Estimating the Financials

The financial analysis section of your business plan is often the hardest part of the job. No one looks forward to writing it, but in the end it is the only thing that investors and bankers really care about. Your financials are more than numbers though... be sure to explain your projections and your plans. A well documented financial section will leave no room for concern on the part of your funders.

There are a variety of financial costs you must be aware of and plan for when growing your business. At this point, you have survived Start-Up and the expenses that are required in the very beginning (if not, see the article Budgeting For Start-Up). Here we will look at regular fixed costs and how to forecast them in your Business Plan.

The costs that you have may be fixed (occurring on a regular basis) or variable (random expenditures that you often cannot predict).

Some of the more common fixed costs include: personnel, insurance, rent, loan payments, advertising/promotions, legal/accounting, supplies, payroll expenses, salaries/wages, utilities, dues/subscriptions/fees, taxes,

The variable costs may include: depreciation, miscellaneous, repairs/maintenance. This means that these expenditures do not happen on a monthly or quarterly basis, but should be budgeted for "just in case."

Your Business Plan should give a three year financial projection. For year 1, you should provide a monthly profit/loss statement and cash flow statement. For years 2 and 3, provide this information on a quarterly basis. This will be your guide and something you should continuously consult to gauge your progress. While it is a measuring stick, know that your business finances will stray from your projections. The reasons for this could range from new competition to technological advances to any number of reasons. This is all part of life and you should not stress out about not meeting your financial goals. They are, however, something to continuously strive towards.

Know that their is a structure for your financials. You do not just jot numbers down on a page and include them in with the rest of your plan. There is a format that banks and other key investors like to see. Now is not the time to be creative. Contact the SBA or invest in some software to guide you through the financial portion of the business plan (or the whole plan itself). If your structure is incomplete or confusing, it could mean the difference between receiving money and being denied funding. One software package to look into is: Business Plan Pro by Paloalto Software (

At a bare minimum, make sure that your financial statement has:

  • A Balance Sheet
  • A Profit and Loss Statement
  • A Cash Flow Statement

You should consider including:

  • A List of Loans You Have Applied For
  • Your Capital Equipment and Supply List
  • Break Even Analysis (normally in a graph format)
  • Sources of Funding and Uses for Funding

While numbers are what is looked at, don't neglect the words that you use to describe those numbers. The written word allows you to explain how you came up with your projections and what a certain line item may really mean.

For more information on estimating your financials and writing your Business Plan, check out the Virtual Business Plan feature at or the information at

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