Financial Plan Part of Your Business Plan

The Financial Plan

The financial plan is the centrepiece of any business plan, indeed some business plans need only comprise of the financial's with a few pages of description of the business.

If the plan is to attract funds from a bank, venture capitalist or angel investor, then it should be written by someone conversant with plans.  I have seen many plans which have been prepared by people who know how to use Business Plan Pro, or Word and Excel, these plans are often no use at all, they may look nice but business wise do not make sense.

I suggest you contact a business consultant or even a friend who is experienced in business, let them look over your spreadsheets, it may take several rewrites to get the financial plan to the stage where it is suitable for applying for funds.

There is considerable skill in reading financial plans, the figures are a balancing act between the capital costs, sales figures, overhead costs and many other parameters, only when the balance is credible is the plan any good. Very few people outside of business and financial professionals have the skills required.

Here are the main headings of a typical financial plan

Assumptions

Here you will put all the factors you are assuming in your financial plan, (guessing), the less of these the better, enter the assumption with the reasoning behind that assumption, for example inflation is not included in the report as we assume that prices and costs increase equally with the inflation rate. You may also put in the interest rate and corporation tax rate you have assumed together with any seasonal factors or any external factors that affects the plan.

Raw Materials

If you are preparing a plan based on production or manufacturing then give information regarding the raw materials such as, can sufficient be procured, what are the seasonal considerations, how does the price vary, are there any alternative suppliers.

If you are using assembly components list prospective suppliers and stock levels, (how many days stock you would need).

Personnel Plan

How many people will you be employing, where will you recruit them from and what will be your labour costs. It would also be preferable to insert an organisation chart here to show responsibilities, also, how many people are required to run your operation.

It is quite possible that in manufacturing the personnel will increase gradually in line with production and sales, possibly on a shift basis, introducing shifts as manufacturing requirement increases.

See the organogram elsewhere on the site.

Finance Plan.

It is preferable that an accountant or other experienced person should complete this section, it will include at a minimum, a profit and loss, balance sheet, cash flow forecast and information on the investment and start up capital.

Sales Forecast.

It can be difficult to forecast sales, but you should try not to be too optimistic, probably look at your competitors sales if possible and start at a low percentage of those sales. Your forecast should be monthly and show any seasonal variations.

There are other items that may be inserted in the financials, dependent on to whom the plan will be submitted, the financial plan should be part of the business plan, however it can be useful on its own if you need to give someone a financial view of your project. Although it may be better to forward the executive summary which tends to be an overview of the whole business plan and usually two or three pages long.

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