Financial Overview Business Plan
The financial overview business plan contains the current and future financial requirements of your business, including the estimated operating expenses.3 min read updated on February 01, 2023
The financial overview business plan contains the current and future financial requirements of your business, including the estimated operating expenses. The financial section is of specific interest to your lenders and investors. It also serves as a roadmap to plan and manage the financial requirements of your company.
What Should You Include in the Financial Analysis Section?
The financial analysis section for a new business is prepared on the basis of estimates, while for an existing one, recent data is used. It should include the following information:
- Balance Sheet: This is a statement of assets and investments matched against loans and liabilities (including equity capital) of the company.
- Cash Flow Analysis: It is the anticipated inward and outward flow of cash. It includes sales forecasts and anticipated cash expenses.
- Profit and Loss Analysis: This is basically your income statement that shows your earnings remaining after meeting all the business expenses over a certain period time, usually a year or a quarter.
- Break-Even Analysis: This analysis tells you the time required to fully recover the cost of doing business. Break-even is the point where you neither make profit nor incur any loss.
- Personnel Expenses Forecast: This is an estimation of your managerial team members' expenses. The personnel to be considered for this forecast can be found in the Management Summary section.
In case of a startup, where the company does not have any previous financial data, many lenders may also ask for your personal financial information.
Historical data includes your balance sheet, capital, income statements for previous periods, tax returns and cash flow statements, while estimated data includes items like a projected income statement, which offers an objective overview of your financial position for the coming three to five years.
How to Write the Financial Analysis Section of a Business Plan
Make objective assumptions based on your business plan to provide estimations and forecasts of your company's financial position at a future point in time. Check the financial assumptions made in other sections of your business plan, write them down and use them in the financial analysis section. Remember that the data you provide in the financial analysis section must be consistent with the assumptions made in other sections of the plan.
Making assumptions and forecasts to provide information in terms of specific numbers can be quite challenging, especially if you are not from a financial background. Involving an experienced financial professional in the early stage of the process can relieve you from most of the stress.
GAAP, which stands for generally accepted accounting principles, is a set of conventions, rules and procedures commonly used in accounting. You should follow these accounting principles while preparing the financial analysis section.
Use Data Visualization Tools
Use graphs and charts to present complicated statistics and data so that they can be easily grasped by your audience. You can place the important visuals in the main section and include the supporting graphics in the appendix.
Spreadsheets are the most common tool used for presenting financial data. Make sure you learn to use them properly.
Choose an Appropriate Template
Many websites offer resources and templates for writing the financial analysis section. Choose an appropriate template to suit your industry and audience.
Sections to Include in Your Financial Projections
The term "financial data" usually refers to an income statement, balance sheet, and cash-flow statement. Investors usually request this historical data for the last three to five years of company's operations. In addition to these three statements, you should also include capital expenditure budgets and any collateral used for procuring a loan.
In case of new startups, financial forecast is presented to showcase the company's ability to pay its expenses, earn profits and manage its finances for the next three to five years. You should separate your data into monthly or quarterly projections. The expenditure projections must match up with the sources of funding.
Your financial projections should include the following sections:
- Income statements or profit and loss statements.
- Balance sheets or the statements of your assets and liabilities.
- Sales and revenue forecast for the next three years.
- Cash-flow statements.
- Breakeven analysis to showcase the time required to recover fixed and variable costs incurred.
- Ratio and trend analysis supported with tables, graphs, charts and other visuals.
- Appendix to include additional information like your personal credit history.
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