It's at the end of your business plan, but the financial plan section is the section that determines whether or not your business idea is viable, and is a key component in determining whether or not your business plan is going to be able to attract any investment in your business idea.
Basically, the financial plan section of the business plan consists of three financial statements, the income statement, the cash flow projection and the balance sheet and a brief explanation/analysis of these three statements.
This article will lead you through the preparation of each of these three financial statements on the following pages. First, however, you need to gather together some of the financial data you'll need to prepare these financial statements for your business plan by examining your expenses.
Think of your business expenses as broken into two categories; your start up expenses and your operating expenses.
All the costs of getting your business up and running go into the start up expenses category.
These expenses may include:
This is just a sampling of start up expenses; your own list will probably expand as soon as you start writing them down.
Operating expenses are the costs of keeping your business running. Think of these as the things you're going to have to pay each month. Your list of operating expenses may include:
Once again, this is just a partial list to get you going. Once you have your operating expenses list complete, the total will show you what it will cost you to keep your business running each month.
Multiply this number by 6, and you have a six month estimate of your operating expenses. Then add this to the total of your start up expenses list, and you'll have a ballpark figure for your complete start up costs.
Now let's look at putting some financial statements for your business plan together, starting with the Income Statement.
Working at home is rapidly becoming the norm rather than the exception. A recent survey conducted by Pacific Bell showed that 43 percent of Bay Area households have members who work at home on a recurring basis. This includes people who either work at home as part of their job or operate a home business. Fifteen percent of Bay Area households operate home businesses.
Home businesses are the fastest growing business sector, and in the process are helping to fuel the economy through job creation, consumer spending, tax revenues, and investment. At the same time, there are stereotypes about home businesses - that the owners are not serious enough about the business to get a real office or that they are just freelancing until they find something better to do.
While this may be true of some home business owners, the majority are very serious about wanting to be successful and need to establish the proper environment. Here are my rules for making a home business work.
Running a home business effectively requires someone with the ability to be able to separate business activities from home activities. Having a separate room in your home that is used exclusively for business activities is highly desirable, especially if you have a family.
Your home office should be equipped with whatever you need to have it function like a normal workplace, so that when you are there, you can get things done. Family rules should be established such that when you are in your office, you are not to be disturbed.
Set regular business hours when you expect to be working, and then stick to the schedule. Treat your home office the same as you would a normal office, only the commute is shorter. When you are in your office, you are working.
Avoid distractions. Don't put a TV in your home office - forget about All My Children and Oprah.
Don't even think about trying to take care of small children while you're supposed to be working. They need more attention than your business does, and there is nothing worse than trying to talk to a potential customer with a screaming kid in the background.
Make sure you have the right tools to be productive and give the outside world the impression you are a serious business.
Every home business should have at least one extra phone line for business calls, and preferably another one for fax and computer transmissions. On the equipment side, a phone, fax, and computer in your home office is a must.
I don't see how it is possible to run a business without a computer, even if it is used only for basic applications like word processing or accounting. Anyone on shoestring budget will end up doing a lot of their own work, and a computer can help with many of those activities, such as graphics for presentations/brochures, Internet access, spreadsheets, and other specialized applications.
Brochures and other promotional materials are also necessary prerequisites for any home business. Chances are, you aren't going to be meeting clients in your home, so you need an effective vehicle to market your capabilities.
Many businesses are run out of homes because of convenience: financial, geographical, or otherwise. The important thing to realize is that a home office must still function and be viewed the same as a normal office. After this is accomplished, the rest is just business as usual.
