- Include a company balance sheet, prepared by your accountant, as of a recent date. This will be your opening balance sheet and it will normally be limited to cash on hand and the capital that you and the other founders have contributed. After business operations commence, you will be able to include your income statement and cash flow statement as parts of your current financial statement. When you have filed federal tax returns, you might want to include copies.
- Your management team will have to work with your financial adviser or accountant to create projections of income, expenses and cash flow over the next three years. Some business plans carry the projections out to five years. Some projections are general and others are very detailed. The objective is to build projections that give a fair representation of the expected performance of your business over the chosen time period, based on certain assumptions. The assumptions are important and they are worthy of serious thought by all concerned in the process. You will have to decide on future values for such things as interest rates, tax rates, selling prices, wage rates and the cost of materials. Give monthly or quarterly results for the first year and annual results for later years. The projections should be updated frequently.
- Outside investors will be particularly interested in your break-even point. When you know your variable costs and your fixed costs, you will be able to calculate your break-even point. This is when your sales volume reaches a point that covers all of your costs.
- Those who review the information in your plan's financial section will appreciate seeing certain key financial ratios with the projections. By comparing the ratios from your financial projections with industry ratios, analysts will be able to form opinions about your planning -- for example, whether it is conservative, traditional or baseless. Ratios for liquidity (ability to cover current expenses), profitability (operational performance), turnover (activity in certain assets, such as accounts receivable) and leverage (use of borrowed funds) provide valuable information about your expectations for your business.
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