Planning For Success

Financial Plan

Convert your market analysis into financial statements that chart the projected growth of your business over a three-to-five year period. Key financial statements that must be included in this section are:

  • The income statement: A projected financial summary of profit and loss, estimated income and expenses, with a monthly breakdown for the first year and quarterly thereafter.

  • The cash-flow statement: A detailed account of the amount of money coming into and going out of the business monthly for the first year and quarterly for each consecutive year thereafter.

  • The balance sheet: A detailed summary of your business assets, liabilities and equity for each year profiled. Include a personal balance sheet.

    You should include with each statement a thorough written analysis that explains the basis for your calculations and any conclusions that can be drawn from your projections. You may also want to include a break-even analysis and ratios such as return-on-investment and return on assets.

    "With a start-up business there is no financial history," says Patrick D. O'Hara, PhD, author of The Total Business Plan (John Wiley & Sons). "Therefore, you should emphasize the reliability of the supporting data."

    Though a business plan, alone, can't guarantee your business will be a success, it does let you evaluate your business idea. Ultimately, it is an operating tool that helps put you on the road to success.

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This article was originally published in the March 1996 print edition of Entrepreneur with the headline: Planning For Success.

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