Writing a Business Plan

Financial Section

Overview of the Economy
Overview of the Industry
Sources for Funding
Capital Equipment
Balance Sheet
Break-Even Analysis
Income Projections
Cash Flow Projection
Deviation Analysis
Historical Reports for Existing Business

Overview of the Economy

These are reviews of economic conditions of specific regions. Find your geographic area and look for "publications".

Overview of the Industry

Consult the web guide, How to Find Industry Information for database resources that provide overviews and reports of many industries.

Sources for Funding

Books can be useful in locating sources for funding a business. You can find books in the Baker University Library catalog. Some are even available in electronic format.

In the Baker University Catalog, use the term, small business finance and click on Subject. By checking the libraries in our consortium, you'll find even more titles.

Your screen should look like this:


OR: From within the catalog,

Other resources you may find useful:

1. Angel Investing: Matching Startup Funds With Startup Companies: The Guide for Entrepreneurs.Mark Van Osnabrugge. Jossey-Bass, 2000.
2. Business Finance.com
3. Corporate Finance Sourcebook. Reed-Elsevier, annual.
   This directory includes venture capitalists, private lenders, commercial banks, investment banks, business intermediaries and more.
4. Directory of Venture Capital and Private Equity Firms, Domestic and International. Grey House Publishing, 2010.
   You may request this on interlibrary loan.
5. Entrepreneur Magazine's Financing Your Small Business: How to Raise the Money You Need. Entrepreneur Media, 1999.
   You may request this on interlibrary loan.
6. National Venture Capital Association
7. Government Assistance Almanac. 2000-2001.
   
   14th ed. J. Robert Dumouchel.
   This source provides information on all kinds of domestic programs available from federal agencies which help users obtain assistance.
8. Home Office and Small Business Answer Book: Solutions to the Most Frequently Asked Questions about Starting and Running Home Offices and Small Businesses. 2nd ed. Janet Attard. Henry Holt, 2000.
9. How to Find Money Online: an Internet-based Capital Guide for Entrepreneurs. Alan Joch. McGraw-Hill, 2001.
10. PSEPS
    You can browse an alphabetical listing or search the database by country, city, and/or industry. Lingings include information such as an overview of the firm, investors, employees, location, and website.
11. Pratt's Guide to Venture Capital Sources. Capitol Publishing. Annual.
    This is the best-known directory of capital venture sources. Contact information and funding preferences are given for each investor. Articles regarding the venture capital industry and funding processes are included.
12. Raising Capital: Get the Money You Need to Grow Your Business. Andrew J. Sherman. Kiplinger Books, 2000.
13. SBA's Outside Resources and Great Business Hotlinks
14. Small Business Administration
15. Small Business Development Centers
16. U.S. Business Advisor

Capital Equipment

• Equipment used to manufacture a product, provide a service, or sell, store, and deliver merchandise
• NOT equipment used in the normal course of business but equipment one will use and wear out as one does business.
• Does not include items expected to be replaced annually or more frequently.
  1. ThomasNet
     Find suppliers for more than 67,000 categories.
  2. The Internet, in general.
  3. Vendor catalogs

  For start up costs, see: Starting Costs Calculator You can use this calculator to quickly determine your: Cash Flow Break-even Monthly Profits Investment Required Money at Risk

Balance Sheet

• Designed to show how the assets, liabilities, and net worth of a company are distributed at a specific point in time.
• Format is standard.

Comparative Sources (used for benchmarking)

• RMA Annual Statement Studies (Robert Morris Associates)
• Industry Norms and Key Business Ratios (Dun & Bradstreet)
• Almanac of Business and Industrial Financial Ratios (Prentice Hall; often known as Troy’s)
• Trade Associations
  One of the best strategies for locating comparative sources of information for an industry or a product is to contact the Trade Association that monitors issues governing a particular industry. On the web, their home pages cover news, legislative concerns, and, most productively, data, analysis, and trends for their industry.
  
  

  Trade Associations can be found through:Business and Company Resource Center Click on:Advanced Search In the Content Area box, highlight:Associations Type in an association name and search.

• Talk to competitors, even those in another area.
• Ask your banker or accountant.
• Chamber of Commerce
• Local Business Schools

Break Even Analysis

• Provides a sales objective at which your business will break even.
• Sales=Fixed Costs + Variable Costs
   OR

• Sales=Fixed Costs / Gross Margin (profit on sales)

Income Projections

You should produce:

• Three Year Summary
• Detail by month for first year
• Detail by quarter for second and third years
• Notes of Explanation
  Some explanations can produce:
  1. best case scenarios
  2. worst case scenarios
  3. most likely scenarios.
• Profit and loss statements.
• Complement the balance sheet
• Provides a moving picture over a period of time.
• Again, use publications such as RMA or trade associations for comparisons.

Cash Flow Projections

You should produce:

• Detail by month for first year
• Detail by quarter for second and third years.
• Notes of Explanation
  
  1. Shows how much cash your business will need.
  2. Details whether to seek equity, debt, operating profits, or sale of fixed assets.
  3. Shows where the cash will come from.

Deviation Analysis

• Looks at the various parts of the business.
• Are some parts doing better than others?
• Are you deviating more from projections than expected in certain areas.

Historical Reports for Existing Business

• Balance sheets for past three years
• Income statements for past three years.
• Tax returns
  • United States Internal Revenue Service