Writing Your Business Plan, Step 10: Financial Plan (History)

May 26, 2009 at 6:00 am 1 comment

Creative Commons License

Creative Commons License

We are in the final section of the Business Plan, the Financial Plan. You’ll recall that we have broken down the financial plan into 3 parts:

  • Preparation (what to prepare before writing the financial plan)
  • History (looking back on the finances of your business)
  • Future (looking forward on the finances of your business)

Last Thursday in preparation for today, I had you prepare the following information:

  • Assets – what do you own in your business? (computers, inventory, etc.)
  • Liabilities (AKA Debts) – what do you owe in your business?
  • Equity – how much have you invested (or has someone else invested) in your business?
  • Revenues – how much did you make in sales in 2008? (this can typically come from your tax return)
  • Expenses – how much did you spend in 2008? (also should be traceable to your tax return)
  • Cash – where is that cash register? (not the physical register, but that paper thingie that tracks which checks you’ve written)

We are going to take these numbers and create the financial history of your business: your financial statements. Because I don’t expect you to be an expert accountant, I encourage you to ask questions (post a comment below) or talk to your accountant to put some of these details together. If you use a program like Quickbooks, you’ll be able to pull some of these reports from that.

The “History” of your business

You’ll want to include the balance sheet and income statement for your business going back 3 years. (If you’ve been in business less than 3 years, then provide what you can.) I’ll provide a little Accounting 101 on some of these financial statements.

Balance Sheet

The Balance Sheet is a snapshot of your business at any given moment. It shows what you own (assets) and what you owe (debts or liabilities). The balance sheet basically looks like this: Assets = Liabilities + Owner’s Equity

In plain English:

What you own = What you Owe + What you have invested in your business

Here is an EXCELLENT template in Excel for your Balance Sheet, courtesy of SCORE.

Income Statement

The Income Statement (also called the Profit & Loss, or P&L) gives the history of your business performance in a period of time. Typically you’ll create this for the most recent year. It typically looks like this: Revenue – Expense = Net Income or Net Loss

In plain English:

Sales – Expenses = Profit or Loss

Here is a RAD template in Excel, direct from the Microsoft website.

Personal Financial Statements

If you are applying for a loan with a bank or seeking investors, you should also include your personal financial statements. Bankers may want you to personally guarantee you commitments, depending on the size of the loan. For example, if you own a portion of your home, this may become collateral for your business loan.

You’ll want to list out your personal assets and your personal debts:


  • Home or Property you own
  • Automobiles that you own (that are paid off)
  • Any investments that you’ve made


  • Loans – personal (mortgage, auto, student, etc)
  • Credit Cards

I recommend including all of the details of your debts including to whom the loan is payable, the original amount, the outstanding amount, the interest rate, and the monthly payment.

Here is an AWESOME template, also from SCORE, for personal financial statements.

Bonus Stuff

If you are applying for a loan or seeking investors, you should have some additional financial information prepared. Financial ratios allow comparisons between some of your numbers. (Here is where we go really nuts with the math and the Excel – but WOW – it is powerful information.) For example, showing what your cost of sales is in relation to your sales gives your investor an understanding of your profit margins.  Here is a GREAT template, also from SCORE, that helps you put together some of these ratios.  If you are not seeking outside financing you may decide to opt out of this information.

Next step

Tomorrow, we’ll be wrapping up the Financial Plan and digging into the financial future of your business.  So, start thinking of what the future of your business will be!


Entry filed under: 13 Step Business Plan, Accounting, Plan It, Strategy.

Insider to Insider: Barbie Hull, Owner of Barbie Hull Photography Writing Your Business Plan, Step 11: Financial Plan (Future)

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