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Key Elements of your Financial Plan

You’ve likely put together a business plan for your current company focusing on overall vision. The financial plan is a critical part of any business plan and focuses on the financial health of your company. It is filled with facts and figures about how you will actually achieve your vision. The financial plan will help with your financing efforts, and it will serve as a guide as you grow your business.

There are a few sections included in most financial plans that we’ll talk through below. It may seem like a lot of detail, but with the right guide and a little prep  you’ll be a pro in no time. 

Remember, honest numbers are best

It is common to want to inflate your potential profit numbers. Everybody wants their business to look good. And who doesn’t want to be an optimist?

But remember to be honest and realistic when creating your financial plan. You can create assumptions and project growth including those assumptions. But make them believable. The last thing you want to do is get investors or a loan based on something that has no chance of working out.

Start with a sales forecast

Start with what you know. If you have any sales history, start there. If you hope to grow your business based on improvements, take your sales from last year and increase them based on your assumptions. Incorporate your seasonality. If you are a company that sells more around a certain holiday, build that into your sales forecast. 

Create a spreadsheet showing projected sales over a 3-5 year period. This may be something you already have or it may be something you need to create. 


Figure out your projected expenses

After figuring out your sales forecast, you need to know what it will cost you to hit those sales. Divide your expenses into two categories – fixed costs and variable costs. Fixed costs are the costs that occur no matter what your sales are. They could include rent, insurance, utilities, supplies, and licenses. Variable costs are costs directly related to your sales such as shipping, commissions, promotional expenses. 

Projected cash flow, income statement, and balance sheet  

The financial plan incorporates some of the same financial statements you prepare for accounting purposes. Accounting looks at the financial statements to see past performance. But in this case, it is forward looking. With a financial plan, you make assumptions about your future profits based on these statements. 

It is helpful to include these statements in your financial plan with projected values looking three to five years out.

Break even analysis

Your financial plan should include a break even analysis. The break even point is when your expenses match your sales. Looking at your projected performance 3-5 years out will give you a better guess at when this could happen.

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