15 December 2023

How to Create a Financial Business Plan

By Ronald Smith

How to Create a Financial Business Plan

Today I want to talk to you about creating a killer financial business plan. Sounds cool, right?

Now, I know what you’re thinking. What’s a financial business plan and why do I need one? Well, my friend, a financial business plan is like a super important roadmap for your business. It helps you figure out where you are and where you want to go financially. Plus, it’s a great way to impress potential investors.

So grab a cup of coffee and let’s dive in, shall we?

The first step in creating your financial business plan is to set some goals. Think about what you want to achieve in the short-term and long-term. Do you want to increase your revenue? Expand your business? Launch a new product? Write down all your goals and make them crystal clear.

Once you’ve set your goals, it’s time to do some research. You need to gather all the financial information you can get your hands on. This includes your past financial statements, sales reports, and expense records. Take a deep dive into your numbers and analyze them carefully.

Now that you have all your financial data, it’s time to crunch some numbers. Use all that information to create a budget for your business. Think about your expenses, how much money you need to make, and how you plan to achieve that. This will help you keep track of your finances and make sure you’re on the right track.

Next up, it’s time to think about your revenue streams. How are you planning to make money in your business? Are you selling products, offering services, or maybe earning money through ads? Write down all your revenue streams and estimate how much money each one will generate.

Once you’ve got your revenue streams figured out, it’s time to think about your expenses. What are the costs involved in running your business? This includes things like rent, utilities, salaries, and marketing expenses. Be thorough and make sure you don’t miss anything.

Now comes the fun part – financial projections. This is where you get to predict the future of your business. Take all the information you’ve gathered and use it to create financial forecasts for the next few years. Be realistic yet ambitious – show potential investors that you mean business.

Finally, it’s time to put it all together. Take all your goals, research, budgets, revenue streams, expenses, and projections and compile them into your financial business plan. Make sure it’s well-organized, easy to understand, and visually appealing. You want it to be a document that you can proudly present to anyone.

And there you have it – your very own financial business plan. Pretty cool, huh? With this plan in hand, you’ll be able to navigate the financial waters of your business like a pro. So go ahead and get started. I believe in you!

How to Create a Financial Business Plan

I’m here to talk to you about the importance of a financial business plan for your small business. These special documents are created to help you plan for the future. Don’t worry, they may look like accounting, but a financial business plan is all about looking ahead.

Now, let’s dive into how you can put together one of these plans for your business.

The Key Parts of a Financial Business Plan

First and foremost, it’s important to know that these parts don’t have to follow any specific order. You might jump back and forth as you start working on your plan. The three main components are profit and loss statements, a balance sheet, and cash flow statements. However, don’t be surprised if you find yourself going back to adjust your estimates for expenses and sales after putting together a cash flow statement.

When it comes to creating a financial business plan, there are a few important things I need to cover.

Sales Forecast

To create a sales forecast for my small business, the best tool to use is a spreadsheet. This will help me predict the sales for my business over the next three years, which is important for attracting investors and lenders. In the first year, I’ll need to set up monthly columns for sales. Then, for the second and third years, I can switch to using quarterly columns.

Expenses Budget

Let me break it down for you. Creating an expenses budget is crucial for balancing out your sales forecast. Basically, it shows you how much money it takes to make what you’re selling. This budget includes different categories like leased equipment, utility payments, payroll, rent, and depreciation for any equipment you use.

The Cash Flow Statement

Now, when you combine the sales forecast with the expenses budget, you end up with a cash flow statement.

The cash flow statement is often forgotten, but it’s actually a great summary of what’s happening in the other financial statements. It keeps track of changes in the balance sheet and includes items from the PL and Equity statements, explained Steven Vertucci, a CPA Audit Partner at MaloneBailey, LLP, in an email to USamerica.US.

The cash flow statement is a crucial part of any financial business plan. It serves as a pivot point that lenders often use to evaluate your projected success or failure. It’s essential because it helps you identify areas in your business model that need adjustments – what’s working and what needs to be discarded.

The cash flow statement is built upon the foundation of other elements in your financial plan. If your business has been operating for a few years, you can refer to past profit and loss statements and balance sheets. These documents provide valuable information for constructing your cash flow statement.

For start-ups, it’s necessary to break down the cash flow statement into 12-month increments. This detailed breakdown helps you understand and plan for the financial challenges and opportunities that lie ahead.

I’m Robert Riordan, a CPA, and I want to emphasize the significance of developing a comprehensive financial business plan. It’s a critical step towards achieving your business goals and securing financial stability.

Let’s talk about keeping track of your finances and making smart business decisions. Understanding your numbers is key to success. So, let’s dive right in!

First things first, let’s take a look at your expenses. It’s important to go over all the numbers and see where your money is going. This helps you know what a budget is and how to stick to it. It’s like a roadmap for your business.

Next, let’s talk about financial ratios. These ratios can give you some great insight into the health of your business. They help you see where your business is going and how it’s performing. So, make sure to apply these ratios and see where you stand.

Now, let’s move on to your financial statements. It’s a good practice to review them every month. These statements show you where you’re at financially. They provide valuable information that can help you succeed in your business. So, don’t forget to give them a close look!

Income Projections

Now that we’ve got a good handle on your financials, let’s talk about making some income projections. This is where we take all the numbers we’ve gathered and make an estimate of how much money your company will make in one year.

Why is this important? Well, it’s not only crucial for potential investors and lenders, but it’s also essential for your own business plans as a small business owner. It helps you set goals and make informed decisions to drive your business forward.

Projected Balance Sheet

By now, you probably know that creating a solid financial business plan is a step-by-step process that includes a projected balance sheet. This is a way for you to consider all the different aspects and make educated estimations about your financial situation in the future.

In order to get a clear picture, you must address any assets and liabilities that haven’t been accounted for yet. This will allow you to determine your projected net worth at the end of the fiscal year.

All of these estimations are based on careful research and informed guesses about your small business’s financial situation. When you put together a well-crafted financial business plan, it provides you with a guide to the expected money trends.

Let me tell you a little secret: finding the breakeven point is like hitting the jackpot in the world of finance. It’s that magical moment when your sales match your expenses. And believe me, if you’re seeking a business loan or trying to impress investors, they’ll be all ears when you show them how these numbers add up.

But here’s some friendly advice from me to you: don’t just create a financial plan and toss it aside like yesterday’s news. Treat it like a valuable tool, a guiding light in the dark abyss of business decisions. In fact, it’s a great idea to fill in those numbers on your profit and loss statement every month, and then compare them to your income projections. It’s like having a compass to steer your ship in the right direction.