Business Plan Financials
How to Write the Financial Plan Portion of a Business Plan
Determining whether or not your business plan is a viable business entity usually depends on one major section: the financials. Learn now to write them here.
The success of your business plan depends on a variety of factors, but one of the most important is your financial plan. Although it comes last in your business plan documents (yet before any appendices you may have), it isn't to be left for last. You'll want to work on your business plan financials from the very first day that you conceive of your business idea, even though it will change dramatically over time. Because without a balanced financial plan, you won't have a business to start in the first place.
Before you start working on the three individual reports needed for the financial section of a business plan (income statement, cash flow projection and balance sheet), you'll first need to amass some basic information: your start up expenses and your operating expenses.
What Are Start up Expenses?
Everything that contributes to the initial start up of your business are considered start up expenses. Some standard start up expenses include:
- The cost of registering your business with the local and federal authorities;
- Set up costs, downpayments or deposits on utilities, equipment, rent or land;
- Permits, licenses and fees to join regulatory bodies; and
- Inventory.
The types of start up costs will be determined by the kind of business you have and what capital, equipment and inventory you bring to the business. As you work through your business plan, try to add items that belong to the start up costs list so you aren't racking your brain later trying to think of them.
What Are Operating Expenses?
The cost of day-to-day operations for your business once it is up and running are considered operating expenses. If an expense will need to be paid every month for the duration of the businesses' life cycle, then they are probably operating expenses. Some standard operating expenses include:
- Wages and salaries;
- Rent, mortgage, lease and utilities;
- Bank and loan fees;
- Advertising, marketing and promotions;
- Office supplies;
- Storage and distribution; and
- Maintenance.
Once you have a list of all your operating expenses, multiply that monthly number by six to get a full six months' worth of operating costs. Then, add that number with your total start up costs, and you'll have the rough amount you'll need to start your business.
The next step in creating a financial plan is to create the three financial statements needed:
Want examples of what the business plan financials should look like? Then try the Free Business Plan Templates and More Free Business Plan Templates. Or, go back to the Free Business Plan How To.
