Example of the Financial Section of a Business Plan - Part 1



The Financial Section of your business plan will begin with an introduction to the Financial Plan. The actual structure and details provided in the introduction is left up to the entrepreneur. Moreover, some entrepreneurs (business plan writers) feel its imperative to give the reader a quick summary of each forecasted statement, while others only tell the reader how the financial plan section has been organized.   Below provides two examples of an Introduction to the Financial Plan:

Example 1:

The XYZ Company has prepared the following financial statements for a three year projected period.  Income Statement, Balance Sheet, Cash Flow Statement.  Also, included under the Financial Plan are a Breakeven Analysis, a Sensitivity Analysis and a Ratio Analysis.

As you will see when reading the financial statements, XYZ Company requires $80,000 to start the business.  The two owners will invest $30,000 while the remaining $50,000 will be a bank loan from Banks Are Us.  Payment on the $50,000 will be made on a monthly basis and amount to $590 per month.   

The cash, appearing on the cash flow statement remains positive throughout the three year projected period.  Due to the projected surplus of cash, the financial statements show full repayment of the external financing by the end of the second year of operating.  As a result, the company will now longer have long term debt appearing on the balance.

The Breakeven point in the first year of operation is 5,000 units.  The financial projections anticipate breakeven point will remain consistent.

Projections show the company will have net earnings of $30,000 at the end of its first year in operations.  Earning projections for the second year are expected to be $72,000.


Example 2:

The Financial Plan outlines J&B's forecasted financial statements and the assumptions made when developing them. The Company's capital requirements, how the capital is to be used and our repayment plan is also illustrated here.

The following financial statements and analysis have been forecasted over a three year period.

Income Statements
Balance Sheets
Cash Flow Statements
Break-Even Analysis
Sensitivity Analysis
Ratio Analysis

The forecasted financial statements assume the Product Development Phase will begin January 1, 200W and end on April 30, 200W. In May, J&B will begin its operations. The fiscal year end has been set for April 30 so that a full year of operations can be shown each year for the three year forecasted period.

Following the forecasted statements and analysis are "Notes to the Financial Statements". These Notes explain how we arrived at the account balances.

_____________ End of Example.

Notice, the above example tells the reader what he/she is expected to see under the Financial Plan. It does not go into details on how the Company plans to repay its debt nor how it will obtain its start-up capital. Rather the Introduction guides the reader to the "Notes to the Financial Statements" for further information. If your Notes to the Financial Statements do not fully explain the "higher points" of your forecasted income statement, balance sheet, your loan repayment schedule, capital requirements, or how the capital will be used, we suggest you develop a in-depth Introduction. On the other end of the continuum, if your notes to the financial statements fully explain these items, you may elect to develop an simply sntroduction similar to J&B Incorporated.

Categories: General