How to Write a Business Plan: Financial Projections

In my most humble opinion, the financial projections section is the absolute most important part of your business plan.  This is because if the company is not going to be profitable, investors are going to want to know about it.  Further, investors are going to want to ensure that the numbers provided are accurate projections. Because of this, this section should be very detailed with supporting data.

The financial projection section should include an income statement for 3 to 5 years into the future, a balance sheet for 3 to 5 years into the future, and a cash flow statement for the next 12 months.  In my experience, the starting point for your financial projections is always the cash flow statement.  With this statement done, this will leave you with your first year of your income statement.  Once this is complete, make sure to expand your growth for revenues for the next 3 to 5 years.  Further, make sure to do research in reference to the various cost will be involved with your business.

The balance sheet is always the hardest financial statement to complete.  In the statement, I always start with funds invested on the equity portion of the sheet.  Then, I move towards the liability section and identify any loans that will be taken.  From this, I then complete the asset portion of the sheet.  In the end, a solid, reliable balance sheet will ensure that the asset side of the balance sheet is equal to the liability and equity portion.