FinancesHow To

Business Plan 101: Financial Plan

The financial section of a business plan or the financial plan is not about showing accounting.  It is about financial projections and how those projections are going to be reached. An accounting plan is looking back in time to the historical view of how goals were reached, while the financial planning section of the business plan is about looking forward. The financial plan is a guess of how things are going to work and can be adjusted to fit your company’s needs and goals.

Financial plans can benefit from past results such as how the market has historically performed or how a company with similar goals has performed. You can also forget about including minute details because there are too many variables to take account for. All you are really looking at is an educated guess. Investors are going to want to see your financial plan to prove to them that your business is going to grow and how quickly that will happen. They also want to see proof that there is a strategy in place where they can leave the investment and make some money. They want to make sure you are capable of repaying the loan that they give you. No investor wants to give money to a company that is not going to thrive.  You must show the numbers and prove them. Remember to be realistic in your forecast of how your company will grow. A good rule of thumb is to break the financial section into components that will demonstrate market segments and give realistic estimates of sales revenue.

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