Building Business Plan Financial
The business plan has many sections. One of the most important sections is the business plan financials. This is where your plan demonstrates the businesses eventual value, its ability to make and control cash and sales, its profit or loss, and of course the dividends paid out to shareholders.
The business plan financials have 4 basic sections, the profit and loss, the cash flow statement, and the business plan balance sheets.
The profit and loss is the portion of the financials where all the other parts of the financials are really brought together. The profit and loss statement shows incoming sales, outgoing operating expenses and cost of goods, along with personnel expenses. It also demonstrates the business plans assumptions of tax rate, interest rate, One of the major mistakes people make is place the loan payment for a business into the profit and loss statement. The main line of the profit and loss that you should be concerned with is the net income or EBITDA (earning before interest taxes depreciation and amortization). This is the profits way of expressing the success of the business to reach its main goal… generating income!
The cash flow statement is the primary tool f to demonstrate the businesses life blood, cash. It also is the best place to demonstrate the buying and selling activities of the business as this is where they appear before they hit the balance sheet.
Last, the balance sheet of the business plan is mostly an accounting tool used to show the assets and liabilities of the business. Most, the balance sheet most balance. Anything more than that for basic business planning and may not be too relevant to what you are doing.
Building business plan financials can be tricky and its important to demonstrate and understanding of them to impress your banker or investor. But its also important to understand them, for your business as well.
Masterplans can create world class financials. Click on the contact a business planner button at the top of the page to find out more.
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