A modest business plan requires time and work to write. particularly if you have to thoroughly examine the finance section’s numerical data. However, completing the business plan’s financial component could have a significant benefit for your company.

Continue reading to find out what a business plan’s financial section is, why it’s important, and how to draft one for your organization.  

What does the business plan’s finance part entail?

A company plan’s finance part is typically one of the last sections. It provides future financial estimates as well as the historical financial status of the company, if any. Businesses provide financing requests in this portion of the plan along with supporting documentation such budgets and financial statements.

The company plan’s financial section presents figures. The executive summary, business description, market analysis, organizational structure, details about the product, and marketing and sales plans are placed before it.

The financial segment is where businesses present their case to lenders or investors in an attempt to secure money. In order to help you plan your budget for future revenue and expenses for your company, this part also serves as a financial roadmap. 

Why it is important 

The business plan’s financial part is essential for getting past vague goals and into the real world of hard data and statistics. 

Using the financial section, you are able to:

• Project the financial future of your company.
• Make a spending plan for things like startup expenditures.
• Obtain funding from investors or lenders.
• Expand your company

It sounds really amazing, doesn’t it? However, a research found that only 35 percent of business owners who were surveyed finished their business plans. Here’s why that can be problematic for the financing and expansion of the business:

• Growth: Compared to 43% of organizations without a business plan, 64% of enterprises with one were able to expand.
• Finances: Compared to 18% of businesses without a strategy, 36% of enterprises with one obtained a loan.

Thus, you should think about investing some time and energy into the financial component of your business plan if you want to potentially quadruple your chances of getting a business loan.

Composing the financial section

You must first acquire some facts before writing the financial part. Remember that the data you collect will vary depending on whether you are a new startup or if you have access to past financial data. 

The following information should be included in your financial section:

• Business expenses 
• Financial estimates
• Statements of finances
• Break-even threshold
• Funding requests
• Exit strategy
• Business expenses

You incur costs whether you’ve been in business for a day or ten. For newly established businesses, these expenditures may just be beginning costs; for established organizations, they may be fixed and variable costs. 

Here are a few typical business expenses that you might need to list in the business plan’s financial section:

• Permits and licenses
• The price of products sold 
• Mortgage or rent payments
• Payroll expenses, such as taxes and salaries

           Services 

• Protection
• Equipment Provisions Marketing 

List all of your present expenses, their amounts, and any future expenses you anticipate having. Make use of a regular time frame (e.g., monthly costs). 

List the expenses that are variable (open to adjustments) and fixed (unchanging from month to month). 

• Financial estimates

What monthly revenue from sales do you expect to make? 

If your business is already up and running, you can get a rough idea by examining prior months’ revenue. If you’re basing estimates on past cash flow, take seasonality and economic ups and downs into account.

If you are a startup, creating your financial estimates could be more difficult. Ultimately, you own no basis for comparison. Determine a realistic monthly target by considering factors such as the market, rivals, and your industry. Advice: Refer to the business plan’s section on market analysis for direction. 

• Statements of finances

A financial statement provides financial facts for your company. Income statements, cash flow statements, and balance sheets are the three primary categories of financial statements.

Income statements provide a summary of the revenue and costs incurred by your company during a given time period, such as a month. This paper displays the net profit or loss your company experienced within that time frame. 

Cash flow statements provide an overview of the money coming in and going out of your company. This document explains if your business has enough cash on hand to pay its bills.

The balance sheet provides an overview of the equity, liabilities, and assets of your company. Decisions on corporate expansion and debt management are aided by balance sheets. 

You can prepare “pro forma financial statements,” or statements based on projections, if you are the owner of a startup. Financial statements have to be part of your documentation if your company has been operating for a while. These can be mentioned in your company plan. Add projected financial statements as well. 

• Break-even threshold

Investors are interested in knowing when your company will break even. When the sales and expenses of your company are equal, you reach the break-even point. 

Calculate the break-even point for your business and include a timeline in the financial portion of your business plan.

• Funding requests

Provide specifics about your fundraising proposal here if you’re searching for money. Mention the amount you are seeking, the length of time your request would cover, and the optimal terms (such as a 10-year loan with 15% equity). 

Don’t forget to explain your request for funds as well as your intended use of it (e.g., equipment). 

Make sure that your financial estimates are a strong support for your financing proposal. 

• Exit strategy

Finally, but just as importantly, your financial section ought to cover your company’s exit strategy. An exit strategy is a plan that describes what you’ll do in the event that you have to retire, sell, or close your company. 

Lenders and investors want to know how their money is secured in the event that your company fails. Exit strategy does this. It describes how your company will survive even in the event that it fails.