This article is the fifth in a five-part series on preparing business plans. Each article has been dedicated to creating a plan for starting or running your business. At the end of the series, if you follow the articles and complete each section, you will have a complete business plan you can use to operate your business or seek financing. Each article covers a different topic:
- Purpose statement, executive summary and business information
- Personnel and organization
- Marketing information
- Current financial information
- Financial projections
We are now almost at the end of the business plan writing process and if you have completed each section, after today’s section, you now have a business plan you can use to operate your business or seek financing. As was discussed at the beginning of this series, a business plan is a tool for gathering all the important information about running your business and your financial condition all in one place. A well-done business plan will help you run your business on a day-to-day basis according to a preset, well thought out, and organized plan. Even in times of unexpected crisis, a business plan is a great tool, to keep you focused, on track and mindful of the big picture you have set for your business. This final section will deal the financial projections section of the business plan.
In the financial projections of the business plan, you place financial projections which are predictions based upon your business’ current financial performance along with marketing information and business planning for the future. When preparing your financial projections you must keep in mind a few factors that must be given careful consideration.
Use this section to explain to readers what the facts are that you based your projections on, such as trends in the economy, market trends, what is going on with your competitors, new products on the market and things like these. Do not take anything for granted without explaining what facts you took for granted when you made your projections. List out each assumption you made and the explanations for why each assumption is valid.
If you are expecting growth to occur in any area relevant to your business, explain it in this section of your business plan. Talk about internal things such as personnel, divisions, new products, research and development. This is also where you talk about external growth factors such as new markets, increased opportunity for sales, geographic spread and the like. Once again, list out each factor that contributes to your growth projection and describe why each factor justifies your claim of growth in the future.
When providing your financial projections, predict what your financial status will be for the next 1 to 4 years. Be sure that every financial report you included in your current financial condition section is represented in the financial projections section. In this section, you will include sales, income, debts, and expenses as well. If you are operating in vastly different market areas, product lines or geographic areas, and the like, consider having separate financial projections for each of these areas.
Once you complete this section, you will have a complete business plan. You will be able to use this plan to search for investors and lenders. It will also be useful for operating your business on a daily basis.
A business plan is a useful tool with many internal and external uses. It is important to take your time to carefully and thoughtfully complete each section. So, the question for you this thrilling day is, now that you have a complete business plan, what are you going to do with it?
As always, if you need assistance or guidance as you complete this section feel free to contact me:
Janeane M. Davis, J. D.
James, Davis, and Associates
484 351 0532