom you will become a bona fide specialist (which also provides crucial differentiation from other advisors the potential client might choose to work with instead ). In other words, you need to choose what type of niche clientele you’re going to target to differentiate yourself. And notably, this problem isn’t unique to new advisors; many established advisors ultimately hit a wall in their business, in part because it’s so time-consuming trying to be everything to everyone, that they reach their personal capacity in serving clients earlier than they ‘should’. Focusing on a particular clientele – to the point that you can anticipate all of their problems and issues in advance – allows the business to be radically more efficient. So who, really , do you want to serve? 2) What will you do for them? Once you’ve chosen who you will serve, the next task is to figure out what you will actually do for them – in other words, what services will you deliver. The reason it’s necessary to first figure out who you will serve, is that the nature of your target niche clientele may well dictate what kind of services you’re going to provide them; in fact, part of the process of identifying and refining your niche in the first place should be to interview a number of people in your niche , and really find out what they want and need that’s important to them (not just the standard ‘comprehensive financial plan’ that too many advisors deliver in the same undifferentiated manner ). For instance, if you’re really serious about targeting retirees, you might not only provide comprehensive financial planning, but investment management services (for their retirement portfolios), a specific retirement income distribution strategy, assistance with long-term care insurance, and guidance on enrolling in Medicare and making decisions about the timing of when to start Social Security benefits . On the other hand, if you hope to work with entrepreneurs, you might need to form relationships with attorneys and accountants who can help facilitate creating new business entities, and your business model should probably be on a retainer basis, as charging for assets under management may be difficult (as entrepreneurs tend to plow their dollars back into their businesses!). If your goal is to work with new doctors, on the other hand, your advice will probably focus more on career guidance, working down a potential mountain of student debt, and cash flow/budgeting strategies. Ultimately, these adjustments will help to formulate the ongoing client service calendar you might craft to articulate what you’ll do with clients (especially if you plan to work with them on an ongoing basis), and the exact business model of how you’ll get paid (Insurance commissions? Investment commissions? AUM fees? Annual retainers? Monthly retainers ? Hourly fees?). 3) How will you reach them? Once you’ve decided who you want to reach, and what you will do for them, it’s time to figure out how you will reach them – in other words, what will be your process for finding prospective clients you might be able to work with? If you’re targeting a particular niche, who are the centers of influence you want to build relationships with? What publications do they read, where you could write? What conferences do they attend, where you might speak? What organizations are they involved with, where you might also volunteer and get involved? If you’re going to utilize an inbound marketing digital strategy as an advisor , what are the topics you can write about that would draw interest and organic search traffic, and what giveaway will you provide in order to get them to sign up for your mailing list so you can continue to drip market to them? In today’s competitive world, it’s not enough to just launch a firm, hang your (virtual) shingle, and wait for people to walk in off the street or call your office. You need to have a plan about how you will get out there to get started! 4) How will you know if it’s working? Once you’ve set a goal for who you want to serve, what you want to do for them, and how you will reach them, it’s time to figure out how to measure whether it’s working. The caveat for most financial advisory businesses, though, is that measuring outcomes is tough because of the small sample size – in a world where you might have to reach out to dozens of strangers just to find a dozen prospects, and then meet with all those prospects just to get a client or two, it’s hard to tell whether a strategy that nets one extra client in a quarter was really a “better strategy” or just random good luck that won’t repeat. As a result, in practice it’s often better to measure activity than results , especially as a newer advisory firm. In other words, if you think you’ll have to meet 10 Centers Of Influence (COIs) to get introductions to 30 prospects to get 3 clients, then measure whether you’re meeting your activity goals of 10 COIs and 30 prospect meetings, and not necessarily whether you got 2, 3, or 4 clients out of the last stint of efforts. Not that you shouldn’t ultimately have results-oriented goals of clients and revenue as well, but activity is often the easier and more salient item to measure, whether it’s phone calls made, articles written, subscribers added to your drip marketing list, prospect meetings, COI introductions, or something else. So when you’re defining the goals of your business plan, be certain you’re setting both goals for the results you want to achieve, and the key performance indicator (KPI) measures you want to evaluate to regarding your activities along the way? 5) Where will you focus your time in the business? When an advisory firm is getting started, the role of the advisor-as-business-owner is to do “everything” – as the saying goes, you’re both the chief cook and the bottle washer . However, the reality is that the quickest way to failure in an advisory firm is to get so caught up on doing “everything” that you fail to focus on the essential activities necessary to really move the business forward (that’s the whole reason for having a plan to define what those activities are, and a measure to determine whether you’re succeeding at them!). Though in truth, the challenge of needing to focus where you spend your time in the business never ends – as a business grows and evolves, so too does the role of the advisor-owner as the leader, which often means that wherever you spent your time and effort to get your business to this point is not where you need to focus it to keep moving forward from here. From gathering clients as an advisor to learning to transition clients to another advisor, from being responsible for the firm’s business development to hiring a marketing manager, from making investment decisions and executing trades to hiring an investment analyst and trader. By making a proactive decision about where you will spend your time, and also deliberately deciding what you will stop doing, it also becomes feasible to determine what other resources you may need to support you, in order to ensure you’re always spending your time focused on whatever is your highest and best use. In addition, the process can also reveal gaps where you may need to invest into and improve yourself, to take on the responsibilities you haven’t in the past but need to excel at to move forward from here. 6) How must you strengthen the foundation? The point of this section is not about what you must do to achieve the goals you’ve set, but what else needs to be done in the business in order to maximize your ability to make those business goals a reality. In other words, if you’re going to focus your time on its highest and best use in the business, what foundation to you need to support you to make that happen? If you’re a startup advisory firm, what business entity do you need to create, what are the tools/technology you’ll need to launch your firm , and what licensing/registrations must you complete? Will you operate with a ‘traditional’ office or from a home office , or run an entirely virtual “location-independent” advisory firm ? What are the expenses you’re budgeting to operate the business? If you’re an advisor who’s hit a growth wall , what are the essential hire(s) you’ll make in the near future where/how else will you reinvest to get over the wall and keep moving forward? At the most basic level, the key point here is that if you’re going to execute on this business plan to move the business forward from here, you need a sound foundation to build upon – so what do you need to do to shore up your foundation, so you can keep building? But remember, the goal here is to do what is necessary to move forward, not everything ; as with so much in the business, waiting until perfection may mean nothing gets done at all.

Creating A Budget And Financial Projections For Your Advisory Business

In addition to crafting a (one-page) financial planner business plan, the second step to your business planning process should be crafting a budget or financial projection for your business for the upcoming year (or possibly out 2-3 years).

Key areas to cover in budget projections for a financial advisory firm are:

Revenue - What are the revenue source(s) of your business, and realistically what revenue can you grow in the coming year(s)? - If you have several types of revenue, what are you goals and targets for each? How many hourly clients? How much in retainers? How much in AUM fees? What commission-based products do you plan to sell, and in what amounts? Expenses - What are the core expenses to operate the business on an ongoing basis? (E.g., ongoing salary or office space overhead, core technology you need to operate the business, etc.) - What are the one-time expenses you may need to contend with this year? (Whether start-up expenses to launch your advisory firm , new hires to add, significant one-time projects to complete, etc.)

An ongoing advisory firm may project out for the next 1-3 years, while a newer advisors firm may even prefer a more granular month-by-month budget projection to have regular targets to assess.

Ultimately, the purpose of the budgeting process here is two-fold. The first reason for doing so is simply to have an understanding of the prospective expenses to operate the business, so you can understand if you do hit your goals, what the potential income and profits of the business will be (and/or whether you need to make any changes, if the business projections aren’t viable!). The second reason is that by setting a budget, for both expenses and revenue, you not only set targets for what you will spend in the business to track on track, but you have revenue goals to be held accountable to in trying to assess whether the business is succeeding as planned.

Vetting Your Business Plan By Soliciting Constructive Criticism And Feedback

The last essential step of crafting an effective financial planner business plan is to vet it – by soliciting feedback and constructive criticism about the gaps and holes. Are there aspects of the financial projections that seem unrealistic? Is the target of who the business will serve narrow and specific enough to be differentiated, such that the person you’re talking to would clearly know who is appropriate to refer to you? Are the services that will be offered truly unique and relevant to that target clientele, and priced in a manner that’s realistically affordable and valuable to them?

In terms of who should help to vet your financial advisor business plan, most seem to get their plan vetted by talking to a business coach or consultant to assess the plan. While that’s certainly a reasonable path, another option is actually to take the business plan to fellow advisors to vet, particularly if you’re part of an advisor study (or “mastermind”) group ; the reason is that not only do fellow advisors have an intimate understanding of the business and potential challenges, but if their target clientele is different than yours, it becomes an opportunity to explain what you do and create the potential for future referrals! In other words, “asking for advice on your business plan” also becomes a great opportunity to “tell you about who I work with in my business that you could refer to me” as well! (In fact, one of the great virtues of a clearly defined niche practice as an advisor is that you can generate referrals from other advisors who have a different niche than yours !)

Similarly, the reality is that another great potential source for feedback about your business plan are Centers of Influence already in your niche in the first place. While you might not share with your potential clients the details of your business financial projections (which is why I advocate that those be separate from the one-page business plan), the essential aspects of the business plan – who you will serve, what you will provide them, how you will charge, and how you will try to reach them – is an area that the target clientele themselves may be best positioned to provide constructive feedback. And in the process, once again you’ll effectively be explaining exactly what your niche business does to target clientele who could either do business with you directly, or refer business to you , even as you’re asking for their advice about how to make the business better (to serve people just like them!). So whether it’s people you’re not yet doing business with but want to, or an existing client advisory board with whom you want to go deeper, vetting your plan with prospective and current clients is an excellent opportunity to talk about and promote your business, even as you’re going through the process of refining it and making it better!

And notably, the other benefit of vetting your business plan with others – whether it’s a coach, colleague, prospects, or clients – is that the process of talking through the business plan and goals with them also implicitly commits to them that you plan to act on the plan and really do what’s there. In turn, what this means is that once you’ve publicly and openly committed to the business plan with them, it’s now fair game for them to ask you how it’s going, and whether you’re achieving the goals you set forth for yourself in the plan – an essential point of accountability to help you ensure that you’re following through on and executing the business plan you’ve created!

So what do you think? Have you ever created a formal business plan for yourself? If you have, what worked for you – a longer plan, or a shorter one? If you haven’t created a business plan for yourself, why not? Do you think the kind of one-page financial advisor business plan template articulated here would help? Have you checked out our financial advisor business plan sample template  for yourself? Do you have a financial advisor business plan example you're willing to share in the comments below?

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14 Reasons Why You Need a Business Plan

Female entrepreneur holding a pen and pointing to multiple sticky notes on the wall. Presenting the many ways having a business plan will benefit you as a business owner.

10 min. read

Updated May 10, 2024

There’s no question that starting and running a business is hard work. But it’s also incredibly rewarding. And, one of the most important things you can do to increase your chances of success is to have a business plan.

A business plan is a foundational document that is essential for any company, no matter the size or age. From attracting potential investors to keeping your business on track—a business plan helps you achieve important milestones and grow in the right direction.

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A business plan isn’t just a document you put together once when starting your business. It’s a living, breathing guide for existing businesses – one that business owners should revisit and update regularly.

Unfortunately, writing a business plan is often a daunting task for potential entrepreneurs. So, do you really need a business plan? Is it really worth the investment of time and resources? Can’t you just wing it and skip the whole planning process?

Good questions. Here’s every reason why you need a business plan.

  • 1. Business planning is proven to help you grow 30 percent faster

Writing a business plan isn’t about producing a document that accurately predicts the future of your company. The  process  of writing your plan is what’s important. Writing your plan and reviewing it regularly gives you a better window into what you need to do to achieve your goals and succeed. 

You don’t have to just take our word for it. Studies have  proven that companies that plan  and review their results regularly grow 30 percent faster. Beyond faster growth, research also shows that companies that plan actually perform better. They’re less likely to become one of those woeful failure statistics, or experience  cash flow crises  that threaten to close them down. 

  • 2. Planning is a necessary part of the fundraising process

One of the top reasons to have a business plan is to make it easier to raise money for your business. Without a business plan, it’s difficult to know how much money you need to raise, how you will spend the money once you raise it, and what your budget should be.

Investors want to know that you have a solid plan in place – that your business is headed in the right direction and that there is long-term potential in your venture. 

A business plan shows that your business is serious and that there are clearly defined steps on how it aims to become successful. It also demonstrates that you have the necessary competence to make that vision a reality. 

Investors, partners, and creditors will want to see detailed financial forecasts for your business that shows how you plan to grow and how you plan on spending their money. 

  • 3. Having a business plan minimizes your risk

When you’re just starting out, there’s so much you don’t know—about your customers, your competition, and even about operations. 

As a business owner, you signed up for some of that uncertainty when you started your business, but there’s a lot you can  do to reduce your risk . Creating and reviewing your business plan regularly is a great way to uncover your weak spots—the flaws, gaps, and assumptions you’ve made—and develop contingency plans. 

Your business plan will also help you define budgets and revenue goals. And, if you’re not meeting your goals, you can quickly adjust spending plans and create more realistic budgets to keep your business healthy.

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  • 4. Crafts a roadmap to achieve important milestones

A business plan is like a roadmap for your business. It helps you set, track and reach business milestones. 

For your plan to function in this way, your business plan should first outline your company’s short- and long-term goals. You can then fill in the specific steps necessary to reach those goals. This ensures that you measure your progress (or lack thereof) and make necessary adjustments along the way to stay on track while avoiding costly detours.

In fact, one of the top reasons why new businesses fail is due to bad business planning. Combine this with inflexibility and you have a recipe for disaster.

And planning is not just for startups. Established businesses benefit greatly from revisiting their business plan. It keeps them on track, even when the global market rapidly shifts as we’ve seen in recent years.

  • 5. A plan helps you figure out if your idea can become a business

To turn your idea into reality, you need to accurately assess the feasibility of your business idea.

You need to verify:

  • If there is a market for your product or service
  • Who your target audience is
  • How you will gain an edge over the current competition
  • If your business can run profitably

A business plan forces you to take a step back and look at your business objectively, which makes it far easier to make tough decisions down the road. Additionally, a business plan helps you to identify risks and opportunities early on, providing you with the necessary time to come up with strategies to address them properly.

Finally, a business plan helps you work through the nuts and bolts of how your business will work financially and if it can become sustainable over time.

6. You’ll make big spending decisions with confidence

As your business grows, you’ll have to figure out when to hire new employees, when to expand to a new location, or whether you can afford a major purchase. 

These are always major spending decisions, and if you’re regularly reviewing the forecasts you mapped out in your business plan, you’re going to have better information to use to make your decisions.

7. You’re more likely to catch critical cash flow challenges early

The other side of those major spending decisions is understanding and monitoring your business’s cash flow. Your  cash flow statement  is one of the three key financial statements you’ll put together for your business plan. (The other two are your  balance sheet  and your  income statement  (P&L). 

Reviewing your cash flow statement regularly as part of your regular business plan review will help you see potential cash flow challenges earlier so you can take action to avoid a cash crisis where you can’t pay your bills. 

  • 8. Position your brand against the competition

Competitors are one of the factors that you need to take into account when starting a business. Luckily, competitive research is an integral part of writing a business plan. It encourages you to ask questions like:

  • What is your competition doing well? What are they doing poorly?
  • What can you do to set yourself apart?
  • What can you learn from them?
  • How can you make your business stand out?
  • What key business areas can you outcompete?
  • How can you identify your target market?

Finding answers to these questions helps you solidify a strategic market position and identify ways to differentiate yourself. It also proves to potential investors that you’ve done your homework and understand how to compete. 

  • 9. Determines financial needs and revenue models

A vital part of starting a business is understanding what your expenses will be and how you will generate revenue to cover those expenses. Creating a business plan helps you do just that while also defining ongoing financial needs to keep in mind. 

Without a business model, it’s difficult to know whether your business idea will generate revenue. By detailing how you plan to make money, you can effectively assess the viability and scalability of your business. 

Understanding this early on can help you avoid unnecessary risks and start with the confidence that your business is set up to succeed.

  • 10. Helps you think through your marketing strategy

A business plan is a great way to document your marketing plan. This will ensure that all of your marketing activities are aligned with your overall goals. After all, a business can’t grow without customers and you’ll need a strategy for acquiring those customers. 

Your business plan should include information about your target market, your marketing strategy, and your marketing budget. Detail things like how you plan to attract and retain customers, acquire new leads, how the digital marketing funnel will work, etc. 

Having a documented marketing plan will help you to automate business operations, stay on track and ensure that you’re making the most of your marketing dollars.

  • 11. Clarifies your vision and ensures everyone is on the same page

In order to create a successful business, you need a clear vision and a plan for how you’re going to achieve it. This is all detailed with your mission statement, which defines the purpose of your business, and your personnel plan, which outlines the roles and responsibilities of current and future employees. Together, they establish the long-term vision you have in mind and who will need to be involved to get there. 

Additionally, your business plan is a great tool for getting your team in sync. Through consistent plan reviews, you can easily get everyone in your company on the same page and direct your workforce toward tasks that truly move the needle.

  • 12. Future-proof your business

A business plan helps you to evaluate your current situation and make realistic projections for the future.

This is an essential step in growing your business, and it’s one that’s often overlooked. When you have a business plan in place, it’s easier to identify opportunities and make informed decisions based on data.

Therefore, it requires you to outline goals, strategies, and tactics to help the organization stay focused on what’s important.

By regularly revisiting your business plan, especially when the global market changes, you’ll be better equipped to handle whatever challenges come your way, and pivot faster.

You’ll also be in a better position to seize opportunities as they arise.

Further Reading: 5 fundamental principles of business planning

  • 13. Tracks your progress and measures success

An often overlooked purpose of a business plan is as a tool to define success metrics. A key part of writing your plan involves pulling together a viable financial plan. This includes financial statements such as your profit and loss, cash flow, balance sheet, and sales forecast.

By housing these financial metrics within your business plan, you suddenly have an easy way to relate your strategy to actual performance. You can track progress, measure results, and follow up on how the company is progressing. Without a plan, it’s almost impossible to gauge whether you’re on track or not.  

Additionally, by evaluating your successes and failures, you learn what works and what doesn’t and you can make necessary changes to your plan. In short, having a business plan gives you a framework for measuring your success. It also helps with building up a “lessons learned” knowledge database to avoid costly mistakes in the future.

  • 14. Your business plan is an asset if you ever want to sell

Down the road, you might decide that you want to sell your business or position yourself for acquisition. Having a solid business plan is going to help you make the case for a higher valuation. Your business is likely to be worth more to a buyer if it’s easy for them to understand your business model, your target market, and your overall potential to grow and scale. 

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  • Writing your business plan

By taking the time to create a business plan, you ensure that your business is heading in the right direction and that you have a roadmap to get there. We hope that this post has shown you just how important and valuable a business plan can be. While it may still seem daunting, the benefits far outweigh the time investment and learning curve for writing one. 

Luckily, you can write a plan in as little as 30 minutes. And there are plenty of excellent planning tools and business plan templates out there if you’re looking for more step-by-step guidance. Whatever it takes, write your plan and you’ll quickly see how useful it can be.

Content Author: Tim Berry

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

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Table of Contents

  • 6. You’ll make big spending decisions with confidence
  • 7. You’re more likely to catch critical cash flow challenges early

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Small business financial planning: setting yourself up for growth

Small business financial planning: setting yourself up for growth

Michael Henson Content Writer

Jun 19, 2024

You’re a small business owner, but you have big dreams. You want to see your business grow to become robust and profitable, but you aren’t sure how best to go about it. That’s why you need to take a serious approach to planning for business growth. 

Planning for growth means creating a successful small business financial plan, one which considers business goals, financial goals, and risk management . Working with a financial advisor is the best way to create a plan that includes retirement planning, funding options, and preparing for worst case scenarios. This article gives you financial planning tips to get you started to make informed decisions. 

Creating a financial plan for your small business

To set your small business up for success, you need a solid financial plan that includes both short-term and long-term business and financial goals, as well as strategies to achieve them. Then you can make informed decisions, access funding, and prepare for risks. Here are some tips to get you started:

Assess your financial situation

Every effective financial plan is built on accurate and reliable financial information. If you don’t already have a small business budget that charts your revenue, outgoings, and profit margins, now is the time to create one. You can download our small business budget planning template to simplify the process. 

Determine your goals

Next, figure out your key business and personal goals. Do you want to increase revenue by 20% this year? Expand into a new market? Be able to retire by the age of 50? Your financial plan should cover both short-term goals for stability and growth as well as long-term goals to build wealth. 

Manage risks and expenses

Now it’s time to evaluate potential risks and expenses. Speak to a financial advisor to determine appropriate risk management strategies for possibilities like economic downturns, loss of key customers, or expensive equipment failures. Your balance sheet shows your financial health, so look for ways to cut excess spending and budget for unexpected costs. Successful small businesses plan for worst-case scenarios to avoid crises.

Explore funding options

Think about how you will fund expanding your goals and operations. Options include business loans, lines of credit, crowdfunding, and personal investment. Meet with a financial advisor to evaluate what makes sense for your needs and risk tolerance. They can help you find good options and negotiate the best rates.

Setting business goals and assessing risks

As a small business owner, you need to define your business goals and plan for risks to set yourself up for growth. These should include personal and business goals, and both short-term aims and long-term plans. You can then assess potential risks that could hold you back from achieving your goals, and work out ways to avoid or mitigate them.

Determine your personal financial goals 

As a small business owner, your personal and business finances are closely linked. Think about your own financial goals, like saving for retirement, college funds for your kids, or paying off debt. A financial advisor can help you create a comprehensive plan that includes both business and personal financial goals. 

Set business goals

Think about why you started your business and what you want to achieve in the next 1-3 years. Do you want to increase revenue or profits? Open a new location? Setting specific, measurable goals will help guide your financial planning. Work with a financial advisor to determine how much money you need to achieve your goals and the funding options available, like small business loans, crowd-funding, or business credit cards. 

Manage risks

Identify potential risks to your cash flow and profits, like economic downturns, loss of key customers, or supply chain issues. Come up with a worst-case scenario plan that includes cutting costs, alternative funding sources, and ways to increase revenue. Planning for risks will help you make better informed decisions if problems arise. You’ll want to revisit your risk assessments regularly as your business grows and evolves.

Managing finances and cash flow

To set your small business up for growth, you need to get a handle on your finances. As a small business owner, this means developing realistic business and financial goals, managing risks, and planning how to fund future growth.

Successful small businesses monitor their financial health regularly and make changes to support growth and stability. That’s why you need to look at your balance sheet, income statement, cash flow statement, and key ratios to determine your company’s financial health. 

The balance sheet shows your assets, liabilities, and equity at a given point in time. The income statement shows your revenue, expenses, and profits over a period of time. Analyzing these financial statements will tell you if you have enough cash on hand, if expenses are too high, if you’re overleveraged with debt, or if profits are growing. 

Retirement planning options for small business owners

Saving for retirement is crucial for your long term financial health, and requires balancing your business’s financial health today with your own financial goals for the future. Speaking to a financial advisor who specializes in small business planning can help determine the right mix based on your business goals and risk tolerance. There are several options tailored to small businesses that provide tax benefits and flexibility.

Simplified Employee Pension (SEP) IRA

A SEP IRA allows you to contribute up to 25% of your salary, or $66,000 for 2023 , whichever is less. Contributions are tax-deductible and the plan is easy to set up and administer. A SEP IRA provides flexibility, since you can vary contributions from year to year based on your business’s financial performance.

Individual 401(k)

An individual 401(k), or solo 401(k), operates similar to a traditional 401(k) but is designed for self-employed individuals and small business owners. For 2024, you can contribute up to $23,000 as an employee , plus up to 25% of your compensation as an employer, for a total of $69,000. A solo 401(k) allows for loans and hardship withdrawals, and contributions can be made up until your tax filing deadline.

Profit-sharing plan

A profit-sharing plan allows you to contribute a percentage of your business’s profits to a retirement plan. Contributions are discretionary and the plan provides flexibility in how profits are distributed to employees. The contribution limit is 25% of compensation or $69,000 for 2024 , and contributions are tax deductible. Profit sharing plans require non-discrimination testing to ensure benefits are fairly distributed among employees.

Effective financial planning is the key to successful business growth

By following these tips and taking advantage of resources for planning for small business, you can develop a successful small business financial plan to guide your company to growth and prosperity. Keep refining and revising your plan as your business evolves. With the right plan in place, you can make informed decisions to ensure the financial health and success of your business for years to come.

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Personalized financial planning explained step-by-step

Create a personalized financial plan, start-to-finish, for all your financial goals, with tools and resources to help you succeed, including tips on investing beyond your 401(k).

Young couple in their kitchen looking over documents as part of their financial planning.

When it comes to life's biggest moments, you probably had a plan. Your family vacation, for example, followed a timeline, a budget—even if you busted it with that fancy dinner on your final evening—and involved compromise and conversation. Smart financial planning follows the same logic.

What are the basics of financial planning? Which steps should you take first in financial planning? Our information and how-to articles (linked below) can help. They take you step-by-step through what you need to know to create a personal financial plan and help get your money in order. From the groceries you need, to the retirement you want, and the car repair bill that’s looming, these ideas help you balance long-term dreams with short-term wants, plus those unexpected events that happen along the way.

This list offers a nice framework you can build on and adjust throughout your life.

It’s OK if you’ve started on some of these tasks. It’s also OK if you haven’t. Just start with one and keep going. (Or tackle the whole thing on a long, rainy weekend with a big pot of coffee and the dog at your feet.)

Let’s get started.

1. Set financial goals.

Goals are crucial to a financial plan. Before calculating how to get somewhere, you need to decide where you’re headed and why. Developing a savings plan based on specific financial goals throughout your life can help you use your money wisely. Do you want to:

  • Save toward a down payment on a new home?
  • Establish a college education fund for your children?
  • Pay down or minimize existing debt?
  • Launch a small business?
  • Accelerate your retirement investing and savings?

Once you take time to envision the sort of life you want live a few years or many years from now, you can organize your financial goals into three general time horizons:

  • Short-term goals (six months to five years): This phase may include many of the initial steps outlined on this list, including budgeting, paying down debt, and building an emergency fund.
  • Mid-term goals (five to 10 years): Buying insurance or expanding your investment approach may be part of the mid-term goal planning.
  • Long-term goals (10+ years): This is where you dig into detailed retirement planning to combine your best thinking around what you truly value in life with expertise from trusted sources of financial education and insight.

Set a more specific target date for each your financial goals. For instance, if you’re the parent of a toddler who may head to college in the 2040s, that gives you a deadline for your college savings goal .

Organize your goals between needs and wants. Layer in the current state of your savings to see how you can adjust your pace of savings to meet your target dates. Do you have money in a 401(k) ,  403(b) , Roth IRA , or  IRA (individual retirement account)? If so, log those numbers as you plan your retirement-related goals .

You can weigh all these options and your financial data at a glance by committing your plan to paper with our financial goals worksheet (PDF) .

2. Follow a budget.

Instead of thinking of a budget as way to restrict your spending, use it as a tool to organize your monthly cash flow to help you pay yourself first (savings/investing) and still have room for the fun stuff. Seeing all your sources of income and spending in detail is important to assess your financial options both now (those short-term wants) and for your distant future (long-term dreams). Your budgeting will include both fixed expenses (think housing, transportation, debt, etc.) and discretionary expenses (restaurants, entertainment, gifts, etc.).

Keep in mind the wide variety of digital apps and tools available to help you make and maintain a budget in your daily life. Depending on your preferences and comfort with mobile apps, you can link financial accounts or set alerts to help categorize and monitor your spending. (As a Principal customer you can link accounts and explore budgeting features as part of your personal financial dashboard when you log in through principal.com or our mobile app.)

For the basics, learn how to create a budget that works for you—not against you (downloadable budgeting sheet included).

3. Build an emergency fund.

All the planning in the world won’t help if life throws you a curveball and you’re not prepared financially. That’s where emergency savings comes in handy.

  • First, calculate how much emergency savings you may need: The minimum recommended emergency savings tends to start at three months of living expenses—with six months or a year providing a more realistic buffer to regroup after a setback. The flexibility of your cash flow helps determine your ultimate target for an emergency fund and how quickly you can reach it. If you’re self-employed, your emergency savings should be even larger due to your generally greater financial risk (income volatility, unplanned business expenses, etc.).
  • Second, pick a tactic that works for your financial habits: Do you want to automate your savings—for instance, divert a small sum from your regular paycheck so it’s deposited into a savings account instead of your checking? Or will you transfer a significant sum—say, a work bonus or tax refund—to kick-start your emergency fund?
  • Choose an account: You want a liquid, accessible account for your fund, but not one that’s too tempting for impulsive withdrawals. For instance, a high-yield savings account with a minimum balance may be a good fit. ( Compare online bank savings and money market rates .)
  • Set parameters for yourself and always replenish the fund: Is the expense unexpected, unavoidable, and urgent? The more your expense meets all three of those criteria, the more it’s likely suited to be covered by your fund. Once you dip into the fund, build it back up as soon as possible.

4. Manage debt.

Understanding and managing debt is a key part of creating a financial plan. Building a positive credit history can help improve your credit score and, in turn, help you qualify for lower interest rates on loans as part of a comprehensive strategy to maximize your incremental savings. It’s important to remember that not all debt is bad: A home mortgage giving you the ability to use the interest paid for a tax deduction can be beneficial. However, a revolving credit card with a high interest rate and ballooning balance doesn’t help your financial plan.

You have multiple ways to help tackle debt: The “snowball method” prioritizes paying smaller loans first to help buoy your spirits with tangible progress in shortening your debt list. Or you can focus on paying off the loans with the highest interest rates so you pay less overall, even if you maintain more loans for longer.

Learn how to pay off the debt you owe now and build a long-term debt-management strategy (worksheet and calculator included).

5. Protect with insurance.

The routines and norms of your daily life can change in an instant. People with a good financial plan hope for the best but always try to plan for the unexpected. Insurance helps with that. You may not realize the flexibility of life insurance as a financial tool to protect you and your dependents in the wake of a tragedy. Or maybe you haven’t been introduced to how short- or long-term disability insurance can help maintain your lifestyle by protecting your income. Here are two key questions to ask yourself:

  • Do you have disability and life insurance at work? Your HR or benefits administrator should be able to help you determine your coverage and basic features such as an “elimination period” (how long you would wait to receive benefits if you do become disabled).
  • How much coverage do you have vs. how much you may need? Long-term disability insurance typically replaces about 60% of your income—sometimes less than half after taxes. So, you may want to bundle that coverage with an additional private pay policy, depending on your budget, priorities, and risk tolerance. (Try our disability income calculator .) Your life insurance at work may be a flat rate based on your income, or you may have special benefits such as business travel insurance, advance payments for a terminal illness, or access to life insurance in retirement.

If you buy more voluntary or supplemental insurance through work, premiums often cost less through your employer and can be deducted from your paycheck. (You also may be able to avoid medical underwriting to start coverage, as well as take the policy with you if you leave your job. However, if you buy the insurance on your own, you may be able to buy more coverage and better customize it to your specific needs.)

6. Plan for taxes.

Paying taxes is part of your inevitable financial routine. First, know your tax bracket and how that may evolve throughout your life.

Integrate a more targeted and year-round tax strategy into your financial plan to better allocate your money according to your priorities. Know the difference between deductions and credits and how your plan will incorporate both. You may spot simple deductions or credits you overlooked in previous years. You can learn the importance of tax sheltering through tax-deferred accounts such as employer retirement plans, IRAs, Roth IRAs, health savings accounts (HSAs), and more. You may pursue more specialized moves such as tax-loss harvesting .

If you have access to a benefit such as a HSA and expect to use it to pay for out-of-pocket medical costs, that could help reduce your overall tax burden. If you’re age 50 or older, you may be able to make catch-up contributions with your retirement savings.

Explore ways to save on your taxes next year, using our tax planning worksheet to think through potential income tax credits and deductions. For even more resources, visit our tax center on principal.com .

7. Plan for retirement.

Even if it’s a long way off, think about what you want your money to do for you when you retire. You’ve probably heard the basic recommendation to try to save aggressively for retirement early in your career, so every dollar works harder by compounding for many more years. Or you know the general rule to aim to replace 80% of your income in retirement. But rules of thumb are no match for a direct, specific interrogation of your personal finances and life goals to build a retirement plan right for you.

There are numerous details that depend on your unique circumstances. Will you pay off your home mortgage before retiring? What will be your sources of retirement income? Have you considered the impact of inflation? Have you factored in the costs of long-term care or a nursing home ?

As you near retirement, evaluate what will be taxable when you remove money from an account such as a 401(k) vs. what could be tax-free, such as a Roth IRA after a certain number of years. Strategies such as Roth conversions are one way of managing the tax implications over time, so you have a balance of retirement income sources. If you have significant 401(k) savings you may want to consider rolling it over into an IRA to help provide more investment options. Learn how to start a rollover IRA .

In the bigger picture, get started creating your own custom retirement plan to help you take a more holistic approach to retirement . You also can consult our Retirement Wellness Planner to build a more detailed plan based on your specific finances. Even better, work on your retirement planning with a trusted financial professional.

8. Invest beyond your 401(k).

To reach your mid- and long-term goals, take your savings strategy and put an engine behind it. That’s what investing can do. Does your timeline and risk tolerance favor a more conservative approach, with options such as government bonds or certificates of deposit? Or do you prefer more aggressive investing in stocks and private equity? Regardless, diversifying your investments can help you generate more consistent returns over time to withstand volatility. A thoughtful, diversified approach—including regularly rebalancing your portfolio to account for market shifts and life stages—is within reach (especially if you take advantage of the expertise of a financial professional ).

Get started broadening your investments with these three steps.

9. Create an estate plan.

You don’t have to be wealthy, old, married, or a parent to need an estate plan, which also lays out who makes financial and health care decisions for you if you can’t make them yourself. An estate plan, ideally including a will (to avoid extra legal costs and confusion among your beneficiaries), enables you to clearly articulate your intentions for your assets after you’re gone. Who will wield power of attorney on your behalf? Will you include a living will in case you’re incapacitated and unable to communicate your wishes?

Learn the basics of estate planning and options for creating one.

Congratulations on working through the steps!

Here’s when to review your financial plan.

Take a fresh look at least once a year or after a big life change, such as:

  • Significant change in income
  • Change in family dynamics like having a baby or adopting, getting married, divorce, or losing a spouse/partner
  • Selling or buying a home
  • Inheritance
  • Unexpected debt
  • Change in financial goals

What’s next?

Log in to your Principal account to see how you’re doing. Don’t have an employer-sponsored retirement account or want to save even more in addition to a 401(k)? We can help you set up your own IRA or Roth IRA . If you don’t already work with a trusted financial professional, we can help find one near you .

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Investing involves risk, including possible loss of principal.

Asset allocation and diversification do not ensure a profit or protect against a loss.

The subject matter in this communication is educational only and provided with the understanding that Principal ® is not rendering legal, accounting, investment advice or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.

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A BS in Business with a finance specialization that helps you build toward your career goals – discover the practical value of your education and learn how developing your skill set can help you pursue your career.

  • Career Skills

Track and build your skills in finance

Our BS in Business with a finance specialization offers a variety of courses that can help you develop career skills. So how do you know which courses are best for your professional growth? Start by setting goals. Make a list of career-related skills and identify any knowledge gaps you may have. Then look for the courses that can help you gain those skills or build on your knowledge. As you complete courses, track your progress and practice regularly so you can stay on top of the latest industry trends. Our Career Development Center can help you with your resume and job search as you learn each new skill.

Develop professional traits that can help you pursue your career

Cultivating professional traits is another means to help you stand out in the workplace. For the BS in Business, Finance program, we focus on helping you to become:

  • Detail oriented
  • A confident leader
  • Comfortable with teamwork
  • A creative problem-solver
  • An effective communicator

Finance skills taught in our BS in Business program

As a student in this program, you’ll be introduced to the business of finance, where professionals help organizations find and manage the resources needed to grow, make investments and acquisitions, help plan for the future and manage existing assets.

Financial analysis skills

  • Collect, interpret and evaluate financial data
  • Communicate findings to others through reports, presentations or meetings
  • Understand how to stay up to date on the latest news and trends to make informed decisions
  • Use financial models to simulate different scenarios and help make decisions

Financial accounting skills

  • Analyze financial data to identify trends, patterns and risks
  • Understand financial reports, such as balance sheets, income statements and cash flow statements
  • Communicate complex financial concepts clearly and concisely
  • Understand how to stay up to date on regulations

Business analysis skills

  • Gather and analyze data to identify problems and opportunities, and help develop solutions
  • Communicate findings clearly and concisely through reports, presentations and visualizations
  • Understand how to work with other departments, such as marketing, sales or external partners

Market analysis skills

  • Build a conceptual framework of financial markets and examine their roles in the global financial environment
  • Use financial statement data in various business analysis and valuation contexts
  • Evaluate the macroeconomic variables and monetary policies that affect financial markets

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How to apply, what are the bs in business, finance admission requirements.

Applicants to the BS in Business, Finance program must provide the following information for admission:

  • An admission application – no application fee required
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  • Applicants with 24 or more quarter credits of prior college or university coursework (transferable college coursework and/or credentials that map to preapproved credit for prior learning opportunities may be considered toward the 24-credit minimum equivalency total)
  • Applicants who do not have any credits eligible for transfer must successfully complete a university-approved reading and writing assessment; by evaluating your skills prior to your first course, Capella can more effectively provide resources to prepare you for a successful learning experience
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  • Provide transcripts for evaluation

Learn more about international student admissions .

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Federal grants

Capella University accepts federal grants , which are education funds that you may not have to repay. Find out more about federal grants and what’s available to you. 

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Get started on your finance career goals with a program that can help you develop foundational business knowledge, learn the fundamentals of management and leadership and gain a deeper perspective on risk management and entrepreneurship.

Our curriculum is designed to help you:

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IMAGES

  1. How To Write A Financial Plan For A Business?

    financial requirements business plan

  2. Financial Plan

    financial requirements business plan

  3. 5 Financial Plan Templates Excel

    financial requirements business plan

  4. Creating A Business Plan Template Business Plan Templates

    financial requirements business plan

  5. 7 Business Plan Examples To Help You Write Your Own (2022)

    financial requirements business plan

  6. 6+ Sample Financial Business Plan Templates

    financial requirements business plan

VIDEO

  1. Fast and Easy Business Loans with ROK Financial

  2. Optimizing Financial Services

  3. Business Loans for Self Employed

  4. What is financial planning and why should I create a plan?

  5. How to Optimize Your Business Plan for Success

  6. Financial Planning for Your Business

COMMENTS

  1. How to Write the Financial Section of a Business Plan

    Use the numbers that you put in your sales forecast, expense projections, and cash flow statement. "Sales, lest cost of sales, is gross margin," Berry says. "Gross margin, less expenses, interest ...

  2. Business Plan Financial Templates

    This financial plan projections template comes as a set of pro forma templates designed to help startups. The template set includes a 12-month profit and loss statement, a balance sheet, and a cash flow statement for you to detail the current and projected financial position of a business. ‌. Download Startup Financial Projections Template.

  3. How to Write a Financial Plan: Budget and Forecasts

    Here is everything you need to include in your financial plan, along with optional performance metrics, funding specifics, mistakes to avoid, and free templates. Key components of a financial plan. A sound financial plan is made up of six key components that help you easily track and forecast your business financials. They include your:

  4. Write your business plan

    Common items to include are credit histories, resumes, product pictures, letters of reference, licenses, permits, patents, legal documents, and other contracts. Example traditional business plans. Before you write your business plan, read the following example business plans written by fictional business owners.

  5. How to Prepare a Financial Plan for Startup Business (w/ example)

    7. Build a Visual Report. If you've closely followed the steps leading to this, you know how to research for financial projections, create a financial plan, and test assumptions using "what-if" scenarios. Now, we'll prepare visual reports to present your numbers in a visually appealing and easily digestible format.

  6. How To Write A Business Plan (2024 Guide)

    Create a Company Description. After you have the executive summary in place, you can work on the company description, which contains more specific information. In the description, you'll need to ...

  7. How to Write a Business Plan: Guide + Examples

    Most business plans also include financial forecasts for the future. These set sales goals, budget for expenses, and predict profits and cash flow. A good business plan is much more than just a document that you write once and forget about. It's also a guide that helps you outline and achieve your goals. After completing your plan, you can ...

  8. Business Plan: What it Is, How to Write One

    Learn about the best business plan software. 1. Write an executive summary. This is your elevator pitch. It should include a mission statement, a brief description of the products or services your ...

  9. Business Plan

    A business plan is a document that contains the operational and financial plan of a business, and details how its objectives will be achieved. It serves as a road map for the business and can be used when pitching investors or financial institutions for debt or equity financing. A business plan should follow a standard format and contain all ...

  10. How to Complete the Financial Plan Section of Your Business Plan

    A business' financial plan is the part of your business plan that details how your company will achieve its financial goals. It includes information on your company's projected income, expenses, and cash flow in the form of a 5-Year Income Statement, Balance Sheet and Cash Flow Statement. ... Funding Requirements/Use of Funds. In this ...

  11. Financial Section of Business Plan

    Generally, the financial section is one of the last sections in a business plan. It describes a business's historical financial state (if applicable) and future financial projections. Businesses include supporting documents such as budgets and financial statements, as well as funding requests in this section of the plan. The financial part of ...

  12. Business Plan Essentials: Writing the Financial Plan

    The financial section of your business plan determines whether or not your business idea is viable and will be the focus of any investors who may be attracted to your business idea. The financial section is composed of four financial statements: the income statement, the cash flow projection, the balance sheet, and the statement of shareholders ...

  13. How To Create Financial Projections for Your Business Plan

    Collect relevant historical financial data and market analysis. Forecast expenses. Forecast sales. Build financial projections. The following five steps can help you break down the process of developing financial projections for your company: 1. Identify the purpose and timeframe for your projections.

  14. Funding Requirements in a Business Plan

    Funding Requirements Presentation. The example below shows the funding requirements information, giving summary details of when the funding is needed, for how long, the amount, and a brief comment on what the funds will be used for. This is part of the financial projections and Contents of a Business Plan Guide, a series of posts on what each ...

  15. 6 Elements of a Successful Financial Plan for a Small Business

    A business financial plan typically has six parts: sales forecasting, expense outlay, a statement of financial position, a cash flow projection, a break-even analysis and an operations plan. A good financial plan helps you manage cash flow and accounts for months when revenue might be lower than expected. It also helps you budget for daily and ...

  16. Financial Plans For Startups

    What are a business' financial requirements? The financials are the nitty-gritty of any business plan. Although many of the figures for a startup may only be projections, it's important to be as realistic and detailed as possible. But what financial information and requirements are relevant to business plans? Read this guide to find out more.

  17. Financial Overview Business Plan

    The financial overview business plan contains the current and future financial requirements of your business, including the estimated operating expenses. The financial section is of specific interest to your lenders and investors. It also serves as a roadmap to plan and manage the financial requirements of your company.

  18. 4 Steps to Creating a Financial Plan for Your Small Business

    Whether the business is starting from scratch or modifying its plan, the best financial plans include the following elements: Income statement: The income statement reports the business's net profit or loss over a specific period of time, such a month, quarter or year.

  19. How to Estimate Your Startup's Financial Requirements

    In order to properly estimate startup financial requirements, you'll want to take into account: one-time startup costs, such as legal fees, accounting fees, web development costs, and equipment costs; as well as ongoing costs including payroll, rent, insurance, infrastructure, taxes and loan payments. Making sure that you've taken all startup ...

  20. Financial Planning in Entrepreneurship: Process, Importance, Tools, Sources

    Forecasting Financial Requirements. ... Investors and lenders request to see the entrepreneur's business plan, including the financial plan with projections and assumptions behind the forecast. If the financial plan is unrealistic, a common mistake with entrepreneurs, the loan or investment will not be forthcoming. ...

  21. Plan your business

    Fund your business. It costs money to start a business. Funding your business is one of the first — and most important — financial choices most business owners make. How you choose to fund your business could affect how you structure and run your business. Choose a funding source.

  22. Determining the financial needs of a new business

    To meet any gap in funds, here are sources you can tap: 1. Personal investment. Most start-ups require some personal investment by the entrepreneur—either cash or personal assets used as collateral to secure financing. If you foresee a cash shortfall, you may need to dig deeper into your personal assets. 2.

  23. How To Start A Business In 11 Steps (2024 Guide)

    Financial plan: The financial plan is perhaps the core of the business plan because, without money, the business will not move forward. Include a proposed budget in your financial plan along with ...

  24. Sample One-Page Financial Advisor Business Plan Template

    Why A Business Plan Matters For Financial Advisors. There's no end to the number of articles and even entire books that have been written about how to craft a business plan, yet in practice I find that remarkably few financial advisors have ever created any kind of formal (written or unwritten) business plan.Given that the overwhelming majority of financial advisors essentially operate as ...

  25. 14 Critical Reasons Why You Need a Business Plan

    Additionally, a business plan helps you to identify risks and opportunities early on, providing you with the necessary time to come up with strategies to address them properly. Finally, a business plan helps you work through the nuts and bolts of how your business will work financially and if it can become sustainable over time. 6.

  26. Small business financial planning: setting yourself up for growth

    Creating a financial plan for your small business. To set your small business up for success, you need a solid financial plan that includes both short-term and long-term business and financial goals, as well as strategies to achieve them. Then you can make informed decisions, access funding, and prepare for risks. Here are some tips to get you ...

  27. Personalized financial planning explained step-by-step

    Create a personalized financial plan, start-to-finish, for all your financial goals, with tools and resources to help you succeed, including tips on investing beyond your 401(k). ... Your life insurance at work may be a flat rate based on your income, or you may have special benefits such as business travel insurance, advance payments for a ...

  28. Bachelor of Science in Business

    What are the BS in Business, Finance admission requirements? Applicants to the BS in Business, Finance program must provide the following information for admission: An admission application - no application fee required; A high school diploma or equivalent; A transcript of any reported GED; You must be at least 24 years old.

  29. Department of Human Services

    Overview. Our mission is to assist Pennsylvanians in leading safe, healthy, and productive lives through equitable, trauma-informed, and outcome-focused services while being an accountable steward of commonwealth resources.

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