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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..

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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Start » startup, business plan financials: 3 statements to include.

The finance section of your business plan is essential to securing investors and determining whether your idea is even viable. Here's what to include.

If your business plan is the blueprint of how to run your company, the financials section is the key to making it happen. The finance section of your business plan is essential to determining whether your idea is even viable in the long term. It’s also necessary to convince investors of this viability and subsequently secure the type and amount of funding you need. Here’s what to include in your business plan financials.

[Read: How to Write a One-Page Business Plan ]

What are business plan financials?

Business plan financials is the section of your business plan that outlines your past, current and projected financial state. This section includes all the numbers and hard data you’ll need to plan for your business’s future, and to make your case to potential investors. You will need to include supporting financial documents and any funding requests in this part of your business plan.

Business plan financials are vital because they allow you to budget for existing or future expenses, as well as forecast your business’s future finances. A strongly written finance section also helps you obtain necessary funding from investors, allowing you to grow your business.

Sections to include in your business plan financials

Here are the three statements to include in the finance section of your business plan:

Profit and loss statement

A profit and loss statement , also known as an income statement, identifies your business’s revenue (profit) and expenses (loss). This document describes your company’s overall financial health in a given time period. While profit and loss statements are typically prepared quarterly, you will need to do so at least annually before filing your business tax return with the IRS.

Common items to include on a profit and loss statement :

• Revenue: total sales and refunds, including any money gained from selling property or equipment.
• Expenditures: total expenses.
• Cost of goods sold (COGS): the cost of making products, including materials and time.
• Gross margin: revenue minus COGS.
• Operational expenditures (OPEX): the cost of running your business, including paying employees, rent, equipment and travel expenses.
• Depreciation: any loss of value over time, such as with equipment.
• Earnings before tax (EBT): revenue minus COGS, OPEX, interest, loan payments and depreciation.
• Profit: revenue minus all of your expenses.

Businesses that have not yet started should provide projected income statements in their financials section. Currently operational businesses should include past and present income statements, in addition to any future projections.

[Read: Top Small Business Planning Strategies ]

A strongly written finance section also helps you obtain necessary funding from investors, allowing you to grow your business.

Balance sheet

A balance sheet provides a snapshot of your company’s finances, allowing you to keep track of earnings and expenses. It includes what your business owns (assets) versus what it owes (liabilities), as well as how much your business is currently worth (equity).

On the assets side of your balance sheet, you will have three subsections: current assets, fixed assets and other assets. Current assets include cash or its equivalent value, while fixed assets refer to long-term investments like equipment or buildings. Any assets that do not fall within these categories, such as patents and copyrights, can be classified as other assets.

On the liabilities side of your balance sheet, include a total of what your business owes. These can be broken down into two parts: current liabilities (amounts to be paid within a year) and long-term liabilities (amounts due for longer than a year, including mortgages and employee benefits).

Once you’ve calculated your assets and liabilities, you can determine your business’s net worth, also known as equity. This can be calculated by subtracting what you owe from what you own, or assets minus liabilities.

Cash flow statement

A cash flow statement shows the exact amount of money coming into your business (inflow) and going out of it (outflow). Each cost incurred or amount earned should be documented on its own line, and categorized into one of the following three categories: operating activities, investment activities and financing activities. These three categories can all have inflow and outflow activities.

Operating activities involve any ongoing expenses necessary for day-to-day operations; these are likely to make up the majority of your cash flow statement. Investment activities, on the other hand, cover any long-term payments that are needed to start and run your business. Finally, financing activities include the money you’ve used to fund your business venture, including transactions with creditors or funders.

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How To Write A Business Plan (2024 Guide)

Updated: Apr 17, 2024, 11:59am

Table of Contents

Brainstorm an executive summary, create a company description, brainstorm your business goals, describe your services or products, conduct market research, create financial plans, bottom line, frequently asked questions.

Every business starts with a vision, which is distilled and communicated through a business plan. In addition to your high-level hopes and dreams, a strong business plan outlines short-term and long-term goals, budget and whatever else you might need to get started. In this guide, we’ll walk you through how to write a business plan that you can stick to and help guide your operations as you get started.

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Drafting the Summary

An executive summary is an extremely important first step in your business. You have to be able to put the basic facts of your business in an elevator pitch-style sentence to grab investors’ attention and keep their interest. This should communicate your business’s name, what the products or services you’re selling are and what marketplace you’re entering.

Ask for Help

When drafting the executive summary, you should have a few different options. Enlist a few thought partners to review your executive summary possibilities to determine which one is best.

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 include your business’s registered name , your business address and any key employees involved in the business. 

The business description should also include the structure of your business, such as sole proprietorship , limited liability company (LLC) , partnership or corporation. This is the time to specify how much of an ownership stake everyone has in the company. Finally, include a section that outlines the history of the company and how it has evolved over time.

Wherever you are on the business journey, you return to your goals and assess where you are in meeting your in-progress targets and setting new goals to work toward.

Numbers-based Goals

Goals can cover a variety of sections of your business. Financial and profit goals are a given for when you’re establishing your business, but there are other goals to take into account as well with regard to brand awareness and growth. For example, you might want to hit a certain number of followers across social channels or raise your engagement rates.

Another goal could be to attract new investors or find grants if you’re a nonprofit business. If you’re looking to grow, you’ll want to set revenue targets to make that happen as well.

Intangible Goals

Goals unrelated to traceable numbers are important as well. These can include seeing your business’s advertisement reach the general public or receiving a terrific client review. These goals are important for the direction you take your business and the direction you want it to go in the future.

The business plan should have a section that explains the services or products that you’re offering. This is the part where you can also describe how they fit in the current market or are providing something necessary or entirely new. If you have any patents or trademarks, this is where you can include those too.

If you have any visual aids, they should be included here as well. This would also be a good place to include pricing strategy and explain your materials.

This is the part of the business plan where you can explain your expertise and different approach in greater depth. Show how what you’re offering is vital to the market and fills an important gap.

You can also situate your business in your industry and compare it to other ones and how you have a competitive advantage in the marketplace.

Other than financial goals, you want to have a budget and set your planned weekly, monthly and annual spending. There are several different costs to consider, such as operational costs.

Business Operations Costs

Rent for your business is the first big cost to factor into your budget. If your business is remote, the cost that replaces rent will be the software that maintains your virtual operations.

Marketing and sales costs should be next on your list. Devoting money to making sure people know about your business is as important as making sure it functions.

Other Costs

Although you can’t anticipate disasters, there are likely to be unanticipated costs that come up at some point in your business’s existence. It’s important to factor these possible costs into your financial plans so you’re not caught totally unaware.

Business plans are important for businesses of all sizes so that you can define where your business is and where you want it to go. Growing your business requires a vision, and giving yourself a roadmap in the form of a business plan will set you up for success.

How do I write a simple business plan?

When you’re working on a business plan, make sure you have as much information as possible so that you can simplify it to the most relevant information. A simple business plan still needs all of the parts included in this article, but you can be very clear and direct.

What are some common mistakes in a business plan?

The most common mistakes in a business plan are common writing issues like grammar errors or misspellings. It’s important to be clear in your sentence structure and proofread your business plan before sending it to any investors or partners.

What basic items should be included in a business plan?

When writing out a business plan, you want to make sure that you cover everything related to your concept for the business,  an analysis of the industry―including potential customers and an overview of the market for your goods or services―how you plan to execute your vision for the business, how you plan to grow the business if it becomes successful and all financial data around the business, including current cash on hand, potential investors and budget plans for the next few years.

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12 Key Elements of a Business Plan (Top Components Explained)

Starting and running a successful business requires proper planning and execution of effective business tactics and strategies .

You need to prepare many essential business documents when starting a business for maximum success; the business plan is one such document.

When creating a business, you want to achieve business objectives and financial goals like productivity, profitability, and business growth. You need an effective business plan to help you get to your desired business destination.

Even if you are already running a business, the proper understanding and review of the key elements of a business plan help you navigate potential crises and obstacles.

This article will teach you why the business document is at the core of any successful business and its key elements you can not avoid.

Let’s get started.

Why Are Business Plans Important?

Business plans are practical steps or guidelines that usually outline what companies need to do to reach their goals. They are essential documents for any business wanting to grow and thrive in a highly-competitive business environment .

1. Proves Your Business Viability

A business plan gives companies an idea of how viable they are and what actions they need to take to grow and reach their financial targets. With a well-written and clearly defined business plan, your business is better positioned to meet its goals.

2. Guides You Throughout the Business Cycle

A business plan is not just important at the start of a business. As a business owner, you must draw up a business plan to remain relevant throughout the business cycle .

During the starting phase of your business, a business plan helps bring your ideas into reality. A solid business plan can secure funding from lenders and investors.

After successfully setting up your business, the next phase is management. Your business plan still has a role to play in this phase, as it assists in communicating your business vision to employees and external partners.

Essentially, your business plan needs to be flexible enough to adapt to changes in the needs of your business.

3. Helps You Make Better Business Decisions

As a business owner, you are involved in an endless decision-making cycle. Your business plan helps you find answers to your most crucial business decisions.

A robust business plan helps you settle your major business components before you launch your product, such as your marketing and sales strategy and competitive advantage.

4. Eliminates Big Mistakes

Many small businesses fail within their first five years for several reasons: lack of financing, stiff competition, low market need, inadequate teams, and inefficient pricing strategy.

Creating an effective plan helps you eliminate these big mistakes that lead to businesses' decline. Every business plan element is crucial for helping you avoid potential mistakes before they happen.

5. Secures Financing and Attracts Top Talents

Having an effective plan increases your chances of securing business loans. One of the essential requirements many lenders ask for to grant your loan request is your business plan.

A business plan helps investors feel confident that your business can attract a significant return on investments ( ROI ).

You can attract and retain top-quality talents with a clear business plan. It inspires your employees and keeps them aligned to achieve your strategic business goals.

Key Elements of Business Plan

Starting and running a successful business requires well-laid actions and supporting documents that better position a company to achieve its business goals and maximize success.

A business plan is a written document with relevant information detailing business objectives and how it intends to achieve its goals.

With an effective business plan, investors, lenders, and potential partners understand your organizational structure and goals, usually around profitability, productivity, and growth.

Every successful business plan is made up of key components that help solidify the efficacy of the business plan in delivering on what it was created to do.

Here are some of the components of an effective business plan.

1. Executive Summary

One of the key elements of a business plan is the executive summary. Write the executive summary as part of the concluding topics in the business plan. Creating an executive summary with all the facts and information available is easier.

In the overall business plan document, the executive summary should be at the forefront of the business plan. It helps set the tone for readers on what to expect from the business plan.

A well-written executive summary includes all vital information about the organization's operations, making it easy for a reader to understand.

The key points that need to be acted upon are highlighted in the executive summary. They should be well spelled out to make decisions easy for the management team.

A good and compelling executive summary points out a company's mission statement and a brief description of its products and services.

An executive summary summarizes a business's expected value proposition to distinct customer segments. It highlights the other key elements to be discussed during the rest of the business plan.

Including your prior experiences as an entrepreneur is a good idea in drawing up an executive summary for your business. A brief but detailed explanation of why you decided to start the business in the first place is essential.

Adding your company's mission statement in your executive summary cannot be overemphasized. It creates a culture that defines how employees and all individuals associated with your company abide when carrying out its related processes and operations.

Your executive summary should be brief and detailed to catch readers' attention and encourage them to learn more about your company.

Components of an Executive Summary

Here are some of the information that makes up an executive summary:

• The name and location of your company
• Products and services offered by your company
• Mission and vision statements
• Success factors of your business plan

2. Business Description

Your business description needs to be exciting and captivating as it is the formal introduction a reader gets about your company.

What your company aims to provide, its products and services, goals and objectives, target audience , and potential customers it plans to serve need to be highlighted in your business description.

A company description helps point out notable qualities that make your company stand out from other businesses in the industry. It details its unique strengths and the competitive advantages that give it an edge to succeed over its direct and indirect competitors.

Spell out how your business aims to deliver on the particular needs and wants of identified customers in your company description, as well as the particular industry and target market of the particular focus of the company.

Include trends and significant competitors within your particular industry in your company description. Your business description should contain what sets your company apart from other businesses and provides it with the needed competitive advantage.

In essence, if there is any area in your business plan where you need to brag about your business, your company description provides that unique opportunity as readers look to get a high-level overview.

Components of a Business Description

Your business description needs to contain these categories of information.

• Business location
• The legal structure of your business
• Summary of your business’s short and long-term goals

3. Market Analysis

The market analysis section should be solely based on analytical research as it details trends particular to the market you want to penetrate.

Graphs, spreadsheets, and histograms are handy data and statistical tools you need to utilize in your market analysis. They make it easy to understand the relationship between your current ideas and the future goals you have for the business.

All details about the target customers you plan to sell products or services should be in the market analysis section. It helps readers with a helpful overview of the market.

In your market analysis, you provide the needed data and statistics about industry and market share, the identified strengths in your company description, and compare them against other businesses in the same industry.

The market analysis section aims to define your target audience and estimate how your product or service would fare with these identified audiences.

Market analysis helps visualize a target market by researching and identifying the primary target audience of your company and detailing steps and plans based on your audience location.

Obtaining this information through market research is essential as it helps shape how your business achieves its short-term and long-term goals.

Market Analysis Factors

Here are some of the factors to be included in your market analysis.

• The geographical location of your target market
• Needs of your target market and how your products and services can meet those needs
• Demographics of your target audience

Components of the Market Analysis Section

Here is some of the information to be included in your market analysis.

• Industry description and statistics
• Demographics and profile of target customers
• Marketing data for your products and services
• Detailed evaluation of your competitors

4. Marketing Plan

A marketing plan defines how your business aims to reach its target customers, generate sales leads, and, ultimately, make sales.

Promotion is at the center of any successful marketing plan. It is a series of steps to pitch a product or service to a larger audience to generate engagement. Note that the marketing strategy for a business should not be stagnant and must evolve depending on its outcome.

Include the budgetary requirement for successfully implementing your marketing plan in this section to make it easy for readers to measure your marketing plan's impact in terms of numbers.

The information to include in your marketing plan includes marketing and promotion strategies, pricing plans and strategies , and sales proposals. You need to include how you intend to get customers to return and make repeat purchases in your business plan.

5. Sales Strategy

Sales strategy defines how you intend to get your product or service to your target customers and works hand in hand with your business marketing strategy.

Your sales strategy approach should not be complex. Break it down into simple and understandable steps to promote your product or service to target customers.

Apart from the steps to promote your product or service, define the budget you need to implement your sales strategies and the number of sales reps needed to help the business assist in direct sales.

Your sales strategy should be specific on what you need and how you intend to deliver on your sales targets, where numbers are reflected to make it easier for readers to understand and relate better.

6. Competitive Analysis

Providing transparent and honest information, even with direct and indirect competitors, defines a good business plan. Provide the reader with a clear picture of your rank against major competitors.

Identifying your competitors' weaknesses and strengths is useful in drawing up a market analysis. It is one information investors look out for when assessing business plans.

The competitive analysis section clearly defines the notable differences between your company and your competitors as measured against their strengths and weaknesses.

This section should define the following:

• Your competitors' identified advantages in the market
• How do you plan to set up your company to challenge your competitors’ advantage and gain grounds from them?
• The standout qualities that distinguish you from other companies
• Potential bottlenecks you have identified that have plagued competitors in the same industry and how you intend to overcome these bottlenecks

In your business plan, you need to prove your industry knowledge to anyone who reads your business plan. The competitive analysis section is designed for that purpose.

7. Management and Organization

Management and organization are key components of a business plan. They define its structure and how it is positioned to run.

Whether you intend to run a sole proprietorship, general or limited partnership, or corporation, the legal structure of your business needs to be clearly defined in your business plan.

Use an organizational chart that illustrates the hierarchy of operations of your company and spells out separate departments and their roles and functions in this business plan section.

The management and organization section includes profiles of advisors, board of directors, and executive team members and their roles and responsibilities in guaranteeing the company's success.

Apparent factors that influence your company's corporate culture, such as human resources requirements and legal structure, should be well defined in the management and organization section.

Defining the business's chain of command if you are not a sole proprietor is necessary. It leaves room for little or no confusion about who is in charge or responsible during business operations.

This section provides relevant information on how the management team intends to help employees maximize their strengths and address their identified weaknesses to help all quarters improve for the business's success.

8. Products and Services

This business plan section describes what a company has to offer regarding products and services to the maximum benefit and satisfaction of its target market.

Boldly spell out pending patents or copyright products and intellectual property in this section alongside costs, expected sales revenue, research and development, and competitors' advantage as an overview.

At this stage of your business plan, the reader needs to know what your business plans to produce and sell and the benefits these products offer in meeting customers' needs.

The supply network of your business product, production costs, and how you intend to sell the products are crucial components of the products and services section.

Investors are always keen on this information to help them reach a balanced assessment of if investing in your business is risky or offer benefits to them.

You need to create a link in this section on how your products or services are designed to meet the market's needs and how you intend to keep those customers and carve out a market share for your company.

Repeat purchases are the backing that a successful business relies on and measure how much customers are into what your company is offering.

This section is more like an expansion of the executive summary section. You need to analyze each product or service under the business.

9. Operating Plan

An operations plan describes how you plan to carry out your business operations and processes.

The operating plan for your business should include:

• Information about how your company plans to carry out its operations.
• The base location from which your company intends to operate.
• The number of employees to be utilized and other information about your company's operations.
• Key business processes.

This section should highlight how your organization is set up to run. You can also introduce your company's management team in this section, alongside their skills, roles, and responsibilities in the company.

The best way to introduce the company team is by drawing up an organizational chart that effectively maps out an organization's rank and chain of command.

What should be spelled out to readers when they come across this business plan section is how the business plans to operate day-in and day-out successfully.

10. Financial Projections and Assumptions

Bringing your great business ideas into reality is why business plans are important. They help create a sustainable and viable business.

The financial section of your business plan offers significant value. A business uses a financial plan to solve all its financial concerns, which usually involves startup costs, labor expenses, financial projections, and funding and investor pitches.

All key assumptions about the business finances need to be listed alongside the business financial projection, and changes to be made on the assumptions side until it balances with the projection for the business.

The financial plan should also include how the business plans to generate income and the capital expenditure budgets that tend to eat into the budget to arrive at an accurate cash flow projection for the business.

Base your financial goals and expectations on extensive market research backed with relevant financial statements for the relevant period.

Examples of financial statements you can include in the financial projections and assumptions section of your business plan include:

• Projected income statements
• Cash flow statements
• Balance sheets
• Income statements

Revealing the financial goals and potentials of the business is what the financial projection and assumption section of your business plan is all about. It needs to be purely based on facts that can be measurable and attainable.

11. Request For Funding

The request for funding section focuses on the amount of money needed to set up your business and underlying plans for raising the money required. This section includes plans for utilizing the funds for your business's operational and manufacturing processes.

When seeking funding, a reasonable timeline is required alongside it. If the need arises for additional funding to complete other business-related projects, you are not left scampering and desperate for funds.

If you do not have the funds to start up your business, then you should devote a whole section of your business plan to explaining the amount of money you need and how you plan to utilize every penny of the funds. You need to explain it in detail for a future funding request.

When an investor picks up your business plan to analyze it, with all your plans for the funds well spelled out, they are motivated to invest as they have gotten a backing guarantee from your funding request section.

Include timelines and plans for how you intend to repay the loans received in your funding request section. This addition keeps investors assured that they could recoup their investment in the business.

12. Exhibits and Appendices

Exhibits and appendices comprise the final section of your business plan and contain all supporting documents for other sections of the business plan.

Some of the documents that comprise the exhibits and appendices section includes:

• Legal documents
• Licenses and permits
• Credit histories
• Customer lists

The choice of what additional document to include in your business plan to support your statements depends mainly on the intended audience of your business plan. Hence, it is better to play it safe and not leave anything out when drawing up the appendix and exhibit section.

Supporting documentation is particularly helpful when you need funding or support for your business. This section provides investors with a clearer understanding of the research that backs the claims made in your business plan.

There are key points to include in the appendix and exhibits section of your business plan.

• The management team and other stakeholders resume
• Marketing research
• Permits and relevant legal documents
• Financial documents

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Martin loves entrepreneurship and has helped dozens of entrepreneurs by validating the business idea, finding scalable customer acquisition channels, and building a data-driven organization. During his time working in investment banking, tech startups, and industry-leading companies he gained extensive knowledge in using different software tools to optimize business processes.

This insights and his love for researching SaaS products enables him to provide in-depth, fact-based software reviews to enable software buyers make better decisions.

4 Key Financial Statements For Your Startup Business Plan

• September 12, 2022
• Fundraising

If you’re preparing a business plan for your startup, chances are that investors (or a bank) have also asked you to produce financial projections for your business. That’s absolutely normal: any startup business plan should at least include forecasts of the 3 financial statements.

The financial projections need to be presented clearly with charts and tables so potential investors understand where you are going, and how much money you need to get there .

In this article we explain you what are the 4 financial statements you should include in the business plan for your startup. Let’s dive in!

Financial Statement #1: Profit & Loss

The profit and loss (P&L) , also referred to as “income statement”, is a summary of all your revenues and expenses over a given time period .

By subtracting expenses from revenues, it gives a clear picture of whether your business is profitable, or loss-making. With the balance sheet and the cash flow statement, it is one of the 3 consolidated financial statements every startup must produce every fiscal year .

Most small businesses produce a P&L on a yearly basis with the help of their accountant. Yet it is good practice to keep track of all revenues and expenses on a monthly or quarterly basis as part of your budget instead.

When projecting your financials as part of your business plan, you must do so on a monthly basis. Usually, most startups project 3 years hence 36 months. If you have some historical performance (for instance you started your business 2 years ago), project 5 years instead.

Expert-built financial model templates for tech startups

Financial Statement #2: Cash Flow

Whilst your P&L includes all your business’ revenues and expenses in a given period, the cash flow statement records all cash inflows and outflows over that same period.

Some expenses are not necessarily recorded in your P&L but should be included in your cash flow statement instead. Why is that? There are 2 main reasons:

• Your P&L shows a picture of all the revenues you generated over a given period as well as the expenses you incurred to generate these revenues . If you sell $100 worth of products in July 2021 and incurred $50 cost to source them from your supplier, your P&L shows $100 revenues minus $50 expenses for that month. But what about if you bought a $15,000 car to deliver these products to your customers? The $15,000 should not be recorded as an expense in your P&L, but a cash outflow instead. Indeed, the car will help you generate revenues, say over the next 5 years, not just in July 2021
• Some expenses in your P&L are not necessarily cash outflows. Think depreciation and amortization expenses for instance: they are pure artificial expenses and aren’t really “spent”. As such, whilst your P&L might include a $100 depreciation expense, your cash flow remains the same.

Financial Statement #3: Balance Sheet

Whilst the P&L and cash flow statement are a summary of your financial performance over a given time period, the balance sheet is a picture of your financials at a given time.

The balance sheet lists all your business’ assets and liabilities at a given time (at end of year for instance). As such, it includes things such as:

• Assets: patents, buildings, equipments, customer receivables, tax credits etc. Assets can be either tangible (e.g. buildings) or intangible (e.g. customer receivables ).
• Liabilities: debt, suppliers payables, etc.
• Equity : the paid-in capital invested to date in the company (from you and any other potential investors). Equity also includes the cumulative result of your P&L: the sum of your profits and losses to date

Whilst P&L and cash flow statement are fairly simple to build when preparing your business plan, you might need help for your balance sheet.

Financial Statement #4: Use of Funds

The use of funds is not a mandatory financial statement your accountant will need to prepare every year. Instead, you shall include it in your startup business plan, along with the 3 key financial statements.

Indeed, the use of funds tells investors where you will spend your money over a given time frame. For instance, if you are raising $500k to open a retail shop, you might need $250k for the first year lease and another $250k for the inventory.

Use of funds should not be an invention from you: instead it is the direct result of your cash flow statement . If you are raising for your first year of business, and your projected cash flow statement result in a $500k loss (including all revenues and expenses), you will need to raise $500k.

For instance, using the example above, if you need $500k over the next 12 months, raise $600k or so instead. Indeed, better be on the safe side in case things do not go as expected!

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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

• 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. 

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 a Business Plan: Your Step-by-Step Guide

So, you’ve got an idea and you want to start a business —great! Before you do anything else, like seek funding or build out a team, you'll need to know how to write a business plan. This plan will serve as the foundation of your company while also giving investors and future employees a clear idea of your purpose.

Below, Lauren Cobello, Founder and CEO of Leverage with Media PR , gives her best advice on how to make a business plan for your company.

Build your dream business with the help of a high-paying job—browse open jobs on The Muse »

What is a business plan, and when do you need one?

According to Cobello, a business plan is a document that contains the mission of the business and a brief overview of it, as well as the objectives, strategies, and financial plans of the founder. A business plan comes into play very early on in the process of starting a company—more or less before you do anything else.

“You should start a company with a business plan in mind—especially if you plan to get funding for the company,” Cobello says. “You’re going to need it.”

Whether that funding comes from a loan, an investor, or crowdsourcing, a business plan is imperative to secure the capital, says the U.S. Small Business Administration . Anyone who’s considering giving you money is going to want to review your business plan before doing so. That means before you head into any meeting, make sure you have physical copies of your business plan to share.

Different types of business plans

The four main types of business plans are:

Startup Business Plans

Internal business plans, strategic business plans, one-page business plans.

Let's break down each one:

If you're wondering how to write a business plan for a startup, Cobello has advice for you. Startup business plans are the most common type, she says, and they are a critical tool for new business ventures that want funding. A startup is defined as a company that’s in its first stages of operations, founded by an entrepreneur who has a product or service idea.

Most startups begin with very little money, so they need a strong business plan to convince family, friends, banks, and/or venture capitalists to invest in the new company.

Internal business plans “are for internal use only,” says Cobello. This kind of document is not public-facing, only company-facing, and it contains an outline of the company’s business strategy, financial goals and budgets, and performance data.

Internal business plans aren’t used to secure funding, but rather to set goals and get everyone working there tracking towards them.

As the name implies, strategic business plans are geared more towards strategy and they include an assessment of the current business landscape, notes Jérôme Côté, a Business Advisor at BDC Advisory Services .

Unlike a traditional business plan, Cobello adds, strategic plans include a SWOT analysis (which stands for strengths, weaknesses, opportunities, and threats) and an in-depth action plan for the next six to 12 months. Strategic plans are action-based and take into account the state of the company and the industry in which it exists.

Although a typical business plan falls between 15 to 30 pages, some companies opt for the much shorter One-Page Business Plan. A one-page business plan is a simplified version of the larger business plan, and it focuses on the problem your product or service is solving, the solution (your product), and your business model (how you’ll make money).

A one-page plan is hyper-direct and easy to read, making it an effective tool for businesses of all sizes, at any stage.

How to create a business plan in 7 steps

Every business plan is different, and the steps you take to complete yours will depend on what type and format you choose. That said, if you need a place to start and appreciate a roadmap, here’s what Cobello recommends:

1. Conduct your research

Before writing your business plan, you’ll want to do a thorough investigation of what’s out there. Who will be the competitors for your product or service? Who is included in the target market? What industry trends are you capitalizing on, or rebuking? You want to figure out where you sit in the market and what your company’s value propositions are. What makes you different—and better?

2. Define your purpose for the business plan

The purpose of your business plan will determine which kind of plan you choose to create. Are you trying to drum up funding, or get the company employees focused on specific goals? (For the former, you’d want a startup business plan, while an internal plan would satisfy the latter.) Also, consider your audience. An investment firm that sees hundreds of potential business plans a day may prefer to see a one-pager upfront and, if they’re interested, a longer plan later.

3. Write your company description

Every business plan needs a company description—aka a summary of the company’s purpose, what they do/offer, and what makes it unique. Company descriptions should be clear and concise, avoiding the use of jargon, Cobello says. Ideally, descriptions should be a few paragraphs at most.

4. Explain and show how the company will make money

A business plan should be centered around the company’s goals, and it should clearly explain how the company will generate revenue. To do this, Cobello recommends using actual numbers and details, as opposed to just projections.

For instance, if the company is already making money, show how much and at what cost (e.g. what was the net profit). If it hasn’t generated revenue yet, outline the plan for how it will—including what the product/service will cost to produce and how much it will cost the consumer.

5. Outline your marketing strategy

How will you promote the business? Through what channels will you be promoting it? How are you going to reach and appeal to your target market? The more specific and thorough you can be with your plans here, the better, Cobello says.

6. Explain how you’ll spend your funding

What will you do with the money you raise? What are the first steps you plan to take? As a founder, you want to instill confidence in your investors and show them that the instant you receive their money, you’ll be taking smart actions that grow the company.

7. Include supporting documents

Creating a business plan is in some ways akin to building a legal case, but for your business. “You want to tell a story, and to be as thorough as possible, while keeping your plan succinct, clear, interesting, and visually appealing,” Cobello says. “Supporting documents could include financial projects, a competitive analysis of the market you’re entering into, and even any licenses, patents, or permits you’ve secured.”

A business plan is an individualized document—it’s ultimately up to you what information to include and what story you tell. But above all, Cobello says, your business plan should have a clear focus and goal in mind, because everything else will build off this cornerstone.

“Many people don’t realize how important business plans are for the health of their company,” she says. “Set aside time to make this a priority for your business, and make sure to keep it updated as you grow.”

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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• 3. Industry Analysis
• 4. Customer Analysis
• 5. Competitive Analysis
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• 8. Management Team
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First Steps: Writing the Financials Section of Your Business Plan This quick guide offers tips that will help you create the financials section for your business plan.

By Entrepreneur Staff Jan 4, 2015

In their book Write Your Business Plan , the staff of Entrepreneur Media, Inc. offer an in-depth understanding of what's essential to any business plan, what's appropriate for your venture, and what it takes to ensure success. In this edited excerpt, the authors outline what type of information you should include in the financials section of your business plan.

Financial data is always at the back of the business plan, but that doesn't mean it's any less important than such up-front material as the description of the business concept and the management team. Astute investors look carefully at the charts, tables, formulas and spreadsheets in the financial section because they know this information is like the pulse, respiration rate and blood pressure in a human being—it shows the condition of the patient. In fact, you'll find many potential investors taking a quick peak at the numbers before reading the plan.

Financial statements come in threes: income statement, balance sheet, and cash flow statement. Taken together they provide an accurate picture of a company's current value, plus its ability to pay its bills today and earn a profit going forward. This information is very important to business plan readers.

You can typically gather information and use Excel or another financial program to create your spreadsheets. You'll also find them available in most business plan software; these programs also do the calculations.

Income statement.

An income statement shows whether you're making any money. It adds up all your revenue from sales and other sources, subtracts all your costs, and comes up with the net income figure, also known as the bottom line.

Income statements are called various names—profit and loss statement (P&L) and earnings statement are two common alternatives. They can get pretty complicated in their attempt to capture sources of income, such as interest, and expenses, such as depreciation. But the basic idea is pretty simple: If you subtract costs from income, what you have left is profit.

To figure your income statement, you need to gather a bunch of numbers, including your gross revenue, which is made up of sales and any income from interest or sales of assets; your sales, general and administrative (SG&A) expenses; what you paid out in interest and dividends, if anything; and your corporate tax rate. If you have those, you're ready to go.

If you're a startup and don't have any prior years' figures to look at, look for statistics about other businesses within your industry. The most important question to ask is: What has been the experience of similar companies? If you know that car dealers across the nation have averaged 12 percent annual sales gains, that's a good starting point for figuring your company's projections.

Balance sheet.

If the income sheet shows what you're earning, the balance sheet shows what you're worth. A balance sheet can help an investor see that a company owns valuable assets that don't show up on the income statement or that it may be profitable but is heavily in debt. It adds up everything your business owns, subtracts everything the business owes, and shows the difference as the net worth of the business.

Actually, accountants put it differently and, of course, use different names. The things you own are called assets. The things you owe money on are called liabilities. And net worth is referred to as equity.

A balance sheet shows your condition on a given date, usually the end of your fiscal year. Sometimes balance sheets are compared. That is, next to the figures for the end of the most recent year, you place the entries for the end of the prior period. This gives you a snapshot of how and where your financial position has changed.

A balance sheet also places a value on the owner's equity in the business. When you subtract liabilities from assets, what's left is the value of the equity in the business owned by you and any partners. Tracking changes in this number will tell you whether you're getting richer or poorer.

Balance sheets can also be projected into the future, and the projections can serve as targets to aim for or benchmarks to compare against actual results. Balance sheets are affected by sales, too. If your accounts receivable go up or inventory increases, your balance sheet reflects this. And, of course, increases in cash show up on the balance sheet. So it's important to look ahead to see how your balance sheet will appear given your sales forecast.

Cash flow statement.

The cash flow statement monitors the flow of cash over a period of time (a year, a quarter, a month) and shows you how much cash you have on hand at the moment.

The cash flow statement, also called the statement of changes in financial position, probes and analyzes changes that have occurred on the balance sheet. It's different from the income statement, which describes sales and profits but doesn't necessarily tell you where your cash came from or how it's being used.

A cash flow statement consists of two parts. One follows the flow of cash into and out of the company. The other shows how the funds were spent. The two parts are called, respectively, sources of funds and uses of funds. At the bottom is, naturally, the bottom line, called net changes in cash position. It shows whether you improved your cash position and by how much during the period.

Other Financial Information

If you're seeking investors for your company, you'll probably need to provide quite a bit more financial information than what is in the income statement, balance sheet and cash flow statements. For instance, a personal finance statement may be needed if you're guaranteeing loans yourself. Applying business data to other ratios and formulas will yield important information on what your profit margin is and what level of sales it will take for you to reach profitability. Still other figures, such as the various ratios, will help predict whether you'll be able to pay your bills for long. These bits of information are helpful to you as well as to investors, it should be noted. Understanding and, if possible, mastering them, will help you run your business more smoothly.

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What Is a Business Plan?

Understanding business plans, how to write a business plan, common elements of a business plan, the bottom line, business plan: what it is, what's included, and how to write one.

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

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A business plan is a document that outlines a company's goals and the strategies to achieve them. It's valuable for both startups and established companies. For startups, a well-crafted business plan is crucial for attracting potential lenders and investors. Established businesses use business plans to stay on track and aligned with their growth objectives. This article will explain the key components of an effective business plan and guidance on how to write one.

Key Takeaways

• A business plan is a document detailing a company's business activities and strategies for achieving its goals.
• Startup companies use business plans to launch their venture and to attract outside investors.
• For established companies, a business plan helps keep the executive team focused on short- and long-term objectives.
• There's no single required format for a business plan, but certain key elements are essential for most companies.

Investopedia / Ryan Oakley

Any new business should have a business plan in place before beginning operations. Banks and venture capital firms often want to see a business plan before considering making a loan or providing capital to new businesses.

Even if a company doesn't need additional funding, having a business plan helps it stay focused on its goals. Research from the University of Oregon shows that businesses with a plan are significantly more likely to secure funding than those without one. Moreover, companies with a business plan grow 30% faster than those that don't plan. According to a Harvard Business Review article, entrepreneurs who write formal plans are 16% more likely to achieve viability than those who don't.

A business plan should ideally be reviewed and updated periodically to reflect achieved goals or changes in direction. An established business moving in a new direction might even create an entirely new plan.

There are numerous benefits to creating (and sticking to) a well-conceived business plan. It allows for careful consideration of ideas before significant investment, highlights potential obstacles to success, and provides a tool for seeking objective feedback from trusted outsiders. A business plan may also help ensure that a company’s executive team remains aligned on strategic action items and priorities.

While business plans vary widely, even among competitors in the same industry, they often share basic elements detailed below.

A well-crafted business plan is essential for attracting investors and guiding a company's strategic growth. It should address market needs and investor requirements and provide clear financial projections.

While there are any number of templates that you can use to write a business plan, it's best to try to avoid producing a generic-looking one. Let your plan reflect the unique personality of your business.

Many business plans use some combination of the sections below, with varying levels of detail, depending on the company.

The length of a business plan can vary greatly from business to business. Regardless, gathering the basic information into a 15- to 25-page document is best. Any additional crucial elements, such as patent applications, can be referenced in the main document and included as appendices.

Common elements in many business plans include:

• Executive summary : This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
• Products and services : Describe the products and services the company offers or plans to introduce. Include details on pricing, product lifespan, and unique consumer benefits. Mention production and manufacturing processes, relevant patents , proprietary technology , and research and development (R&D) information.
• Market analysis : Explain the current state of the industry and the competition. Detail where the company fits in, the types of customers it plans to target, and how it plans to capture market share from competitors.
• Marketing strategy : Outline the company's plans to attract and retain customers, including anticipated advertising and marketing campaigns. Describe the distribution channels that will be used to deliver products or services to consumers.
• Financial plans and projections : Established businesses should include financial statements, balance sheets, and other relevant financial information. New businesses should provide financial targets and estimates for the first few years. This section may also include any funding requests.

Investors want to see a clear exit strategy, expected returns, and a timeline for cashing out. It's likely a good idea to provide five-year profitability forecasts and realistic financial estimates.

2 Types of Business Plans

Business plans can vary in format, often categorized into traditional and lean startup plans. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.

• Traditional business plans : These are detailed and lengthy, requiring more effort to create but offering comprehensive information that can be persuasive to potential investors.
• Lean startup business plans : These are concise, sometimes just one page, and focus on key elements. While they save time, companies should be ready to provide additional details if requested by investors or lenders.

Why Do Business Plans Fail?

A business plan isn't a surefire recipe for success. The plan may have been unrealistic in its assumptions and projections. Markets and the economy might change in ways that couldn't have been foreseen. A competitor might introduce a revolutionary new product or service. All this calls for building flexibility into your plan, so you can pivot to a new course if needed.

How Often Should a Business Plan Be Updated?

How frequently a business plan needs to be revised will depend on its nature. Updating your business plan is crucial due to changes in external factors (market trends, competition, and regulations) and internal developments (like employee growth and new products). While a well-established business might want to review its plan once a year and make changes if necessary, a new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.

What Does a Lean Startup Business Plan Include?

The lean startup business plan is ideal for quickly explaining a business, especially for new companies that don't have much information yet. Key sections may include a value proposition , major activities and advantages, resources (staff, intellectual property, and capital), partnerships, customer segments, and revenue sources.

A well-crafted business plan is crucial for any company, whether it's a startup looking for investment or an established business wanting to stay on course. It outlines goals and strategies, boosting a company's chances of securing funding and achieving growth.

As your business and the market change, update your business plan regularly. This keeps it relevant and aligned with your current goals and conditions. Think of your business plan as a living document that evolves with your company, not something carved in stone.

University of Oregon Department of Economics. " Evaluation of the Effectiveness of Business Planning Using Palo Alto's Business Plan Pro ." Eason Ding & Tim Hursey.

Bplans. " Do You Need a Business Plan? Scientific Research Says Yes ."

Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."

Harvard Business Review. " How to Write a Winning Business Plan ."

U.S. Small Business Administration. " Write Your Business Plan ."

SCORE. " When and Why Should You Review Your Business Plan? "

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How to Complete the Financial Section of Business Plan

A plan intends to explain the business, introduce critical contributors, products and, services and defines the goals for the future. It paints a picture of the founder’s expectations and helps others see their vision. The financial section of the plan provides the proof behind the story. It is the section that investors and lenders are most interested in, and often the first section they read, despite it being near the end of the plan. It also acts as a roadmap and a guide for the direction the company will take into the future.

Financial Section Elements

While it may sound complicated, the financial section of a business plan only contains three documents and a brief explanation of each. It is necessary to prepare an income statement, cash flow projection and a balance sheet either using spreadsheets, or software that does all of the calculations automatically. Before beginning this statement, it’s necessary to gather the following information:

Business Start-Up Expenses

This list of all of the costs associated with getting the business up and running comprises what primarily are one-time fees such as registering the company. Following is only a partial list of possible start-up costs, every business is unique, and the list may, or may not, contain these items and more.

• Business registration fees
• Licensing and permits
• Product inventory
• Deposit on rental property
• Down payment to purchase property
• Down payment on machines and equipment
• Set-up fees for utilities

Business Operating Costs

As the name implies, operating costs are the ongoing expenses that need to be paid to keep the business running. These expenses are usually monthly bills, and for a start-up, estimate six months worth of these costs. A company’s list of operating expenses might include:

• Monthly mortgage payment or rent
• Logistics and distribution
• Marketing and promotion
• Loan paymentsRaw materials
• Office supplies
• Building/vehicle maintenance

The Income Statement

This financial statement details the company’s revenues, expenses, and profit for a set period. Established businesses generated these annually, or semi-annually, based on actual performance. Start-ups with no previous years to look at have to use statistical data within the industry to make reasonable projections. A start-up will also produce monthly versions of this statement to show the forecast of growth. This section will include the data such as:

• Gross revenue (sales, interest income and sales of assets)
• General and administrative expenses (start-up and operating costs)
• Corporate tax rate (expected tax liabilities)

The math is simple here: subtract the expenditures from the revenue, and the remaining number is profit. When put into the proper format, an income statement gives a clear view of the financial viability of a company.

Cash-Flow Projection

This statement shows how you expect cash to flow in to, and out of, your business. It’s an essential internal cash management tool and a source of data that shows what your business’s capital needs will be in the near future. For investors and bank loan officers, it helps determine your creditworthiness and amount you can borrow. The cash-flow projection contains three parts:

• Cash revenues — This part details the incoming cash from sales for specific periods of time, usually monthly. It is an estimate, based upon past performance and future projections for current businesses, and industry averages for start-ups.
• Cash disbursements — Every monthly bill or other expense that is paid out in cash gets listed in this section. As with revenue, these are estimates, either based upon historical data, current data, or industry data.
• Cash flow projection — This merely is a reconciliation of the cash revenues to cash disbursements. Adding the current month’s revenues to the carried-over balance, then subtracting the month’s disbursements creates estimated cash flow.

The Balance Sheet

The final financial statement required for the business plan’s financial section is a balance sheet. This statement is a snapshot of the company’s net worth at a given point in time. Established businesses produce a balance sheet annually. Information from the income statement and cash flow projection are used to complete this statement. It summarizes the business’s financial data into three main categories:

• Assets — This is the total of all of the tangible items that the company owns that hold monetary value. That includes equipment, property, and cash-on-hand, for example.
• Liabilities — This is the total amount of debt that the company owes its creditors. You’ll include every debt, whether recurring, one-time, fixed, or variable.
• Equity — This is merely the difference between the company’s assets, including retained earnings and current earnings, and its liabilities.

Side-Notes and Details

In some cases, it may be necessary to explain details within the financial statements. Denote these instances within the statement and include a brief explanation sheet as an attachment. It may also be useful to add information on the process used to estimate revenues and expenses, which will show interested parties the intent and help them better understand the data.

Don’t Sweat the Process

It’s important to note that the order in which these financial statements is created may vary from the way they are presented here. This is to be expected. In fact, most business plan creators end up going back and forth with these statements as the numbers reveal the business’s financial reality. It paints a crystal clear picture of its economic viability, which can present to a lender, investor, or shareholder with confidence.

All of these financial documents can be created by using accounting and business software readily available online. Even so, some people aren’t entirely comfortable creating financial statements for their business plan, and outsource this critical task to a professional. Even the largest corporations struggle with financial planning and reporting, and they often hire the job out to someone more qualified. It’s merely a matter of making sure that the data is accurate, easy to track, and based on sound accounting practices.

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What finance details should be in your business plan?

One of the first questions I always ask people looking for accountancy advice is, “can I see your business plan?” A business plan shows your projected profit and loss and demonstrates that you understand the essentials of cash flow. It’s also a clear indicator that you recognise the financial challenges of running a company, writes Andy Revell of DSL Accounting .

In my experience, it is common for business owners to come back to me and say: “I never got round to writing one up.” Research conducted by Barclays found that less than 50% of small business owners in the UK have a basic business plan, a component which is essential to running a successful business.

As a figure which rings true with my experience working with SMEs, my advice is that when you’re onto an exciting idea and begin selling your product or service, write out some kind of formal business document – it usually pays to do so, clarifies your vision and establishes your place in the market.  

I’ve compiled my thoughts on why a business plan is so important for an SME at any stage of its journey. I’ve also added my thoughts on the most important financial information you should be including.

Having a business plan provides a ton of benefits. I’ve been working with SME’s for decades, and you can always tell a well-organised operation from a mile off. Having a business plan is a great way of getting your business into order and laying the foundations for solid, dependable growth:

1.    You’re more likely to actually start your business if you have a plan in place – would-be entrepreneurs who’ve set out their thinking are more likely to make the leap 2.    A business plan with solid financial data is crucial if you’re going to apply for loans or any sort of investment 3.     Solid financial planning will help with everything - from knowing how to price your products, to deciding when to hire employees 4.     Finally, a business plan, especially financial plans, can provide indicators of whether your business is actually performing as well as it should be

Hopefully, that’s enough to at least make you consider writing up your business plan. For a general overview of what to include in your plan, this guide should help. However, I want to look in particular at the financial planning aspects – as any accountant will always focus on this side of things first.

3 financial details you should include in your business plan

In any business plan, there’s going to be a reasonable amount of guesswork as you can’t be sure of everything that’s going to happen. Nonetheless, just taking the time to think about your potential costs and profits can help you with planning.

So, open up a spreadsheet and start putting together your projections – these should be based on your existing data and educated guesswork and estimations. As a rule of thumb, your projections should cover a timeframe of the next three years, minimum.

1. Income or profit/loss statement

An income or profit/loss statement estimates what your expected income and expenses will be over a given time period. For the first year, provide monthly estimates, then for years two and three, put together quarterly summaries.

This includes revenues from all the products or services that you sell. Depending on the size of your business, you may have a couple of revenue sources, or many. Detail all your products or services in a spreadsheet and estimate the amount of income they will generate over the course of a month

What are the costs involved in selling your goods or services? Once again, list all your expected outgoings on things like advertising, travel, office space, utilities, salaries, rent and so on.

Once your statement is complete, add up the totals, then minus the total for your expenses from the total for your income. If you’re still in the black after accounting for losses, you can be confident the business will have solid foundations.

2. The business balance sheet

A balance sheet is a summary of what you own and what you owe. Investors and bank, in particular, will be interested in this data as it gives them an understanding of the true financial state of your business – rather than any overly-optimistic predictions. In your spreadsheet, create columns for:

Assets mean all the cash you hold, the value of your equipment, inventory, and debtors (amounts owed to you). It might also include other things of value, such as patents.

• Liabilities

Your liabilities include money that you owe to suppliers, taxes, business loans or hire purchase and rent.

A key thing to remember is that the assets and liabilities must be a true representation of the state of your business at a given moment in time – you can’t fill out a list of your assets one day, then come back to filling in liabilities a month later, since the balance will have changed in the meantime.

3. Cash flow statement

As an accountant, this is possibly the most important document I want to see when advising clients. The cash flow statement is one of the best barometers for measuring the true health of the business and shows how much cash you expect to enter the business over a given period of time. It should include:

• Sales receipts
• Cash receipts
• Credit receipts
• Accounts receivable
• Accounts payable

Show me a company with a business plan, and I’ll show you an organised business

In my experience, companies that have taken the time to sit down and figure out their financial situation and projections are usually much better prepared for growth – and for potential hiccups along the way.

So, when an accountant asks if you have a business plan they can look at – make sure you’re one of the minorities who says yes.

Andy Revell is a director at DSL Accounting , a leading small business accountancy firm located in the West Midlands.

More by Andy Revell:

4 simple steps to ensure your small business bank loan gets approved

This article was written for Handpicked Accounts by Andy Revell of DSL Accounting .

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Subscribe for exclusive access, what does a business financial plan include a painless, step-by-step walkthrough.

Written by Rebeca Seitz | February 24, 2020

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While your incredible, unique, surefire business idea will be sure to captivate investors, you won’t get very far in finding financial support unless you can also tell its financial story. That’s the purpose of your business financial plan—to show your potential funders what a good bet this is. You aren’t just a dreamer. You’re a doer . You’re business financial plan shows this.

“The goal is to show your lender that you are a reliable and resilient borrower to give them confidence in their decision,” Bill Phelan, CEO of PayNet , an Equifax Company, told Foundr.

Foundr understands that this part of getting your business off the ground can be intimidating. You might even be tempted to put it off or ignore it entirely, hoping a magical unicorn will notice how hard you’re working and how good your idea is and just pop up with a check.

Come on back to reality and let’s do this.

On the major plus side, this endeavor doesn’t only serve the people who are holding the cash you need. Creating the five elements of your business financial plan (income forecast, expense budget, cash flow snapshot, assets and liabilities disclosure, and break even analysis) serves you .

Writing your business financial plan forces you to take an honest look at what you’re about to attempt. You’ll have to think not just about today’s exciting idea, but the intricacies of how that idea will come to fruition in a nearby tomorrow.

Chances are high that you will spot any potential financial pitfalls as you create this plan, instead of crashing into them six months from now and watching all your work go down in flames.

This isn’t rocket science, it’s entrepreneurship. And you’re here for that—for all of that—right?

Then let’s get to it.

Elements of a Business Financial Plan, Explained

Financial plans typically include five elements:

• Income forecast
• Expense budget
• Cash flow snapshot
• Assets and liabilities disclosure
• Break even analysis

The exact order and terminology may vary, but the information that should be included boils down to those five areas. Let’s walk through each one and you’ll see how simple this is.

Sales Forecast

Just write, “I’m going to make a million dollars in three weeks!”

Do not write that, or anything remotely resembling it. Yes, even if you just know that it is absolutely 100% true for your amazing idea.

The sales forecast is your opportunity to show a lender or investor that you are not a starry-eyed dilettante who will blow through their cash. This is your moment to be reasonable and mature. Feel free to drink a cup of tea (pinky raised) and speak in a lofty British accent while you write out the list of ways you will make money. Is it product sales? Advertising? Memberships?

Now, the time has come to validate your dreams with a warm, comforting coat of research-based estimates. Find a product or service that is similar to yours. Now find two more. Look at the sales of those products or services. Consider how they are each similar to or different than yours. What do you plan to do differently? How will your product or service cause a different reaction in the market?

Now assign sales figures to each item listed in your income source list, based on similar sales in your industry and  your reflection on your idea’s potential compared to their reality. Keep in mind that your numbers here are not set in stone. They are your  informed best estimate,  and you will explain how you arrived at that estimate when you sit with a lender or investor discussing the plan you’re now writing.

For instance, let’s say you have designed a beautiful, one-of-a-kind fork. It provides all the services of the billions of existing forks on the planet—but it also records how many calories it forks into your mouth and reports those to the health app on your iPhone. (Also, it’s dishwasher safe!)

You could research sales of forks and sales of health gadgets, then use the information from that to form best guesses for how your new Fork Dork could sell.

Later, when you’re sitting with Mrs. Josephine Banker and telling her how you need a $2.3 million loan to create a prototype, you will be able to say, “Look at all the forks that sell every year already, Mrs. Banker. Obviously, forks are in major use. Now take a look at the billions that are spent on calorie counters and food trackers. See what a credible profit potential this holds?”

Insider word of advice: Once you’ve created your estimate, cut it by 20%.

Trust me on this.

That way, when you’re sitting with Mr. Igor Investor, you’ll be able to say, “To be conservative and reasonable, I lowered my projections by 20%.” He’s going to appreciate this display of reason and perhaps attach more credibility, not only to your entire financial business plan, but to your business idea as a whole.

And here are some of the fun graphs that can be made with sales projections.

Download templates to create your own sales projection worksheets and charts at vertex42.com. Find the sales projection worksheets here .

Expense Budget

Wouldn’t it be awesome if you had every dollar you needed before you needed it to build your business? What a fun fantasy.

And that’s all it will be, unless you put fantasy to paper. For your next business financial plan element, you’ll create an expense budget.

This is not the place to skimp or ignore . Here’s your opportunity to ask for everything you envision needing. You may not get it all, but you should absolutely include it all in the ask.

Remember that this is your opportunity to show how reasonable and logical you are. So, while you will include every potential expense you can imagine, you will also refrain from granting yourself a million dollar salary in the first six weeks with a half million dollar bonus two weeks later.

Be realistic. Learn to pronounce “boot strap” and “grow to go” (yes, you can do it in that British accent you perfected during the income forecasting).

In your expense budget, you’ll list salaries, contract worker fees, costs for equipment, research, office rent, supplies, software, subscriptions, travel, and more.

If this is your first go-round, a strong word of advice: Don’t forget to budget for legal (attorneys), accounting (bookkeepers and tax professionals), and tax payments (on payroll and sales). Some founders think they can skimp on these areas and squeak through with fingers crossed.

But if you want to build a business financial plan that reflects a mature, responsible approach (and not ruin yourself financially if this doesn’t work out), then you will include money for attorneys, accountants, and the government’s cut.

Also, include a line item for contingencies and miscellaneous. It should be 10-20% of your entire expense budget. So, if you tallied up everything you anticipate needing to spend for the year and it comes to $1 million, add $100,000-$200,000 in the “contingencies/miscellaneous” column.

It will feel excessive.

Mrs. Banker and Mr. Investor know it is not.

It is, instead, the line they know you will pull from when something unexpected inevitably happens, and that means you will most likely not be coming in their door with your hand out again.

For my fellow visual learners, here’s an example of an expense budget:

Cash Flow Snapshot

Now that you’ve thought through where the money is coming from and where it’s going, you can create a Cash Flow Snapshot. This document gives you an idea of how much money you’ll have on hand for operations on any given day. It also lets your lender or investor see why you need operational money to get (or keep) going.

At first, the Cash Flow Snapshot can seem redundant. If 1,000 Fork Dorks are projected to sell in August for $40 each, then August income is $40,000, right?

Well, who bought the Fork Dorks? (There’s another business idea: a band called “Who Bought the Fork Dorks?”) If wholesalers bought them to re-sell in stores, then they might not be paying you for your product for 30, 60, or 90 days. So, $40,000 of product can go out in August, but it could be November before that $40,000 comes in as income. This is accrual accounting and something you can talk about with the accountant you intend to hire because you are a serious entrepreneur. By using accrual accounting to create your Cash Flow Snapshot, you’ll see that, if there is no other source of income than that $40,000 sale in August, the busy workers in the factory making Fork Dorks might well walk off the job.

You’d wind up Fork Dork-less!

Also, you’d be back in the banker or investor’s office with your hand out and a sheepish expression, explaining how you really, really are a smart, serious, trustworthy entrepreneur but you didn’t take into account something as simple as the gap between sale and payment.

Aren’t Cash Flow Snapshots awesome?

Visual learners, here’s your example of a blank Cash Flow Snapshot  (download a template from SCORE here ):

Assets and Liabilities Sheet (aka Balance Sheet)

Okay, so we have a sheet that shows where the money is coming from, another one that shows where the money is being spent, and another that shows the ebb and flow of all that in monthly time. Lovely!

Now you’ll incorporate in whatever Mrs. Banker, Mr. Investor, and you have put into the business, as well as other elements, to create your Assets and Liabilities Sheet.

Assets include the money you have in the bank (both pennies!), the money that’s coming in (that $40,000 in November), the value of what you could sell but haven’t yet ($100,000 worth of Fork Dorks sitting on your warehouse shelves), Mr. Igor’s investments, any other investments (don’t group short-term and long-term investments into one line), any real estate or vehicles the company owns, any equipment—basically anything the company owns that could be sold for money.

Liabilities include everything the company owes. Imagine the company goes belly up. Now think about who would be owed money. Mrs. Banker’s loan (and interest that would be due). Payroll and taxes for your employees. Contracted worker fees. Other contracted fees (e.g. office rent for the remainder of the lease). List all of these in the liabilities section.

To figure out the net worth of your company, subtract your liabilities from your assets. For instance, if you owe $100,000 (liabilities) and you have $200,000 in assets, then your company’s net worth is $100,000. This is also called the owner’s equity  because it’s the value of what the owners own by being owners of this business.

The Assets and Liabilities Sheet shows how the net worth of your business/owner’s equity changes from month to month or year to year as you pay off the liabilities and accrue assets.

Resist the urge to rub your hands together and giggle as you see the number head into a positive range and grow.

Well, go ahead, nobody’s watching. But only for a second.

Visual learners, here’s your example of an Assets and Liabilities Sheet  (download a template to create yours from Vertex42 here ):

Break Even Analysis

At last, you have reached the Final Frontier. Okay, not really. You’ve just come to the final element of writing a business financial plan: the Break Even Analysis.

This document is exactly what it sounds like, a reflection of when your company is going into the black and not going back. At what point do the numbers reflect that your company is making more than it’s spending? Mr. Investor is particularly interested in this part because it shows him when and how his gamble might pay off.

Remember how you absolutely, 100% are not going to show your sales hitting $1 million in three weeks? (If you’ve already forgotten that part of this article, then you might need to pause here and go Google “ginkgo biloba.”) A big reason for that is to avoid a “hockey stick” in your break even analysis.

They look like this:

Now, before a bunch of pucks get thrown at the Foundr offices, let’s be clear that this is not a bias against hockey. No, this is a bias against unrealistic expectations and projections (aka googly-eyed entrepreneurs). Put your most posh British accent back on and tell yourself, “I must be reasonable.”

Now create a spreadsheet that shows when your income moves beyond your expenses and stays there.

Here’s what one looks like (download yours from SCORE here ):

Ta Da! Business Financial Plan, Done

You did it! You made it to the end of an article that had nothing to do with your creative product or service and everything to do with math, finance, accounting, and reasonable entrepreneurial endeavors. You now know how to create a business financial plan.

You are a boss.

Or, you’re soon going to be.

But not of Fork Dork, Inc.

That one’s mine.

Any questions? Feel free to blast them in the comments below!

About Rebeca Seitz

Rebeca Seitz is a best-selling writer and producer, and the founding CEO of 1C Productions, Inc. She recently raised over $3M for a single business venture and helped create, distribute, and promote products with sales of over $34M. Her books are published by HarperCollins and B&H Group and her last screenplay was produced with Out of Order Studios and written with Disney veteran Bob Burris. She has appeared on NPR, CNN, Huffington Post Live, and more regarding the responsible use of mass media.

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Planning, Startups, Stories

Tim berry on business planning, starting and growing your business, and having a life in the meantime., business plan financials: how many months and years.

Do complete business plan financials include three years of monthly financial projections? Five years? One year? Obviously the answer to this frequently asked business plan financials question depends on the specific context. Sometimes specific organizations, business plan readers, require some specific timeframe. The Small Business Administration (SBA), for example, requires at least 12 months of monthly projections for most of its mainstream loan guarantee programs.

For normal planning purposes, for any normal company, you should have at least 12 months detailed month by month for business plan financial forecasts. That would be for sales forecast, cost of sales, your burn rate, and eventually the complete financial forecast, if you’re going to do it. Then have another two years beyond that, for three years total, as annual projections.

If you’re using LivePlan this solves itself with the settings in your plan. If you’re doing it yourself with a standard spreadsheet, the normal structure looks like the illustration here:

That doesn’t mean you don’t think in longer terms. Think about what you want for your business for 5, 10, 20 years. I’m all in favor of that. But I don’t think you should plan for very long time periods in the detail of financial forecasts. The larger numbers — sales, for example, involve so much uncertainty that the time you spend trying to project more detail isn’t worth it. At least not in normal cases. If you’re farming lumber from tree farms, maybe. Another special case I’ve seen is the long development and planning cycle for mainstream pharmaceutical research, requiring years of spending before getting to revenue.

You can put too much detail into a business plan. You run into a problem of diminishing returns. For the detail it takes to run the monthly cash flow into the second year and beyond, with so much compounded uncertainty, the information value, and decision-making benefits, are rarely worth it.

Be forewarned. You’ll run into experts who will say you need more than 24 months, or more than five years in detail. They will be very sure of themselves. Sometimes what they mean is that they know more than you do, so they want you to suffer more. Or they want you to pay them to do the financials instead. Or they don’t like you or your business plan and they’re embarrassed to tell you. So instead, they say you need to forecast in more detail. If they are investors, what they mean is they don’t want to invest and they don’t want to tell you why. If they are loan managers, they don’t want to make the loan. And they don’t want to tell you the real reason.

My advice to you, when that comes up, is that unless you are a special case (if you are, you know who you are), look for another expert.

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What Financials Should Be Included in a Business Plan?

When it comes to creating a business plan, one of the most important aspects to consider is the financial section. This section is crucial as it outlines the financial health of your business and helps investors and lenders understand the risks associated with investing in your company. In this article, we’ll explore the financials that should be included in a business plan to ensure that your plan is comprehensive and informative.

Revenue Projections

Revenue projections are an essential part of any business plan. This section outlines your expected sales revenue over a specific period, usually a year or more. Revenue projections are important as they help investors and lenders understand the expected growth of your business and its future potential.

When creating revenue projections, it’s important to be realistic and provide detailed information on the assumptions and methods used to calculate your projections. This can include market research, industry trends, and historical data.

An effective way to present revenue projections is through a table or graph that visually displays your expected revenue growth over time. This can help investors and lenders quickly understand the potential profitability of your business.

Profit and Loss Statement

A profit and loss statement, also known as an income statement, is a financial report that shows the revenues, expenses, and profits generated by your business over a specific period. This statement is important as it provides a clear picture of your business’s financial performance and its ability to generate profits.

When creating a profit and loss statement, it’s important to include all revenue sources and expenses, including fixed and variable costs. This can include salaries, rent, utilities, and other operational expenses.

An effective way to present a profit and loss statement is through a table that breaks down your revenues and expenses, showing the net profit or loss generated by your business.

Cash Flow Statement

A cash flow statement is a financial report that shows the inflows and outflows of cash in your business over a specific period. This statement is important as it provides a clear picture of your business’s ability to manage its cash flow and meet its financial obligations.

When creating a cash flow statement, it’s important to include all sources of cash inflows and outflows, including operating activities, investing activities, and financing activities. This can include sales revenue, investments, and loans.

An effective way to present a cash flow statement is through a table that breaks down your cash inflows and outflows, showing the net increase or decrease in cash during the period.

Balance Sheet

A balance sheet is a financial report that shows the assets, liabilities, and equity of your business at a specific point in time. This statement is important as it provides a clear picture of your business’s financial health and its ability to meet its financial obligations.

When creating a balance sheet, it’s important to include all assets, including cash, inventory, and equipment, as well as liabilities, including loans and accounts payable. This can also include shareholder equity and retained earnings.

An effective way to present a balance sheet is through a table that breaks down your assets, liabilities, and equity, showing the net worth of your business.

Break-Even Analysis

A break-even analysis is a financial report that shows the point at which your business’s total revenue equals its total costs. This analysis is important as it helps you determine the minimum amount of sales revenue needed to cover your business’s expenses.

When creating a break-even analysis, it’s important to include all fixed and variable costs, including salaries, rent, utilities, and other operational expenses. This can also include the unit price and the number of units sold.

An effective way to present a break-even analysis is through a table or graph that visually displays the point at which your business breaks even.

Projected Profit Margin

A projected profit margin is a financial report that shows the expected profit margin of your business over a specific period. This report is important as it helps investors and lenders understand the profitability of your business and its ability to generate profits.

When creating a projected profit margin, it’s important to include all revenue sources and expenses, including fixed and variable costs. This can also include market research and industry trends.

An effective way to present a projected profit margin is through a table or graph that visually displays the expected profit margin over time.

Debt Schedule

A debt schedule is a financial report that shows the repayment schedule of your business’s debt over a specific period. This report is important as it helps you understand your debt obligations and your ability to meet them.

When creating a debt schedule, it’s important to include all debt obligations, including loans and interest payments. This can also include the repayment schedule and the interest rate.

An effective way to present a debt schedule is through a table that breaks down your debt obligations and repayment schedule.

Capitalization Table

A capitalization table is a financial report that shows the ownership structure of your business. This report is important as it helps you understand the ownership percentages of your business and the rights and privileges associated with each ownership class.

When creating a capitalization table, it’s important to include all ownership classes, including common stock, preferred stock, and options. This can also include the ownership percentages and the associated rights and privileges.

An effective way to present a capitalization table is through a table that breaks down the ownership classes and percentages.

Use of Funds

A use of funds report is a financial report that shows how your business plans to use the funds raised from investors or lenders. This report is important as it helps investors and lenders understand how their investment will be used and the potential return on investment.

When creating a use of funds report, it’s important to include all planned uses of funds, including operational expenses and capital expenditures. This can also include the expected return on investment and the timeline for achieving profitability.

An effective way to present a use of funds report is through a table or graph that visually displays the planned uses of funds.

Financial Assumptions

Financial assumptions are a set of assumptions and projections that underpin your financial statements. This report is important as it helps investors and lenders understand the assumptions and methods used to calculate your financial statements.

When creating financial assumptions, it’s important to include all assumptions and projections used to create your financial statements, including market research, industry trends, and historical data. This can also include sensitivity analysis and worst-case scenarios.

An effective way to present financial assumptions is through a table or graph that visually displays the key assumptions and projections.

In conclusion, the financial section of a business plan is crucial as it outlines the financial health of your business and helps investors and lenders understand the risks associated with investing in your company. By including revenue projections, profit and loss statements, cash flow statements, balance sheets, break-even analysis, projected profit margins, debt schedules, capitalization tables, use of funds reports, and financial assumptions, you can create a comprehensive and informative business plan that will help you secure funding and grow your business.

Frequently Asked Questions

What is a business plan.

A business plan is a written document that describes a company’s goals and strategies for achieving them. It outlines a company’s mission, target market, competition, marketing and sales strategies, and financial projections. It’s an important tool for entrepreneurs seeking funding or investors, as it provides a roadmap for the company’s success.

Why is Financial Information Important in a Business Plan?

Financial information is an essential component of a business plan. It provides investors, lenders, and other stakeholders with a clear understanding of the company’s financial health and viability. Financial information typically includes income statements, balance sheets, cash flow statements, and financial projections for the next three to five years.

While the specific financials included in a business plan may vary depending on the industry and company, there are several key financials that should be included. These include income statements, balance sheets, cash flow statements, and financial projections. It’s also important to include a detailed breakdown of the company’s expenses, including fixed and variable costs.

How Do You Create Financial Projections for a Business Plan?

Creating financial projections for a business plan requires careful research and analysis. Start by identifying your company’s revenue streams and estimating the amount of revenue you expect to generate each year. Then, calculate your expenses, including fixed and variable costs. Finally, use this information to create financial projections for the next three to five years.

What Are Some Common Mistakes to Avoid When Including Financials in a Business Plan?

One common mistake when including financials in a business plan is being overly optimistic about revenue projections. It’s important to be realistic and conservative in your projections to avoid overestimating your company’s potential. Another mistake is failing to include a detailed breakdown of expenses, which can lead to inaccurate financial projections. Finally, it’s important to ensure that all financial information is accurate and up-to-date, as inaccurate information can damage your company’s credibility with investors and lenders.

What financials should be included in the business plan

When creating a financial section of a business plan, entrepreneurs should include a balance sheet, income statement, cash flow statement, and financial projections. It’s also important to outline the assumptions made in these projections and justify them with data and market research.

By including these essential financials in a business plan, entrepreneurs can demonstrate to investors that they have a solid understanding of the market, their niche, and their financials. This can help them secure funding and propel their business forward.

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Home >> #realtalk Blog >> Manage a business >> How to write a resta…

How to write a restaurant business plan + free template (2024)

By Homebase Team

Whether you’re living the dream of opening your own restaurant or reworking your existing concept, a restaurant business plan template takes a ton of stress out of writing a business plan.

With prompts for every section you’ll need, we’ve created our free restaurant business plan template to be your operational foundation (you’re welcome!). Something you can download, customize, and come back to whenever you make business decisions for your restaurant.

But first, let’s go through all the ways a written business plan helps shape your restaurant, and why it boosts your business’s chance of success.

What is a restaurant business plan?

A restaurant business plan is a written document that lays out an overview of a restaurant, its objectives, and its plans for achieving its goals.

It’s needed across all kinds and sizes of restaurants, and can be a handful of pages long or much more detailed. A well-written restaurant business plan not only helps you organize your ideas, it’s also a key part of getting investor funding .

Starting a restaurant? Here’s why you need a business plan. 

Creatively, opening a new restaurant can be incredibly exciting. But it’s also super complicated. From licenses, to equipment, to building a team, each phase needs a lot of attention to detail.

Before you jump in, it’s important to shape your plan of attack, organizing your business ideas into a clear, concise narrative that an outsider could easily understand. A business plan is an essential part of this—and here’s why.

Your business plan helps you:

Set short and long-term goals.

A restaurant business plan not only shows how your business will operate in its early stages, it also shows what steps it’ll need to follow as time goes by. Setting both your short and long-term goals at the outset makes you more likely to achieve them.

Understand your resource needs.

Going through the exercise of writing a restaurant business plan is as important as having the finished document in front of you. As you organize your thoughts, your resource needs—from the amount of capital you need to raise all the way down to the equipment you need to find—will take shape. 

Reduce potential risks.

Sadly, some 60% of restaurants fail within the first year of opening. One of the main reasons? A failure to plan. Your business plan will help you plan for most challenges at your restaurant before they come up, keeping you on the right side of that number.

Develop a marketing strategy.

As you do your market analysis and figure out who your customers are likely to be, the ways you’ll promote your business will get clearer. The more specific you are with your market research, the easier and more effective your marketing efforts will be.

Build your team.

Your business plan helps you see who you’ll need on your team and which roles you’ll need to fill first . For investors, it’s a document showcasing everyone’s collective experience, personalizing your restaurant in their eyes and packing a professional punch.

Share your vision.

Whether you’re using your business plan to secure startup funding or need additional capital after you’ve already opened, your restaurant business plan shows an investor or lender exactly why they should get behind you. 

The 9 elements of a strong restaurant business plan.

Your restaurant business plan will be unique to your vision. But all good business plans hit standard points, and whoever reads yours will expect them. As you develop and finalize your ideas, here are nine key elements you should include. 

1. Executive summary

A strong restaurant business plan begins with a strong executive summary. This is a sharp, concise overview of your restaurant and your opportunity to grab people’s attention.

Here’s where you communicate, in a nutshell, what kind of restaurant you want to run. Which demographic will you be targeting? Why is your business something the community wants or needs? Especially if you’re asking for financing, include a snapshot of your financial information and growth plan as well. 

Your executive summary should briefly lay out:

• Your mission statement. Why are you starting this restaurant now, in this location? 
• Your idea. What’s the concept of this restaurant?
• Your plan of execution. What are your key steps to making this concept work?
• Your potential costs. What are your expected expenses?
• Your anticipated ROI. How much do you expect your restaurant to make?

Many investors will make a split-second decision off of the executive summary alone—it might be all they’re going to read, so make every word count.

2. Company description

Now it’s time to let your creativity out and give your restaurant concept life. Give a more detailed description of your concept that lets your passion for what you’re creating come through. 

Flesh out all the other details of your proposed restaurant, including your restaurant’s:

• Style of cuisine and any unique selling points or differentiators that will make customers choose you
• Service style
• Restaurant name (or at least ideas)
• Size, seating style, and capacity
• Location ideas or the location you’ve scouted or secured
• Ambiance ideas including décor, lighting, and music
• Operating hours
• Other service offerings like whether you’ll offer delivery or takeout, delivery guarantees, catering, and any retail products you plan to sell
• Legal structure (e.g. sole proprietorship, LLC) 
• Existing management and their roles, including yours
• Experts or advisors you’ve brought on board

3. Market analysis

Present the research you’ve done on your target market. Make a couple of buyer personas to represent your future customers, explaining:

• Where your target customers live
• Their income levels
• Their dining-out and/or ordering-in pain points (e.g. lack of late opening hours, lack of family friendliness)
• How often they dine out or order in

Go through which other restaurants already have a customer base in your area, then explain why people will choose your restaurant over others. 

4. Sample menu

Even at the business plan stage, menu engineering is crucial. The specific menu items you’re likely to serve—the biggest thing that will set you apart—should shine through with descriptions that are short, clear, and evocative. If you have an executive chef already, this is a great area for them to add input.

Use language that will get people excited about trying your offerings. Hire a designer or use an online program to create your own mockup using the same colors, fonts, and design elements as the rest of your branding. 

5. Business structure

Dive deeper into your business structure (sole proprietorship, partnership, LLC, etc.) and organizational management. Show what your different employee positions will be (co-founders, managers, servers) to give a sense of your team’s makeup. An organizational chart can be helpful here.

Investors won’t expect you to have your entire team on board at this stage, but you should have at least a couple of people firmed up. For the roles that are already filled, including your own, summarize your collective experience and achievements. Bullet points work well, or some people choose to go into more detail with full resumes for the executive team or critical team members.

6. Restaurant design and location

Long before you sign a lease, make sure that your new offering will outshine existing ones nearby. In this section of your business plan, explain why your chosen location, or the ones you’re narrowing down, are going to be an effective space for your target market.

Consider things like:

• Neighborhood demographics
• Foot traffic
• Labor costs
• Accessibility

Hand in hand with location, your restaurant’s interior design—both in its floor plan and its ambiance—is also crucial to your business’s viability. Come up with a captivating restaurant design that communicates your theme and matches your cuisine, creating a memorable customer experience. Decide how many tables you’ll be serving, and plan out any outdoor seating.

Touch on things like:

• Team uniforms
• Flatware and glassware

7. Marketing strategy

How do you plan to market your restaurant? Your plan for grabbing customers’ attention is vital to getting diners through the door, especially at the beginning before word-of-mouth advertising has taken off.

What kind of offers will you provide? Will you have promotional events, direct mail, or a social media strategy ? Go through your planned marketing campaigns and explain how each of them will help secure your target market. 

8. Takeout and delivery options

If you’ve decided to have takeout and delivery at your restaurant—pretty important for most target markets—decide whether you’ll use your own drivers or a professional fleet like Uber Eats or DoorDash.

Show how you’ll provide the smooth digital experience your customers will expect. Decide if and how your website will come into play, bearing in mind that in 2023, 40% of consumers preferred to order directly from the restaurant website .

9. Financial projections

Your restaurant’s projected budget need to be solid, especially if you’re using your business plan to get startup funds. Without this, investors have no way of knowing if your business is a good investment or when it will become profitable.

Hire an experienced accountant with expertise in running restaurants and write down your market research, your planned costs , and your projected income. Show how investor funds will be used and whether you’ll be putting up collateral to get a loan. Give a sales forecast, usually for the first five years, and make sure to give a break-even analysis.

Get started with our free restaurant business plan template.  

As the team behind Homebase , we know how much there is to consider when you’re starting a new restaurant. We’re proud to be an all-in-one partner for thousands of restaurants large and small—helping make everything from staffing, to scheduling, to team communication easier for business owners.

And we know that your restaurant business plan is a high-stakes document. That’s why we created our free restaurant business plan template to make sure nothing gets overlooked.

Check out our free, downloadable template to get your ideas into shape, get started on your restaurant journey—and get investors excited to jump on board with you. 

Download your restaurant business plan template for free: Restaurant business plan + free template (2024)

Stop chasing down phone numbers with our built-in team communication tool. Message teammates, share updates, and swap shifts — all from the Homebase app.

Restaurant business plan template FAQs

What is the basic planning document for a successful restaurant.

The basic planning document for successful restaurants is a restaurant business plan. A restaurant business plan lays out a restaurant’s long and short-term goals and its plans for achieving those goals. Restaurant planners use it both to finetune their ideas and to secure investor funding.

How to write a restaurant business plan.

When writing a restaurant business plan, include an executive summary, a detailed restaurant description, market analysis research, a sample menu, a breakdown of your business structure, the design and location of your restaurant, your planned takeout and delivery options, your marketing strategy, and your financial projections.

What makes a business plan template for restaurants different from a standard business plan?

A restaurant business plan template differs from a standard business plan by including things like menu engineering, interior design, kitchen operations, front-of-house management, takeout and delivery offerings, and location analysis, which are unique to the food service industry.

Remember:  This is not legal advice. If you have questions about your particular situation, please consult a lawyer, CPA, or other appropriate professional advisor or agency.

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6 Small Business Financial Statements for Startup Financing

Financial Statements You'll Need for Your Startup Business Plan

You're ready to start your small business and your're working on a great business plan to take to a bank or other lender. A key part of that plan is the financial statements. These statements will be looked at carefully by the lender, so here are some tips for making these documents SELL your business plan . 

Financial Statements You Will Need

You may need several different types of statements, depending on the requirements of your lender and your own technical expertise. 

The statements you will certainly need are:

• A startup budget or cash flow statement
• A startup costs worksheet
• A pro forma (projected) profit and loss statement
• A pro forma (projected) balance sheet 

Your lender may also want these financial statements: 

• Sources and uses of funds statement
• Break-even analysis

Putting these Statements in Order

First, work on your startup budget and your startup costs worksheet. You'll need to do a lot of estimating.

The trick is to underestimate income and overestimate expenses, so you can create a more realistic picture of your business over the first year or two.

Then work on a profit and loss statement for the first year. A lender will definitely want to see this one. And, even though it's not going to be accurate, lenders like to see a startup balance sheet. 

Some lenders may ask for a break-even analysis, a cash flow statement, or a sources and uses of funds statement. We'll go over these statements so you can quickly provide them if asked.

Business Startup Budget

 A startup budget is like a projected cash flow statement, but with a little more guesswork.

Your lender wants to know your budget - that is, what you expect to bring in and how much to expect to spend each month. Lenders want to know that you can follow a budget and that you will not over-spend. 

They also want to see how much you will need to pay your bills while your business is starting out (working capital), and how long it will take you to have a positive cash flow (bring in more money than you are spending). 

Include some key information on your budget:

• What products or services you are selling, including prices and estimated volumes
• Key drivers for expenses, like how many employees you'll need and your marketing initiatives  

A typical budget worksheet should be carried through three years, so your lender can see how you expect to generate the cash to make your monthly loan payments.

Startup Costs Worksheet

A startup costs worksheet answers the question "What do you need the money for?" In other words, it shows all the purchases you will need to make in order to open your doors for business. This could be called a "Day One" statement  because it's everything you will need on your first day of business. 

• Facilities costs, like deposits on insurance and utilities
• Office equipment, computers, phones
• Supplies and advertising materials like signs and business cards
• Fees to set up your business website and email
• Legal fees licenses and permits

Profit and Loss Statement/Income Statement

After you have completed the monthly budget and you have gathered some other information, you should be able to complete a Profit and Loss  or Income Statement. This statement shows your business activity over a specific period of time, like a month, quarter, or year.

To create this statement, you'll need to list all your sources to get your gross income over that time. Then, list all expenses for the same time.

Because you haven't started yet, this statement is a called a projected P&L, because it projects out your estimates into the future.  

This statement gathers up all your sources of income, including shows your profit or loss for the year and how much tax you estimate having to pay.

Break-Even Analysis

A break-even analysis shows your lender that you know the point at which you will start making a profit or the price that will cover your fixed costs . The break-even analysis is primarily for businesses making or selling products, or to set the right price for a product or service.  

It's usually shown as a graph with sales volume on the X axis and revenue on the Y axis. Then fixed an variable costs (those you must pay) are included. The break-even point marks the place where costs are covered.

This analysis can also be useful for service-type businesses to show an overall profit point for specific services. If you include a break-even analysis, be sure you can explain it.

Beginning Balance Sheet

A startup balance sheet is difficult to prepare, even if there isn't much to include. The balance sheet shows the value of the assets you have purchased for startup, how much you owe to lenders and other creditors, and any initial investments you have made to get started. The date for this spreadsheet is the day you open the business.

Sources and Uses of Funds Statement

Large businesses use Sources and Uses of Funds statements in their annual reports, but you can create a slightly different simple statement to show your lender what you need the money for, what sources you have already, and what's left over to be financed.

To create this statement, list all your startup and working capital(on-going cash needs), how much collateral you will be bringing to the business, other sources of funding, and how much you need to borrow. 

Optional: A Business Requirements Document

 A business requirements document is similar to a proposal document, but for a larger, more complex project or startup. It gives a complete picture of the project or the business plan. It goes into more detail on the project that will be using the financial statements. 

Include Financial Statements in Your Business Plan

You will need a complete startup business plan to take to a bank or other business lender. The financial statements are a key part of this plan. Give the main points in the executive summary and include all the statements in the financial section. 

Finally, Check for Mistakes!

Before you submit your startup business plan and financial statements, check this list. Don't make these  common business plan mistakes !

Check all numbers for accuracy and consistency. Especially make sure the amounts you are requesting are specific and that they are the same throughout all the parts of your business plan.

SCORE.org. " How to Set Up and Maintain a Budget for Your Small Business ." Accessed Sept. 10, 2020.

SCORE.org. " Financial Projections Template ." Accessed Sept. 10, 2020.

Harvard Business Review. " A Quick Guide to Breakeven Analysis ." Accessed Sept. 10, 2020.

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What Happens to Biden’s Student Loan Repayment Plan Now?

More than eight million borrowers are enrolled in the income-driven plan known as SAVE. The Education Department is assessing the rulings.

By Tara Siegel Bernard

President Biden’s new student loan repayment plan was hobbled on Monday after two federal judges in Kansas and Missouri issued separate rulings that temporarily blocked some of the plan’s benefits, leaving questions about its fate.

The preliminary injunctions, which suspend parts of the program known as SAVE, leave millions of borrowers in limbo until lawsuits filed by two groups of Republican-led states challenging the legality of the plan are decided.

That means the Biden administration cannot reduce borrowers’ monthly bills by as much as half starting July 1, as had been scheduled, and it must pause debt forgiveness to SAVE enrollees. The administration has canceled $5.5 billion in debt for more than 414,000 borrowers through the plan, which opened in August.

If you’re among the eight million borrowers making payments through SAVE — the Saving on a Valuable Education plan — you probably have many questions. Here’s what we know so far, though the Education Department has yet to release its official guidance.

Let’s back up for a minute. What does SAVE do?

Like the income-driven repayment plans that came before it, the SAVE program ties borrowers’ monthly payments to their income and household size. After payments are made for a certain period of years, generally 20 or 25, any remaining debt is canceled.

But the SAVE plan — which replaced the Revised Pay as You Earn program, or REPAYE — is more generous than its predecessor plans in several ways.

Ask us your questions about the SAVE student loan repayment plan.

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• Best Online Advisor for Low Fees 
• Best Online Advisor for Diversified Investing
• Best Online Advisor for 529 Plans
• Best Online Advisor for Financial Planning and Personal Development
• Best Online Advisor for Retirement Saving
• Why You Should Trust Us

Best Online Financial Advisors 2024: Find the Right Fit for Your Needs

Paid non-client promotion: Affiliate links for the products on this page are from partners that compensate us (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate investing products to write unbiased product reviews.

What Are Online Financial Advisors?

A financial advisor is a catch-all term that includes financial planners and investment advisors. Most online advisors offer investment management — whether it's carried out by a human or a sophisticated computer algorithm — and financial planning services or tools.

Types of Online Advisors

The main types of online financial advisors are: 

• Robo-Advisors: Automated investment platforms (aka robo-advisors) use algorithms to generate a custom investment portfolio based on an individual's risk tolerance, goals, and time horizon. Robo-advisors typically offer low-cost ETFs as a cost-effective way to instantly diversify an investor's asset allocation and mitigate risk. 
• Human Advisors (Virtual): Financial advisors that offer personalized financial planning and investment advice online through virtual meetings, email, and other virtual communication channels. 
• Hybrid Models: Some online brokerages offer hybrid financial advice, combining automated investment advice and management through a robo-advisor and one-on-one consultation from a human advisor. 

Benefits of Using Online Financial Advisors

Online financial advisors allow you to ditch the in-person hassle and access expert financial guidance from your phone or home computer. Online financial advisors leverage investment technology and generally low-cost compared to traditional in-person consultants.  

Not only does it make investing more affordable for many individuals, but clients can more easily adjust and monitor their investments on their own time. Robo-advisor and hybrid online advisors typically offer online dashboards and tools for convenient managing and monitoring. 

Compare the Top Online Financial Advisors 2024

For this list, we didn't consider online advisors that match clients and advisors for comprehensive financial  planning services, such as Zoe Financial or Facet Wealth . Instead, we focused on tech-driven firms where you can access an automated and personalized portfolio and consult a professional for advice when needed.

Here are our top picks for the best online financial advisors as picked by Business Insider editors in 2024.

SoFi Automated: Best Online Advisor for Low Fees 

SoFi Automated Investing supports individual investment accounts, joint accounts, traditional IRAs, Roth IRAs, SEP IRAs, and 401(k) rollovers.

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. No account minimum or management fees to invest
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Goal planning and automatic portfolio rebalancing
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Range of other account options across SoFi website
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. SoFi offers complimentary CFP access across all accounts
• con icon Two crossed lines that form an 'X'. No tax-loss harvesting
• con icon Two crossed lines that form an 'X'. No socially responsible portfolio options

SoFi Invest is one of the best investment apps and the best investment apps for beginners. It's a great platform for US investors who are looking for an intuitive online trading experience, an open active or automated investing account, and assets like cryptocurrencies.

• Promotion: None at this time.
• Consider it if: You're new to investing and want to leave the trading decisions to professionals.

SoFi Automated Investing offers individual and joint taxable brokerage accounts , traditional IRA, Roth IRA, and SEP IRA.

SoFi stands out for its lack of advisory fees, free one-on-one consultations with CFPs, portfolio diversity, and goal-planning features. SoFi builds a personalized investment portfolio based on your risk tolerance, goals, and time horizon. Additional SoFi membership perks include loan discounts and career counseling. 

What to look out for: SoFi doesn't have tax-loss harvesting features and limited portfolio diversity. 

SoFi Invest review

Betterment: Best Online Advisor for Diversified Investing

Betterment offers individual or joint accounts, IRAs, trust accounts, and cash reserve or checking accounts.

$0 to open, $10 to start investing ($100,000 for premium plan)

$4 per month (or 0.25%/year) for digital plan; 0.40%/ year for premium plan; 1%/year for crypto portfolios

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. No minimum for standard investing account
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Goal-based planning, tax-loss harvesting, charitable giving, and socially responsible investing available
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Access to certified financial planners
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Mobile app with external account syncing options
• con icon Two crossed lines that form an 'X'. You'll have to pay to consult a human advisor, unless you have the premium plan
• con icon Two crossed lines that form an 'X'. $4 monthly fee (or 0.25% annual fee)

Betterment is best for hands-off investors who want to take advantage of professionally built, personalized ETF and cryptocurrency portfolios. The platform offers CFP access, so it could suit those in search of additional guidance from human advisors.

• App store rating: 4.7 iOS/4.5 Android
• Consider it if: You want access to robo-advice with multiple service levels.

Betterment Investing offers individual and joint taxable brokerage, traditional IRA, Roth IRA, SEP IRA, inherited IRA, and trust.

What stands out:  Betterment is a robust trading platform offering premium plans with unlimited access to CFPs through phone or email. Investors can use the platform's goal-setting feature, ESG investing, automatic rebalancing, and easy-to-use financial dashboard. 

What to look out for:  Accounts with a $100,000 balance can upgrade to get advisor access, but the annual fee increases from 0.25% (an industry low) to 0.40%

Betterment review

Wealthfront: Best Online Advisor for 529 Plans

Fund your first taxable investment account with at least $500 in the first 30 days of account opening and earn a $50 bonus.

$1 ($500 for automated investing)

$0 for stock trades. 0.25% for automated investing (0.06% to 0.13% for fund fees)

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Low annual fee for investment accounts; crypto trust investments available
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Tax-loss harvesting, portfolio lines of credit, 529 college savings plans available
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Cash account
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Mobile app and investing and retirement tools
• con icon Two crossed lines that form an 'X'. You need at least $100,000 to utilize additional investment strategies
• con icon Two crossed lines that form an 'X'. No human advisor access

Wealthfront is one of the best robo-advisor options if you're in search of low-cost automated portfolio management, and one of the best socially responsible investing apps for features like tax-loss harvesting, US direct indexing, and crypto trusts.

• Consider it if: You're balancing several goals and want to streamline your finances.
• Promotion: Fund your first taxable investment account with at least $500 in the first 30 days of account opening and earn a $50 bonus.

Wealthfront Investing offers individual and joint taxable brokerage, traditional IRA, Roth IRA, SEP IRA, trust, and 529 savings plan .

Wealthfront is one of the best online financial advisors for college education savings and cryptocurrency trusts. You can borrow up to 30% of your investment balance at a low interest rate with a portfolio line of credit. Wealthfront also offers personalized recommendations with smart financial planning software. 

What to look out for:  On-staff financial advisors don't offer personalized advice

Wealthfront review

Ellevest: Best Online Advisor for Financial Planning and Personal Development

Ellevest offers two investing portfolios to fit your needs.

$1 - $240 (varies by portfolio)

$54 - $97 annually; $5 or $9/month

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Personalized, automated investment advice with a $0 minimum requirement
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Monthly plans include discounted access to certified financial planners
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Automated IRA accounts and 401(k)/403(b) rollovers available
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Private wealth management for individuals, families, and institutions who have at least $1 million to invest
• con icon Two crossed lines that form an 'X'. No active trading opportunities available; money is mainly invested in stock ETFs and bond ETFs
• con icon Two crossed lines that form an 'X'. You can only open individual investment accounts and retirement accounts; joint accounts or custodial accounts not available

Ellevest is one of the best robo-advisors for goal-focused investing. It could be a good fit if you want automated investing and retirement accounts.

• Consider it if: You're looking for a one-stop shop for financial planning.

Ellevest offers individual taxable brokerage, traditional IRA, Roth IRA, and SEP IRA (all held at Folio Investments).

Ellevest is a comprehensive financial advisor and trading platform built around women's unique needs and challenges. Investors get access to an extensive library of content and advisor-led workshops. Additionally, Ellevest offers a socially responsible investment portfolio and monthly progress reports. 

What to look out for:  Financial coaching costs extra (but members get 30%- 50% off). Access to retirement account management requires an upgrade.

Ellevest review

Ameriprise Financial Investments: Best Online Advisor for Retirement Saving

Ameriprise Financial Services has been operating for 130 years Ameriprise Financial Services is licensed in all 50 states but only has 10 physical locations throughout the US; it's currently headquartered in Minneapolis, Minnesota

Varies by account

$500 annual advisory fee, 2% AUM

• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Access to personal finance research and investment tools
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Fiduciary financial advisor access
• Check mark icon A check mark. It indicates a confirmation of your intended interaction. Various account and investment options
• con icon Two crossed lines that form an 'X'. High account minimums
• con icon Two crossed lines that form an 'X'. Difficult to navigate website
• con icon Two crossed lines that form an 'X'. Complex fee structure

Ameriprise Financial Services is a brokerage and financial advisory firm best for experienced, passive investors interested in using the site's financial planning services, wealth management tools, and fiduciary advisor access.

Ameriprise Financial Investments offers three managed account options that can be opened as an individual brokerage account, traditional IRAs, Roth IRAs, Simple IRAs, SEP IRAs, 401(k)s, 403(b)s, 529 plans, and Coverdell education savings accounts (CESA). 

Ameriprise Financial Investments is one of the largest registered investment advisors in the US and is best for experienced investors looking for advanced charting and investing features. You'll get access to fiduciary financial advisors for consultations or account management. 

What to look out for: Ameriprise 's managed account fees are high, and it has a complex fee structure. 

Ameriprise Financial Services review

How Much Do Online Financial Advisors Cost?

Financial advisors providing financial advice often charge by the hour, typically between $100 to $300. Advisors creating a comprehensive financial plan tend to charge a flat rate between $1,000 and $3,000. 

If you hire an advisor to manage your investment portfolio, you'll be charged a percentage of your account balance, typically between 1% and 3% annually. In comparison, that's much higher than the fees that the best robo-advisors charge; you get the added benefit of building a relationship with a trusted source who can adjust your strategy as needed, provide personal recommendations, and answer questions when they arise.

How to Choose the Best Online Financial Advisors

The best online financial advisor for you depends on your goals, risk tolerance, investments, and time horizon. If you're a new investor interested in passive investing, an online robo-advisor is likely a good place to start. On the other hand, if you're looking for professional insight and a customized financial plan, you're better off with access to a human advisor through phone or video calls. 

You can also meet with an expert in person for financial guidance. So if you prefer to meet face-to-face, here are some tools to find some in your area:

• This is a database of all CERTIFIED FINANCIAL PLANNER™ professionals who are authorized to use their CFP® marks by the CFP® Board and are accepting new clients.
• Using the advanced search function, you can choose from over 40 focus areas you're looking to get help with and include your current amount of investable assets.
• Click here to visit the CFP Board website .
• This database helps connect young professionals — those in generations X and Y (millennials) — with individual advisors.
• Every advisor holds the CFP® certification, is a fiduciary , does not require a minimum net worth to take on new clients, and does not earn commissions.
• Click here to visit XY Planning Network .
• This platform maintains a database of fee-only financial advisors, not specifically CFP® certificates, who commit to a fiduciary oath once a year. 
• You can filter by location to see a list of advisory firms in your area.
• Click here to visit the National Association of Personal Financial Advisors website .

Online financial advisors are generally trustworthy. The best advisors follow the fiduciary rule, meaning they operate in their clients' best interest and are fee-only. This means client fees are their only compensation, and they don't earn a commission when they invest in certain funds or buy financial products.

Not everyone needs a robo-advisor, but beginners or passive investors looking for a hands-off approach to stock trading may prefer how cost-effective and convenient robo-advisors are. Affordable financial advisors can be hard to come by, so robo-advisors are a great alternative for many people. However, a financial advisor may be better if you need specific advice on your finances or investment strategy or if you're too overwhelmed or confused by your money to plan for retirement or invest in the stock market. 

The cost of an online financial advisor varies from platform to platform and advisor to advisor. The cost largely depends on the services, licensing, account balance, and complexity. Robo-advisors typically charge lower fees than human advisors. 

Why You Should Trust Us: Our Methodology

We Reviewed the best online financial advisors using Business Insider's methodology for rating investment platforms . We compared a long list of Registered Investment advisors (RIAs), considering fees, investment selection, access, ethics, and customer service. The best online advisors have top marks in all five categories. Investment platforms are given a rating between 0 and 5.

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