Financial assumptions and projections are critical components of all business plans.
This information helps you determine how much financing your business needs and helps outsiders determine whether lending you money or investing in your business is a wise use of their funds. Financiers want and often require entrepreneurs to put their own funds in the venture, and the greater the portion you commit relative to your net worththe better.
You must also determine which type of financing would be most suitable for your business. Banks offer several types of loans to businesses that do not present too much risk.
Do you need a short-term working capital loan to increase your inventory? Do you want a transaction loan, with which you receive all the money at once, or a line of credit that lets you draw on funds as you need them?
Do you need an intermediate-term loan to purchase larger assets such as real estate or equipment? Or are you a high-risk business that needs to jump through the extra hoops required to secure a government-backed Small Business Administration loan?
Structuring Your Financial Plan Begin your financial plan with information on where your firm stands financially at the end of the most recent quarter what its financial situation has looked like historically.
|Financial Projections | Pro Business Plans||Case Studies Complex financial Models Experienced Financial Analysts Valued Clients A housing development project for oil field workers was seeking a business plan to provide the lender that incorporated the sensitivity of oil price and adequately reflected multiple construction phases - Pro Business Plans build a model with projections to reflect it.|
Then lay out your goals with financial projections for the next three to five years, depending on what lenders or investors have asked for. These are called "pro forma" statements, and they are based on your assumptions about how your business will perform.
Your one-year projections should be broken down by month, while your more distant projections can be broken down by year.
If your business is new, your statements will be speculative, but you can make them realistic by basing them on the published financial statements of existing businesses similar to yours.
Three Key Financial Statements Your financial plan should include three key financial statements: Lenders and investors want to know what kind of numbers your company is working with and whether your company is profitable or expects to be soon. Within each category are numerous subcategories. For example, your assets will include cash, accounts receivable, inventory and equipment.
Your liabilities will include accounts payable, wages and salaries, taxes, rent and utilities, and loan balances. How much will these expenses be, and how often will you need to pay them?
Will you have trade credit, and how long will you have to pay your suppliers? Your financial statements should show both a long- and short-term vision for your business.
In business plans, three-year and five-year projections are considered long term, and your plan will be expected to cover at least three years. Your projections should be neither overly optimistic best-case scenarios, nor overly cautious worst-case scenarios, but realistic in-between projections that you can support.
Lenders may want your statements presented in a certain way, so ask before you draw them up. A bank, for example, may want to see monthly projections for the first year, quarterly projections for the second year and annual projections for the third year.
In addition to financial statements for your company, if you are a new business, you may need to provide personal financial statements for each owner. Whatever their form, financial statements must be complete, accurate and thorough. Each number on your spreadsheets must mean something.
Your income statement must reconcile to your cash flow statement, which reconciles to your balance sheet.
Your balance sheet must balance at the end of every period.Web Solutions, Inc. isp business plan financial plan. Web Solutions, Inc. is an established Internet service provider, ISP, in Phoenix, AZ, serving the small business and home office markets.
This section presents our financial projections for the term of the plan.
You do this in a distinct section of your business plan for financial forecasts and statements. Many people get confused about this because the financial projections that you include--profit. 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. A sports facility needed a full set of financial projections with a detailed table for drivers to consider enterprise rentals, team practice events, and misc.
revenue. Pro Business Plans generated assumptions from a comparable facility analysis relative to the regional market and facility size. Your financial projections are well-educated guesses.
While developing the assumptions, it is important to remember that your financial projections do not exist in vacuum. They must be tied in some fashion to the data you provided throughout your business plan.
Pro Business Plans prepares financial projections for companies to use for investors, banks, and internal analysis.