How to Write the Financial Plan and Analysis Section of a Business Plan
Updated: Jan 7
“If a proposal doesn't prove out as expected when we run it, sometimes we change the model.” - Edgar Fiedler
You’ve made your pitch for funding, secured a meeting, and now you need to support your position with accurate financial projections. Generally, investors and banks would like to see at least your first three years' forecasts ( and, in some cases, five-year economic forecasts). Therefore, financials are an essential requirement for your detailed business plan.
In this, the ninth article in our creating a business plan series, we will focus on the financial projections and modeling requirements to include within your comprehensive business plan.
You must include a few specific projected forecast statements for your readers to take your business plan seriously. It will help your business plan readers understand your expected financial performance. They’ll be looking for:
Sales forecast and total revenues
Start-up and operations expenses statement
Startup personal budget needs (what do you need to survive personally)
Hiring Needs and Salary Details
Asset and Depreciation Schedule
Income statement or Profit and Loss (P&L) statement
Financial analysis and business ratios
Your accountant or financial business advisor can help you draft these, as well as suggest other statements that might be useful, given your specific circumstances. If you’re not comfortable with these financial management reports, it’s best to leave them to a professional.
Your financial projections should include the following information as a minimum.
If you have no established sales history, a sales forecast can be challenging. But if you have a thorough understanding of your market and industry, as well as prevailing market trends, you can make reasonably-educated guesses. Having this data will aid you to be able to creating a meaningful Sales Forecast.
Break your sales forecast down into monthly sales per separate revenue streams (i.e., by service type, product sales). Focus on which units are selling, for what price, and in what quantity. If you have multiple revenue streams or varying categories of transactions, list them all separately, focusing on total annual sales. A valid 12-month sales forecast free template is available on the Score website. For a three-year sales forecast, try this example.
Start-Up and Operations Expenses Statement
As you start up your business, you’re likely to encounter costs in your ramp-up period. Typically these are the costs to set up your business and keep it afloat. Be sure to include all relevant expenses for website design, legal or accountancy fees, Companies registration costs (i.e., HMRC), any prototyping work that is part of your business feasibility plan, and other costs associated with your business setup.
An expense statement is of limited value if there’s doubt about its accuracy. Be sure to include rent, labor costs, legal expenses, hardware and software purchases, marketing expenses, web design investments, and every other relevant, direct expense. Here is an example startup expense template.
For your ongoing operations expenses, be sure to separate fixed costs and variable costs to give your readers a sense of which payments are stable and which can change. As a guideline, costs checklist to consider within your operations expenses (not a complete list, and example only):
Fixed costs typically include:
rent, council tax, and insurance;
maintenance and repairs;
utilities (i.e., electricity, gas, and water rates);
salaries (including employer's National Insurance, pension, holidays contributions, and other PAYE commitments);
planned advertising and promotions;
administrative costs (i.e., accountancy or legal fees
software and IT costs (i.e., book-keeping, Sales CRM, website domains, emails)
depreciation of fixed assets.
Variable costs typically include (for service companies, you may not have any variable costs):
overtime payments and temporary employees;
wages directly linked to output levels.
For example, planned capital expenditure or specific PR-related activities.
Cash Flow Statement
This statement details your likely cash flow turnover in and out — how much money is flowing into your business (from sales and invoices) and how much is leaving (from bills and purchases). Again, a startup will need to make educated guesses, whereas an established company can base its projections on historical data. A valid cash-flow forecast free template is available from Start-up Loans.
Your statement can answer questions such as how you’ll manage your cash flow in practical terms. For example, does your cash flow differ per revenue stream? What are your payment terms? How will you pay suppliers via credit card or in arrears? If that latter, in how many days?
The balance sheet is a deeper dive into your projected finances. It includes the projections you made in your sales forecast and expenses statement, as well as all other assets and liabilities, like heavy equipment, property, and unsold inventory. These are assets that need to be valued.
Are you owed monies? Do you owe others? What is your expected capital investment?
The balance sheet must value and include all of your assets and provide a detailed accounting of any liabilities the company will be carrying. Remember to include your asset depreciation and whether or not you intend to sell your assets once they have reached maturity. Here is a projected balance sheet template available for download.
Profit and Loss Statement
Your P&L statement is a monetary declaration summarising the revenues, operating costs, and expenditures sustained during a specific period, usually a fiscal quarter or year. Using the data from all three, you’ll project likely profits or losses, creating three year-forecasts based on your input.
If you’re a new corporate body, you may find it helpful to run different financial scenarios and make various assumptions. Here is an example of a P&L account sheet, and here is an accessible template available for download.
Will you have a profit or loss in year one? Do your results differ over the years if you alter the figures provided in your sales forecast and cash flow statement? Again, giving diverse interpretations demonstrates you’ve done your homework.
Creating Your Financial Projections
Previously, most people created their financial projections using Microsoft Excel or perhaps a free download of an Excel template from the internet. You would have to input your business data regularly, typically monthly manually, or pass it onto your bookkeeper or accountant.
The modern way of processing your financial book-keeping is to use online accounting software systems, which have the additional benefit of automatically generating your financial statements.
If you’re already familiar with accounting software like Xero or QuickBooks, you can create your financial projections for your detailed business plan. In addition, the software will help you organize your baseline budget data. Microsoft Excel is also a commonly used tool for this purpose.
Alternatively, you can use business plan creation software like LivePlan, (an online business planning and financial management software) or talk with your financial advisor.
Professional Business Plan Writing Services
If you’d like professional business plan writing services or help with your financial projections, give us a call at Noirwolf. We have the business plan consulting experience to create winning business plans every time. Contact us today to learn more about Noirwolf consulting services and how we can be of great help to you.
About Noirwolf Consulting
Our business plan development process includes all critical aspects to help you create a successful business plan customized to meet your individual needs, whether starting your business or looking to secure a bank loan or investment.
Our business plans typically include - company overview, market analysis, competitor research, marketing, sales approach, operations plan, and a comprehensive financial forecast with projected financial statements—ideal for bank loans, financing, or to support a business manager visa application.
You can see all the information in one place and modify it to suit your financing or immigration visa requirements.
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