Writing a Business Plan

  Introduction to Financial Planning

The main financial planning tools for a start-up small business will be financial objectives, projected Monthly Living Expenses (Exhibit 2), Summary Year 1 Cash Flow Projection (Exhibit3), Monthly Cash Flow Projection, Year 1 (Exhibit 4),  and Quarterly Cash Flow Projections, Years 2 and 3 (Exhibits 5 and 6). These Exhibits are discussed in detail. (See sample)

Your lender may require you to prepare a projected balance sheet,  break-even chart, and projected income statements. We recommend that you use the services of an accountant to prepare these last three items.

Development of Financial Objectives:

First step is stating your objectives for the business.  These financial objectives must be specific--not just "to be profitable."  For a new business, objectives stated in terms of cash flow are more useful than goals stated in terms of profits.  It is possible for a business to show a profit and yet to be in a negative cash position.  The sample illustrates objectives for Fast n’ Fresh.

Sources of Information:

·       Data from trade associations, technical journals

·       SBA resources such as SCORE and SBDCs

·       Other persons in similar businesses

·       Real estate agents

·       Accountants and/or bookkeepers

·       Major suppliers

·       Robert Morris Associates, Dun and Bradstreet

·       Personal experience

·       Links in this web site

Time Line for Required Filings

You need to establish a time line when you will make the necessary filings included, but not limited to: Fictitious Business Name Statement (including newspaper publication), Opening Business Bank Account, Sales Tax Permit (if selling products), Federal and State Employer ID numbers (if hiring employees), Workers Compensation Insurance (if hiring employees), a state business license (if business activity requires one), and city business license (if business activity requires one). The Licenses and Permits section of this web site illustrates the filing process for one city.

Accounting System

You will probably not mention the following two items in your business plan, but you will have to do them as part of your financial operation

1.   Create a "Chart of Accounts."  You will use these account labels when you create your cash flow projections.  The "chart" will require more labels if you sell inventory rather than just provide services.  The "chart" will require even more accounts if you intend to hire employees.
   

2.   Address several items as part of your accounting system.

A. How are you going to separate cash receipts from customers, cash receipts from lenders, cash receipts from your personal bank account?  Are you going to have a cash receipts journal or classify (identify) each item in your checkbook?
   

B.   How are you going to classify the expenses of the business and separate them from your personal draws or payments of expenses?  Are you going to have a check, disbursement journal or just classify each deposit in your checkbook?
   

C. How are you going to accumulate (summarize) all of the data for the month into financial statements?  Are you going to use a Computer based general ledger or total each account manually onto a manual general ledger such as a "peg board" system?
   

D.  Are you going to be using a car or computer in your business or engage in business travel meals, or entertainment?  If so, are you going to be using a diary, log or other system to document the business use so you can gain a tax deduction?
   

E.   If your business is going to be a success, you must estimate, control, and spend your cash with care.  A bookkeeping system is a must.

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