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Business Plan Elements – 8 & 9

March 29, 2009

Part 8: Financials

The financials should be developed after you’ve analyzed the market and set clear objectives. That’s when you can allocate resources efficiently. The following is a list of the critical financial statements to include in your business plan packet.

Historical Financial Data  If you own an established business, you will be requested to supply historical data related to your company’s performance. Most creditors request data for the last three to five years, depending on the length of time you have been in business.  The historical financial data you would want to include would be your company’s income statements, balance sheets, and cash flow statements for each year you have been in business (usually for up to 3 to 5 years). Often lenders are also interested in any collateral that you may have that could be used to ensure your loan, regardless of the stage of your business. 

Prospective Financial Data  All businesses, whether startup or growing, will be required to supply prospective financial data. Most of the time, lenders will want to see what you expect your company to be able to do within the next five years. Each year’s documents should include forecasted income statements, balance sheets, cash flow statements, and capital expenditure budgets. For the first year, you should supply monthly or quarterly projections. After that, you can stretch it to quarterly and/or yearly projections for years 2 through 5.

Make sure that your projections match your funding requests; lenders will be on the lookout for inconsistencies. It’s much better if you catch mistakes before they do. If you have made assumptions in your projections, be sure to summarize what you have assumed. This way, the reader will not be left guessing.

Finally, include a short analysis of your financial information. Include a ratio and trend analysis for all of your financial statements (both historical and prospective). Since pictures speak louder than words, you may want to add graphs of your trend analysis (especially if they are positive).

Part 9: The Appendix

The appendix section to your business plan  should be provided to readers on an as-needed basis.  It should not be included with the main body of your business plan.  Your plan is your communication tool; as such, it will be seen by a lot of people. Some of the information in the business section you will not want everyone to see, but, specific individuals (such as creditors) may want access to this information in order to make lending decisions. Therefore, it is important to have the appendix within easy reach.

The appendix would include:

Credit history (personal & business)
Resumes of key managers
Product pictures
Letters of reference
Details of market studies
Relevant magazine articles or book references
Licenses, permits, or patents
Legal documents
Copies of leases
Building permits
Contracts
List of business consultants, including attorney and accountant

Any copies of your business plan should be controlled; keep a distribution record. This will allow you to update and maintain your business plan on an as-needed basis. Remember, too, that you should include a private placement disclaimer with your business plan if you plan to use it to raise capital.

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