financial summary in business plan

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5 Tips to Help with Financial Planning

financial summary in business plan

Financial planning means putting your incomes and expenses on a scale to achieve monetary equilibrium or upward mobility on your income levels. Your plan should capture how your current and future risks are covered to protect you from economic uncertainties and losses. Planning helps you to sustain yourself and your family, and so it should be taken as a priority and not a choice. Another aspect of your plan that you should prioritize is your goals either in short, medium and long term and their budgetary requirements.

1. Understand Your Money Mindset

The first tip to having a productive financial plan is to understand your money mindset. If what matters most to you is the present then you fall in the survivor’s list. Survivors also include people who tend to have the urge to satisfy their current desires such as a pricey pair of shoes or a sumptuous snack with little or no thought of the financial implications of their decisions on tomorrow.

Achievers are action oriented and are classified as precious. They have investments, shares and bank deposits. Even if they lose their jobs, they still have something they can bounce back on. However, these actions do not portray financial stability because such people lack intention.

The wealthy people are the strategists. They are long term viewers. All their actions fulfill a purpose, and they seek development in all aspects of their life. They don’t just pump in money in endless investments but instead have fewer investments that are sustainable and profitable but take time to actualize.

Once you understand which money mindset best describes you, you will be able to draft a financial plan that works for you and your needs.

2. Formulate a Financial Plan

No engineer is complete without his measuring tape just as no electrician is complete without his tester. When you draft your plan on paper, you bring your ideas and thoughts to life. A blueprint of your plan enables you to have a reference for your progress. Start by stating your short, middle and long-term goals and then align them with their expenditure and projected profits. You also need to put into consideration your assets and liabilities and how you can maximize and minimize them respectively to achieve your goals.

Implement your plan and then conduct a monitoring and evaluation exercise as per the set timelines and make adjustments where necessary.

The golden rule here is to avoid spending before you have dealt with small/personal debts and bills. Saving does not require you to be earning a lump sum salary. Starting small especially when you are young with minimal responsibilities helps you have enough for investments in the future. Analyze your spending and cut on expenses that are not necessary. It is also advisable to plan for your retirement, even though you might not think about it when you’re young. The earlier you start saving, the more financially stable you will be once you’ve stopped working.

4. Invest in Yourself

The most valuable investment you can make is in yourself. It does not necessarily mean to completely lose you in a classroom trying to amass a good number of degrees. It captures your entire being. Learn to exercise more, travel to different places in the world or your country or attend inspiring and informative talks. When your life gets sucked into these various facets, you get exposed to a lot of things that will eventually guide you in making your financial plan. It is also crucial to build your career and increase your earning potential.

5. Seek Financial Advice

Once you have managed to grow your savings, it is advisable to seek advice from a financial planner to assist you to make sensible investment choices. A wise financial adviser will help you identify the risks involved in potential investments, and provide viable options for maximum returns while helping you achieve your financial goals in the shortest time possible. A financial adviser can also come in handy by helping you prepare a budget. You don’t have to seek financial advice from a financial planner only. You can also talk to a relative or a mentor who is good with money.

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Start » startup, business plan financials: 3 statements to include.

The finance section of your business plan is essential to securing investors and determining whether your idea is even viable. Here's what to include.

By: Danielle Fallon-O'Leary , Contributor

Businessman reviews financial documents

If your business plan is the blueprint of how to run your company, the financials section is the key to making it happen. The finance section of your business plan is essential to determining whether your idea is even viable in the long term. It’s also necessary to convince investors of this viability and subsequently secure the type and amount of funding you need. Here’s what to include in your business plan financials.

[Read: How to Write a One-Page Business Plan ]

What are business plan financials?

Business plan financials is the section of your business plan that outlines your past, current and projected financial state. This section includes all the numbers and hard data you’ll need to plan for your business’s future, and to make your case to potential investors. You will need to include supporting financial documents and any funding requests in this part of your business plan.

Business plan financials are vital because they allow you to budget for existing or future expenses, as well as forecast your business’s future finances. A strongly written finance section also helps you obtain necessary funding from investors, allowing you to grow your business.

Sections to include in your business plan financials

Here are the three statements to include in the finance section of your business plan:

Profit and loss statement

A profit and loss statement , also known as an income statement, identifies your business’s revenue (profit) and expenses (loss). This document describes your company’s overall financial health in a given time period. While profit and loss statements are typically prepared quarterly, you will need to do so at least annually before filing your business tax return with the IRS.

Common items to include on a profit and loss statement :

Businesses that have not yet started should provide projected income statements in their financials section. Currently operational businesses should include past and present income statements, in addition to any future projections.

[Read: Top Small Business Planning Strategies ]

A strongly written finance section also helps you obtain necessary funding from investors, allowing you to grow your business.

A balance sheet provides a snapshot of your company’s finances, allowing you to keep track of earnings and expenses. It includes what your business owns (assets) versus what it owes (liabilities), as well as how much your business is currently worth (equity).

On the assets side of your balance sheet, you will have three subsections: current assets, fixed assets and other assets. Current assets include cash or its equivalent value, while fixed assets refer to long-term investments like equipment or buildings. Any assets that do not fall within these categories, such as patents and copyrights, can be classified as other assets.

On the liabilities side of your balance sheet, include a total of what your business owes. These can be broken down into two parts: current liabilities (amounts to be paid within a year) and long-term liabilities (amounts due for longer than a year, including mortgages and employee benefits).

Once you’ve calculated your assets and liabilities, you can determine your business’s net worth, also known as equity. This can be calculated by subtracting what you owe from what you own, or assets minus liabilities.

Cash flow statement

A cash flow statement shows the exact amount of money coming into your business (inflow) and going out of it (outflow). Each cost incurred or amount earned should be documented on its own line, and categorized into one of the following three categories: operating activities, investment activities and financing activities. These three categories can all have inflow and outflow activities.

Operating activities involve any ongoing expenses necessary for day-to-day operations; these are likely to make up the majority of your cash flow statement. Investment activities, on the other hand, cover any long-term payments that are needed to start and run your business. Finally, financing activities include the money you’ve used to fund your business venture, including transactions with creditors or funders.

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How to Craft the Financial Section of Business Plan (Hint: It’s All About the Numbers)

Writing a small business plan takes time and effort … especially when you have to dive into the numbers for the financial section. But, working on the financial section of business plan could lead to a big payoff for your business.

Read on to learn what is the financial section of a business plan, why it matters, and how to write one for your company.

What is the financial section of business plan?

Generally, the financial section is one of the last sections in a business plan. It describes a business’s historical financial state (if applicable) and future financial projections. Businesses include supporting documents such as budgets and financial statements, as well as funding requests in this section of the plan.

The financial part of the business plan introduces numbers. It comes after the executive summary, company description , market analysis, organization structure, product information, and marketing and sales strategies.

Businesses that are trying to get financing from lenders or investors use the financial section to make their case. This section also acts as a financial roadmap so you can budget for your business’s future income and expenses.

Why it matters

The financial section of the business plan is critical for moving beyond wordy aspirations and into hard data and the wonderful world of numbers.

Through the financial section, you can:

describes how you can use the four ways to use the financial section of business plan

So, if you want to possibly double your chances of securing a business loan, consider putting in a little time and effort into your business plan’s financial section.

Writing your financial section

To write the financial section, you first need to gather some information. Keep in mind that the information you gather depends on whether you have historical financial information or if you’re a brand-new startup.

Your financial section should detail:

Business expenses

Financial projections

Financial statements, break-even point, funding requests, exit strategy, business expenses.

Whether you’ve been in business for one day or 10 years, you have expenses. These expenses might simply be startup costs for new businesses or fixed and variable costs for veteran businesses.

Take a look at some common business expenses you may need to include in the financial section of business plan:

Write down each type of expense and amount you currently have as well as expenses you predict you’ll have. Use a consistent time period (e.g., monthly costs).

Indicate which expenses are fixed (unchanging month-to-month) and which are variable (subject to changes).

How much do you anticipate earning from sales each month?

If you operate an existing business, you can look at previous monthly revenue to make an educated estimate. Take factors into consideration, like seasonality and economic ups and downs, when basing projections on previous cash flow.

Coming up with your financial projections may be a bit trickier if you are a startup. After all, you have nothing to go off of. Come up with a reasonable monthly goal based on things like your industry, competitors, and the market. Hint : Look at your market analysis section of the business plan for guidance.

A financial statement details your business’s finances. The three main types of financial statements are income statements, cash flow statements, and balance sheets.

Income statements summarize your business’s income and expenses during a period of time (e.g., a month). This document shows whether your business had a net profit or loss during that time period.

Cash flow statements break down your business’s incoming and outgoing money. This document details whether your company has enough cash on hand to cover expenses.

The balance sheet summarizes your business’s assets, liabilities, and equity. Balance sheets help with debt management and business growth decisions.

If you run a startup, you can create “pro forma financial statements,” which are statements based on projections.

If you’ve been in business for a bit, you should have financial statements in your records. You can include these in your business plan. And, include forecasted financial statements.

financial summary in business plan

You’re just in luck. Check out our FREE guide, Use Financial Statements to Assess the Health of Your Business , to learn more about the different types of financial statements for your business.

Potential investors want to know when your business will reach its break-even point. The break-even point is when your business’s sales equal its expenses.

Estimate when your company will reach its break-even point and detail it in the financial section of business plan.

If you’re looking for financing, detail your funding request here. Include how much you are looking for, list ideal terms (e.g., 10-year loan or 15% equity), and how long your request will cover.

Remember to discuss why you are requesting money and what you plan on using the money for (e.g., equipment).

Back up your funding request by emphasizing your financial projections.

Last but not least, your financial section should also discuss your business’s exit strategy. An exit strategy is a plan that outlines what you’ll do if you need to sell or close your business, retire, etc.

Investors and lenders want to know how their investment or loan is protected if your business doesn’t make it. The exit strategy does just that. It explains how your business will make ends meet even if it doesn’t make it.

When you’re working on the financial section of business plan, take advantage of your accounting records to make things easier on yourself. For organized books, try Patriot’s online accounting software . Get your free trial now!

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How to Write the Financial Section of a Business Plan

Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.

financial summary in business plan

Taking Stock of Expenses

The income statement, the cash flow projection, the balance sheet.

The financial section of your business plan determines whether or not your business idea is viable and will be the focus of any investors who may be attracted to your business idea. The financial section is composed of four financial statements: the income statement, the cash flow projection, the balance sheet, and the statement of shareholders' equity. It also should include a brief explanation and analysis of these four statements.

Think of your business expenses as two cost categories: your start-up expenses and your operating expenses. All the costs of getting your business up and running should be considered start-up expenses. These may include:

Your own list will expand as soon as you start to itemize them.

Operating expenses are the costs of keeping your business running . Think of these as your monthly expenses. Your list of operating expenses may include:

Once you have listed all of your operating expenses, the total will reflect the monthly cost of operating your business. Multiply this number by six, and you have a six-month estimate of your operating expenses. Adding this amount to your total startup expenses list, and you have a ballpark figure for your complete start-up costs.

Now you can begin to put together your financial statements for your business plan starting with the income statement.

The income statement shows your revenues, expenses, and profit for a particular period—a snapshot of your business that shows whether or not your business is profitable. Subtract expenses from your revenue to determine your profit or loss.

While established businesses normally produce an income statement each fiscal quarter or once each fiscal year, for the purposes of the business plan, an income statement should be generated monthly for the first year.

Not all of the categories in this income statement will apply to your business. Eliminate those that do not apply, and add categories where necessary to adapt this template to your business.

If you have a product-based business, the revenue section of the income statement will look different. Revenue will be called sales, and you should account for any inventory.

The cash flow projection shows how cash is expected to flow in and out of your business. It is an important tool for cash flow management because it indicates when your expenditures are too high or if you might need a short-term investment to deal with a cash flow surplus. As part of your business plan, the cash flow projection will show how much capital investment your business idea needs.

For investors, the cash flow projection shows whether your business is a good credit risk and if there is enough cash on hand to make your business a good candidate for a line of credit, a short-term loan , or a longer-term investment. You should include cash flow projections for each month over one year in the financial section of your business plan.

Do not confuse the cash flow projection with the cash flow statement. The cash flow statement shows the flow of cash in and out of your business. In other words, it describes the cash flow that has occurred in the past. The cash flow projection shows the cash that is anticipated to be generated or expended over a chosen period in the future.

There are three parts to the cash flow projection:

The balance sheet reports your business's net worth at a particular point in time. It summarizes all the financial data about your business in three categories:

The relationship between these elements of financial data is expressed with the equation: Assets = Liabilities + Equity .

For your business plan , you should create a pro forma balance sheet that summarizes the information in the income statement and cash flow projections. A business typically prepares a balance sheet once a year.

Once your balance sheet is complete, write a brief analysis for each of the three financial statements. The analysis should be short with highlights rather than in-depth analysis. The financial statements themselves should be placed in your business plan's appendices.

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Women & wealth, 3 financial statements your business plan must include.

Team building a business plan

One of the most common reasons that businesses fold is that they run out of money. This doesn't necessarily mean that they didn't have enough customers – many do – but rather that their expenses exceeded their revenue: They couldn't sell enough to cover their costs.

In fact, according to U.S. Bank data, 82 percent of businesses have poor cash flow management processes and/or a poor understanding of cash flow management and, according to a CB Insights study, 29 percent run out of cash altogether.

While financial statements can help business owners spot upcoming financial challenges, such as running low on inventory or raw materials, sometimes the problem is that they're using their financial statements incorrectly or ineffectively. This can lead entrepreneurs to overlook important warning signs specific to cash flow or operations, or to miss upcoming opportunities.

Financial statements are a critical section of any business plan, whether the company is pursuing outside financing or creating more of an internal operating manual. There are three primary financial statements a business needs to generate and regularly monitor:

Each statement provides insights into how the business is doing that can help owners and managers recognize how to improve operations. But because each statement serves a different purpose, it's important to know how to best use each one.

Profit and Loss Statement

Your P&L, or income statement, is an overview of your company's operations over a specific period of time – usually one year. It is a reflection of the business's financial performance or health. It's also generally used as a look back, although you can certainly use it when creating projections as well.

Your P&L summarizes how much revenue you generated, what your total expenses were, and what your resulting profit (or loss) was once those expenses were subtracted from your revenue.

The P&L is a useful tool for comparing performance and assessing growth. You can compare past years' P&L figures to your current and future years to see if your business is growing or shrinking.

Profits generated can then be used to buy more assets, reinvested in the business, applied to reduce liabilities, or paid out to owners as a dividend or bonus, all of which will be reflected on the balance sheet. That's how the two documents are related.

Balance Sheet

While your P&L reflects how much money came in and how much went out over the course of a year, a quarter, or a month, your balance sheet is a statement of what your business owns and what it owes at a particular point in time (the most common date used is 12/31).

At the top of the statement are all of your business assets – the things you own. This includes your property, plant and equipment – your long-term assets. Any real estate, computer equipment, raw materials, inventory and machinery would be included in this list. Short-term assets, such as accounts receivable (what your customers owe you), also fall into this category. Anything you use to generate income should be listed under assets.

Your liabilities and shareholders' equity goes on the bottom half of your balance sheet. Liabilities are what you owe. This includes expenses like building or equipment leases, loans, taxes owed and unpaid invoices.

Your shareholders' (or owners') equity is the value the business has created, which is shared by your shareholders – all your partners or owners in the business.

Shareholders' equity plus liabilities always equals your assets. The higher the shareholders' equity, the more value the business is creating.

Cash Flow Statement

Your cash flow statement is a look at all the money the business has earned and paid out over a period of time. Cash flow statements are frequently used for projections – for looking ahead to try and anticipate when the company might need an infusion of cash or be able to afford a major investment. For that reason, cash flow statements often break down cash inflow and outflow on a monthly basis.

Cash coming into the business can be generated by operations (what you sell to customers), investments (such as stocks or real estate), and/or financing (such as when you receive a loan or take on an investor).

When cash is paid to buy more assets or to pay back a loan or credit extended, those amounts fall under cash outflow.

Analyzing changes in cash flow over several periods, such as months or quarters, gives you, lenders or investors a sense of how cash-healthy the company is.

Putting It All Together

Where P&L statements provide an overview of how a business is doing, a cash flow statement can shine a spotlight on the peaks and valleys many companies experience during a typical year. For example, if you're a swimming pool retailer, your projections for the spring and summer months will likely go way up with demand, while cash flow in the winter months – at least in the north – may plummet. It's important to be prepared to sustain the business during November, December and January when you may have little in the way of cash coming in.

Your balance sheet is a reflection of how well you're using your company's assets. Over time, your assets and shareholders' equity should steadily rise, while your liabilities should decline. If they're headed in the other direction, you may be headed for a cash crunch.

These three financial statements are important business tools that can help you recognize where your attention needs to be directed in order for your business to grow. Update and look at them regularly to keep cash steadily flowing in, in order to bulk up your P&L and your balance sheet – and to help ensure your business survives and thrives.

Looking for additional guidance? Connect with a First Horizon banker to learn more.

financial summary in business plan

How to Write a Financial Plan for Your Small Business — 2022 Guide

financial summary in business plan

Building a financial plan can be the most intimidating part of writing your business plan . It’s also one of the most vital. Businesses that have a full financial plan in place more prepared to pitch to investors, receive funding, and achieve long-term success.

Thankfully, you don’t need an accounting degree to successfully put one together. All you need to know is the key elements and what goes into them. Read on for the six components that need to go into your financial plan and successfully launch your business.

What is a financial plan?

A financial plan is simply an overview of your current business financials and projections for growth. Think of any documents that represent your current monetary situation as a snapshot of the health of your business and the projections being your future expectations.

Why is a financial plan important for your business?

As said before, the financial plan is a snapshot of the current state of your business. The projections, inform your short and long-term financial goals and gives you a starting point for developing a strategy.

It helps you, as a business owner, set realistic expectations regarding the success of your business. You’re less likely to be surprised by your current financial state and more prepared to manage a crisis or incredible growth, simply because you know your financials inside and out.

And aside from helping you better manage your business, a thorough financial plan also makes you more attractive to investors. It makes you less of a risk and shows that you have a firm plan and track record in place to grow your business.

Components of a successful financial plan

All business plans, whether you’re just starting a business or building an expansion plan for an existing business, should include the following:

Even if you’re in the very beginning stages, these financial statements can still work for you.

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How to write a financial plan for your small business

The good news is that they don’t have to be difficult to create or hard to understand. With just a few educated guesses about how much you might sell and what your expenses will be, you’ll be well on your way to creating a complete financial plan.

1. Profit and loss statement

This is a financial statement that goes by a few different names—profit and loss statement, income statement, pro forma income statement, P&L (short for “profit and loss”)— and is essentially an explanation of how your business made a profit (or incur a loss) over a certain period of time.

It’s a table that lists all of your revenue streams and all of your expenses—typically over a three-month period—and lists at the very bottom the total amount of net profit or loss.

There are different formats for profit and loss statements, depending on the type of business you’re in and the structure of your business (nonprofit, LLC, C-Corp, etc.).

What to include in your profit and loss statement

These three components (revenue, COGS, and gross margin) are the backbone of your business model — i.e., how you make money.

You’ll also list your operating expenses, which are the expenses associated with running your business that isn’t directly associated with making a sale. They’re the fixed expenses that don’t fluctuate depending on the strength or weakness of your revenue in a given month—think rent, utilities, and insurance.

How to find operating income

To find your operating income with the P&L statement you’ll take the gross margin less your operating expenses:

Gross Margin – Operating Expenses = Operating Income

Depending on how you classify some of your expenses, your operating income will typically be equivalent to your “earnings before interest, taxes, depreciation, and amortization” (EBITDA). This is basically, how much money you made in profit before you take your accounting and tax obligations into consideration. It may also be called your “profit before interest and taxes,” gross profit, and “contribution to overhead”—many names, but they all refer to the same number.

How to find net income

Your so-called “bottom line”—officially, your net income, which is found at the very end (or, bottom line) of your profit and loss statement—is your EBITDA less the “ITDA.” Just subtract your expenses for interest, taxes, depreciation, and amortization from your EBITDA, and you have your net income:

Operating Income – Interest, Taxes, Depreciation, and Amortization Expenses = Net Income

For further reading on profit and loss statements (a.k.a., income statements), including an example of what a profit and loss statement actually looks like, check out “ How to Read and Analyze an Income Statement.” And if you want to start building your own, download our free Profit and Loss Statement Template .

2. Cash flow statement

Your cash flow statement is just as important as your profit and loss statement. Businesses run on cash —there are no two ways around it. A cash flow statement is an explanation of how much cash your business brought in, how much cash it paid out, and what its ending cash balance was, typically per-month.

Without a thorough understanding of how much cash you have, where your cash is coming from, where it’s going, and on what schedule, you’re going to have a hard time running a healthy business . And without the cash flow statement, which lays that information out neatly for lenders and investors, you’re not going to be able to raise funds.

The cash flow statement helps you understand the difference between what your profit and loss statement reports as income—your profit—and what your actual cash position is.

It is possible to be extremely profitable and still not have enough cash to pay your expenses and keep your business afloat. It is also possible to be unprofitable but still have enough cash on hand to keep the doors open for several months and buy yourself time to turn things around —that’s why this financial statement is so important to understand.

Cash versus accrual accounting

There are two methods of accounting—the cash method and the accrual method.

The accrual method means that you account for your sales and expenses at the same time—if you got a big preorder for a new product, for example, you’d wait to account for all of your preorder sales revenue until you’d actually started manufacturing and delivering the product. Matching revenue with the related expenses is what’s referred to as “the matching principle,” and is the basis of accrual accounting.

The cash method means that you just account for your sales and expenses as they happen, without worrying about matching up the expenses that are related to a particular sale or vice versa.

If you use the cash method, your cash flow statement isn’t going to be very different from what you see in your profit and loss statement. That might seem like it makes things simpler, but I actually advise against it.

I think that the accrual method of accounting gives you the best sense of how your business operates and that you should consider switching to it if you aren’t using it already.

Why you should use accrual accounting for cash flow

For the best sense of how your business operates, you should consider switching to accrual accounting if you aren’t using it already.

Here’s why: Let’s say you operate a summer camp business. You might receive payment from a camper in March, several months before camp actually starts in July—using the accrual method, you wouldn’t recognize the revenue until you’ve performed the service, so both the revenue and the expenses for the camp would be accounted for in the month of July.

With the cash method, you would have recognized the revenue back in March, but all of the expenses in July, which would have made it look like you were profitable in all of the months leading up to the camp, but unprofitable during the month that camp actually took place.

Cash accounting can get a little unwieldy when it comes time to evaluate how profitable an event or product was, and can make it harder to really understand the ins and outs of your business operations. For the best look at how your business works, accrual accounting is the way to go.

3. Balance sheet

Your balance sheet is a snapshot of your business’s financial position—at a particular moment in time, how are you doing? How much cash do you have in the bank, how much do your customers owe you, and how much do you owe your vendors?

What to include in your balance sheet

It’s called a balance sheet because it’s an equation that needs to balance out:

Assets = Liabilities + Equity

The total of your liabilities plus your total equity always equals the total of your assets.

At the end of the accounting year, your total profit or loss adds to or subtracts from your retained earnings (a component of your equity). That makes your retained earnings your business’s cumulative profit and loss since the business’s inception.

However, if you are a sole proprietor or other pass-through tax entity, “retained earnings” doesn’t really apply to you—your retained earnings will always equal zero, as all profits and losses are passed through to the owners and not rolled over or retained like they are in a corporation.

If you’d like more help creating your balance sheet, check out our free downloadable Balance Sheet Template .

4. Sales forecast

The sales forecast is exactly what it sounds like: your projections, or forecast, of what you think you will sell in a given period. Your sales forecast is an incredibly important part of your business plan, especially when lenders or investors are involved, and should be an ongoing part of your business planning process.

Your sales forecast should be an ongoing part of your business planning process.

You should create a forecast that is consistent with the sales number you use in your profit and loss statement. In fact, in our business planning software, LivePlan , the sales forecast auto-fills the profit and loss statement.

There isn’t a one-size-fits-all kind of sales forecast—every business will have different needs. How you segment and organize your forecast depends on what kind of business you have and how thoroughly you want to track your sales.

Generally, you’ll want to break down your sales forecast into segments that are helpful to you for planning and marketing purposes.

If you own a restaurant, for example, you’ll want to separate your forecasts for dinner and lunch sales. But a gym owner may find it helpful to differentiate between the membership types. If you want to get really specific, you might even break your forecast down by product, with a separate line for every product you sell.

Along with each segment of forecasted sales, you’ll want to include that segment’s “cost of goods sold” (COGS). The difference between your forecasted revenue and your forecasted COGS is your forecasted gross margin.

5. Personnel plan

Think of the personnel plan as a justification of each team member’s necessity to the business.

The overall importance of the personnel plan depends largely on the type of business you have. If you are a sole proprietor with no employees, this might not be that important and could be summarized in a sentence of two. But if you are a larger business with high labor costs, you should spend the time necessary to figure out how your personnel affects your business.

If you opt to create a full personnel plan, it should include a description of each member of your management team, and what they bring to the table in terms of training, expertise, and product or market knowledge. Think of this as a justification of each team member’s necessity to the business, and a justification of their salary (and/or equity share, if applicable). This would fall in the company overview section of your business plan.

You can also choose to use this section to list entire departments if that is a better fit for your business and the intentions you have for your business plan . There’s no rule that says you have to list only individual members of the management team.

This is also where you would list team members or departments that you’ve budgeted for but haven’t hired yet. Describe who your ideal candidate(s) is/re, and justify your budgeted salary range(s).

6. Business ratios and break-even analysis

Business ratios explained.

If you have your profit and loss statement, your cash flow statement, and your balance sheet, you have all the numbers you need to calculate the standard business ratios . These ratios aren’t necessary to include in a business plan—especially for an internal plan—but knowing some key ratios is always a good idea.

Common profitability ratios include:

Common liquidity ratios include:

Of these, the most common ratios used by business owners and requested by bankers are probably gross margin, return on investment (ROI), and debt-to-equity.

Break-even analysis explained

Your break-even analysis is a calculation of how much you will need to sell in order to “break-even” i.e. cover all of your expenses.

In determining your break-even point, you’ll need to figure out the contribution margin of what you’re selling. In the case of a restaurant, the contribution margin will be the price of the meal less any associated costs. For example, the customer pays $50 for the meal. The food costs are $10 and the wages paid to prepare and serve the meal are $15. Your contribution margin is $25 ($50 – $10 – $15 = $25).

Using this model you can determine how high your sales revenue needs to be in order for you to break even. If your monthly fixed costs are $5,000 and you average a 50 percent contribution margin (like in our example with the restaurant), you’ll need to have sales of $10,000 in order to break even.

Make financial planning a recurring part of your business

Your financial plan might feel overwhelming when you get started, but the truth is that this section of your business plan is absolutely essential to understand.

Even if you end up outsourcing your bookkeeping and regular financial analysis to an accounting firm, you—the business owner—should be able to read and understand these documents and make decisions based on what you learn from them. Using a business dashboard tool like LivePlan can help simplify this process, so you’re not wading through spreadsheets to input and alter every single detail.

If you create and present financial statements that all work together to tell the story of your business, and if you can answer questions about where your numbers are coming from, your chances of securing funding from investors or lenders are much higher.

Additional small business financial resources

Ready to develop your own financial plan? Check out the following resources for more insights into creating an effective financial plan for your small business.

Trevor Betenson

Trevor is the CFO of Palo Alto Software, where he is responsible for leading the company’s accounting and finance efforts.

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Access our collection of user-friendly templates for business planning, finance, sales, marketing, and management, designed to assist you in developing strategies for either launching a new business venture or expanding an existing one.

You can use the templates below as a starting point to create your startup business plan or map out how you will expand your existing business. Then meet with a SCORE mentor to get expert business planning advice and feedback on your business plan.

From creating a startup budget to managing cash flow for a growing business, keeping tabs on your business’s finances is essential to success. The templates below will help you monitor and manage your business’s financial situation, create financial projections and seek financing to start or grow your business.

This interactive calculator allows you to provide inputs and see a full estimated repayment schedule so that you can plan around your capital needs and cash flow.

Marketing helps your business build brand awareness, attract customers and create customer loyalty. Use these templates to forecast sales, develop your marketing strategy and map out your marketing budget and plan.

How healthy is your business? Are you missing out on potential growth opportunities or ignoring areas of weakness? Do you need to hire employees to reach your goals? The following templates will help you assess the state of your business and accomplish important management tasks.

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Learn how having a SCORE mentor can be a valuable asset for your business. A SCORE mentor can provide guidance and support in various areas of business, including finance, marketing, and strategy. They can help you navigate challenges and make important decisions based on their expertise and experience. By seeking out a SCORE mentor, you can gain the guidance and support you need to help grow your business and achieve success.

SCORE offers free business mentoring to anyone that wants to start, currently owns, or is planning to close or sell a small business. To initiate the process, input your zip code in the designated area below. Then, complete the mentoring request form on the following page, including as much information as possible about your business. This information is used to match you with a mentor in your area. After submitting the request, you will receive an email from your mentor to arrange your first mentoring session.

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Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.

Business Plan Section 7: Financial Information

In this section of your business plan, learn how to put your business finances into context to influence potential lenders or investors.

financial summary in business plan

This section of your business plan is crucial if you’re presenting your plan to potential lenders or investors, but it’s also important if you’re using it in-house as a roadmap to get started and continue to grow. You may have the best idea in the world for a business-or it may need tweaking. You won’t actually know until you sit down and work up the numbers for your financial information section.

As a startup, spelling out your sales projections for the future will help you closely examine your business model and costs, how you’ll allocate your resources, and figure out whether you actually do have a viable idea. For existing businesses, think of this as a financial checkup: a way to examine your previous sales figures and ensure your health going forward.

If you’re applying for a loan or making a presentation to investors, this section is the companion piece to your Funding Request. It’s where you support the numbers you put together in your sales and marketing plan, and demonstrate why you’re a good investment. In this section, you’ll take all of the marketing, sales, and product information you’ve amassed, and show how they translate into dollars. Sharpen your pencil and get your spreadsheet on!

Writing the Financial Section

There are two parts to the financial component of a business plan: historical data and prospective data. If you’re a startup, you obviously won’t have any previous financial information for the company, so many lenders will want to see your personal financial information in lieu of, or in addition to, your business financials.

Historical Data

Spell out how much money you’re investing in the business, along with specifics about the assets you plan to use. If you’re looking for financing, you’ll probably have to show personal income tax returns for the last few years. Be prepared with documentation for the last three to five years, depending on how long you’ve been in business. You’ll need income statements, balance sheets, cash flow statements, and tax returns.

Income Statements

Income statements document how much money you’ve taken in for the business, where the money came from, what your expenses were, and your net income, or how much you wound up with after paying all the expenses. The statements are usually prepared quarterly, and will show at a glance whether the company is making money or operating at a loss.

Balance Sheets

Balance sheets list the type and value of all of your business’s assets and liabilities, along with ownership interest (who owns what in the company, and how much). Assets will include your cash on hand, accounts receivable, inventory, equipment, and property you own. Liabilities are things such as your accounts payable and long-term debt. The balance sheet is a snapshot of your company’s financial position at the time it’s prepared, comparing what you own with what you owe.

Cash Flow Statements

Cash flow statements show all the cash you have coming in and out of the company, whether as a direct result of your business activities or from any outside investments you’ve made.

Tax Returns

How your business is structured will determine which tax forms you have to file with the Internal Revenue Service each year, so these may be your personal tax returns with a Schedule C attachment, or separate corporate tax returns.

If you’re looking for a loan, you’ll most likely also need to show the value of any collateral you’re offering to ensure payments, like real estate, vehicles, inventory, stocks and bonds, and equipment.

Prospective Data

Now, everyone knows you don’t have a crystal ball and can’t actually predict what will happen over the next five years, but there’s a point to putting the projections together. Lenders and investors really want to see that you have thought things through and considered the possible outcomes as your business progresses. They want to understand the thought process behind your numbers and why you’ve made those assumptions.

This means you need to do a significant amount of planning before sitting down to work on your projections, critically thinking through different scenarios. Again, the work and research you’ve already done for previous sections of your business plan will be invaluable here in making the assumptions needed to put your projections together.

Include projected income statements, balance sheets, and cash flow statements, which we described above, along with a capital expenditure budget.

Capital Expenditure Budget

A capital expense is a tangible, physical asset like property, buildings or equipment. This budget is your plan for how much you’ll spend to buy or upgrade these assets, whether that might be purchasing new machinery or repairing your HVAC system.

Funders may also want to see an analysis of how your results would change if some of the variables changed, so consider including a section on that, as well. As an added benefit, this isn’t just a theoretical exercise on your part, but will actually help you run the business and make adjustments as they become necessary. Business Insider offers a look at how to make realistic projections that will be meaningful to your business as well as to lenders and investors.

If you’re just at the beginning stages of business, make sure to also include any startup costs you’ll have. Some may be specific to your industry, such as particular types of equipment, tools or store fixtures. Others are fairly common across the board, like professional fees for lawyers or accountants, licensing and incorporation fees, security deposits and rent, and computers.

As a rule, the financial part of your plan should follow generally accepted accounting principles (GAAP) as set by the Federal Accounting Standards Advisory Board, especially if you’re putting it together primarily to get a loan or a line of credit. For this section, it helps to be fluent with spreadsheets, as that’s the best and most accepted way to present this information. This is one part of the business plan that you may want to get some outside assistance with, perhaps from your accountant or financial advisor, to help put the numbers together and present them properly. If you use an accountant, and your financial statements have been audited, make a note of that in the plan. If you want to give it a go on your own, SCORE, the Service Corps of Retired Executives, has a financial projections template available on its website.

Attention to detail is very important throughout the whole process of writing a business plan, but we can’t stress it strongly enough with regards to your finances. Be VERY careful to make sure that your projections match the numbers you put together for the funding request portion of the plan. At best, any inconsistencies here could delay consideration of your application, and at worst, could be a signal that you’re not as on top of things as you should be, disqualifying you altogether.

Visuals help. Yes, there may be professional number crunchers going over your data, but consider showing your projections graphically along with the requisite spreadsheets, especially if the graphs demonstrate a positive trend.

Include a brief analysis of the financial information you’re presenting to explain the numbers, putting them into context for someone that has less of an understanding about your business and industry than you do.

Whether you have a startup or existing business, there’s an excellent likelihood you’ll also be asked for personal financial information, so consider including that as part of your business plan. Your credit history or a copy of a recent credit report can go in the appendix, together with copies of your tax returns or any additional information a lender may request.

Next Article: Business Plan Section 8 – Funding Request

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How to make a financial statement for small business.

How to Make a Financial Statement for Small Business

A financial statement is a formal record of a company’s financial activity. These plans give a current landscape of your small business and forecast the future vision and plans of the business.

Creating financial statements for your small business starts with your day to day bookkeeping. You will use pull and organize the data from these records to put together your financial statements.

Financial statements are a key part of a business plan that will help your business attract an

investor or obtain bank loans.

Here are the types of financial statements and tips on how to create them:

Balance Sheet

A balance shows the assets, liabilities and shareholder equity during a specific period. To create a balance sheet, start by listing your assets on the left side of the page including cash you have in hand and in the bank, the value of the equipment you own, the value of the inventory you have in stock and any other financial assets. On the right side of the page list your liabilities including accounts payable, credit card balances, bank loans and any other money your company owes. Finally, total your assets and liabilities and then subtract your liabilities from your assets. The amount left is known as owner equity.

Income Sheet

An income sheet shows revenues, expenses and income or loss for a period. First, gather all types of earnings during the time period the statement will cover. These sources of earnings could be wholesale and retail sales or income from renting out propriety. Next total up all of your expenses such money spent on materials, payroll, advertising, utilities, equipment and rent on business properties. You can find your bottom line by subtracting your total expenses from your total income.

Statement of Cash Flow

A statement of cash flow shows the inflows and outflows of cash and the ending balance during a period. The statement of cash flows has three sections operating activities , investing activities and financing activities .

This article will also include information about:

What Should Be Included in a Financial Statement?

How do i write a financial plan for my business.

financial summary in business plan

A financial statement reports the financial health and activity to potential investors and creditors.

Since the report is sent to external stakeholders, a business must prepare their reports according to the generally accepted accounting principles of the United States . This makes it easier for investors and creditors to compare the financial health of your companies to other by comparing financial statements.

Therefore it is standard practice to include these elements to your financial statement.

Assets: probable forecasted economic benefits obtained or managed by an external entity due to past transactions.

Comprehensive income : change in equity (net assets) during a period from transactions and other events and circumstances from external sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

Distributions to owners: decreases in net assets resulting from transferring assets, rendering services, or incurring liabilities to owners. Distributions to owners decrease ownership interest.

Equity : residual interest in the assets that remain after deducting its liabilities. In your company, equity is the ownership interest.

Expenses: outflows, uses of assets or incurring liabilities during a period from delivering or producing goods or services that make up your central operations.

Gains : increases in equity (net assets) from business transactions and from all other transactions except those that result from revenues or investments by owner.

Investments by owners : increases in net assets resulting from transfers to it from other entities of something of value to obtain or increase ownership interest (or equity) in it.

Liabilities : probable future sacrifices of economic benefits from present obligations to transfer assets or provide services in the future because of past transactions or events.

Losses : decreases in equity (net assets) from all business transactions and events and circumstances affecting a business during a period except that result from expenses or distributions to owners.

Revenues : inflows or enhancements of assets of a business or settlement of its liabilities during a period from delivering or producing goods, rendering services, or other activities that constitute the business’ ongoing central operations.

Business planning or forecasting is the view of your business starting today and going into the future. You don’t do the financials in a business plan the same way you calculate the details in your accounting reports.

There are two main purposes of the financial section of your business plan. First, this information is needed by potential investors, venture capitalists, angel investors and anyone else with a financial stake in your business. The second, and arguably, the most important purpose of the financial section of your business plan is for your own benefit, so you understand how to project how your business will do.

Step 1: Make A Sales Forecast

Create a spreadsheet projecting your sales over the course of three years. Set different sections for different lines of sales and columns for every month of the first year and on a quarterly basis for year two and three. You should spreadsheet blocks that include one block for unit sales, one block for pricing, a third block that multiplies units by unit cost to calculate cost of sales. You cost of sales in your sales forecast because you want to calculate the gross margin. The gross margin is sales less cost of sales.

Step 2: Create A Budget for Your Expenses

You need to understand how much it will cost you to actually make the sales you have forecasted. Consider your fixed costs (i.e., rent and payroll) and variable costs (i.e., most advertising and promotional expenses) when you are creating your budget. With many of these numbers, you are going to have to estimate things like interest and taxes. multiply estimated profits by your best-guess tax percentage rate to estimate taxes and then multiply your estimated debts balance by an estimated interest rate to estimate interest.

financial summary in business plan

Step 3: Develop Cash Flow Statement

This is a statement that shows physical money moving in and out of your business. You base your cash flow statement partly on your sales forecasts, balance sheet items and other assumptions. Existing business should have historical financial statements to use to project their cash flow. New businesses should start by projecting cash flow statement that is broken down into 12 months. To get these projections is important to know how you will be invoicing. Will you expect your customers to pay right away or within 30 to 90 days? You don’t want to be surprised that you only collect 70 percent of your invoices in the first 30 days when you are counting on 100 percent to pay your expenses. Some business planning software programs will have these formulas built in to help you make these projections.

Step 4: Project Net Profit

This step is your pro forma profit and loss statement that details forecasts for your business for the next three years. Use numbers that you put in your sales forecast, expense projections and cash flow statement. Net profit is gross margin minus expenses, interest and taxes.

Step 5: Deal with Your Assets and Liabilities

You have to deal with assets and liabilities that aren’t in the profits and loss statement and project your business’s net worth at the end of a fiscal year. Compile and estimate what money you will have on hand month by month including accounts receivable (money owed to you), inventory if you have it, land, buildings and equipment. Then figure out your liabilities or debts including accounts payable (money your business owes) and debts from outstanding loans.

Step 6: Find the Breakeven Point

The breakeven point is when your business expenses match your sales volume. Your three-year income projection should enable you to obtain this analysis. If your business is viable your overall revenue should eventually exceed your overall expenses. This is important information for potential investors who want to know that they are investing in a company that is growing quickly with an exit strategy.

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