The financial plan of a startup business plan is an excellent place to score more points from the investors. It also a place where a mistake can serious bring down your business. The financial projection has many things to say about your business. The investors are waiting keenly to know what story your financial plan will tell. Do every at your disposal to tell an excitingly brilliant story.
Profit and Loss Statement
This is the income statement. It tells great story. The lenders are eagerly waiting to see that element of success in the business. The statement is very explicit when it comes to telling the funder if it is a sound business. The business may be termed successful if there is a continuous trend of growth year by year. The progression may not be large if the business is a sole proprietorship and the work depends on one individual. Nevertheless, it may just be sufficient information for the lenders.
The investors are interested in businesses with promising growth rate even though it makes some losses in the first year. If it is evident that it will continue to grow and be profitable thereafter. It may turn out to be the investor best option.
Balance Sheet Projection
Balance sheet shows the balance between assets and liabilities of the company and the owners’ equity. It displays the amount of debt a business has and its assets that will generate the desired profit for the company. Investors are interested in this as well as the bankers.
If the company has to go down, with good asset base, the lenders or investors can still recover some money from the sales of the assets. It will not be a complete loss in this case. There can be recovery from assets such as equipment, inventory and intellectual property. It may be a saving grace from it to be a total loss to the funders.
Cash Flow Statement
The cash flow statement shows the business cash requirements from time to time. The initial cash needs will be explicitly stated which is the startup capital requirement.
The cash flow statement further states the utilisation of cash, when more cash will be needed and time of cash surplus in the business. It aids the management to plan ahead of time especially for the periods when there will be insufficient cash in the business. The management team can adequately estimate the effect of credit granted by suppliers and collecting payments from customers. These are shown on the cash flow statement. An effective adjustment of how long payments are made to the suppliers and how fast customers pay for the goods they purchased can provide a source of liquidity to the business. The balance between these two ends may be the difference between success of the business and liquidation.
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