How to Make a Business Plan – The Financials

How to Make a Business Plan - The Financials

How to Make a Business Plan – The Financials

How to Start in an Online Business

Phase 2 – Step 14

 

You can view all of my Posts by clicking on the following LinkHelpMeGetMine.com

 

How to Make a Business Plan - The Financials

How to Make a Business Plan – The Financials

 

This is Part 3 of a 3 part post: How to Make a Business Plan – The Financials. This post deals with the final component in your Business Plan:  The Financials. The information presented here is based on creating a business in the USA, so certain information is based on the USA Federal Tax Code. If you are creating a business in a different country, you will need to make the necessary alterations for certain Sections based on your country’s Tax Codes.

 

This Section will include several different Forms that will need to be created and completed. The best way to create these Forms is to create Spreadsheets. If you are not familiar with how to create Spreadsheets, do not panic. I will walk you through the process step-by-step.

Just like for the creation of Word Processor Documents, there are many different programs that can be used to create Spreadsheets. Although the end results will be nearly identical, each program works a little differently and each one may call their Editing Tools something a little different. Therefore, you may need to do a little searching in the Help Section of the program that you are using in order to find the correct tool needed to complete a certain task, or simply click on the various items in your Tool Bar and become better familiar with the program that you are using.

If you are somewhat familiar with creating Spreadsheets, great, as I believe that it would be better for you to complete this part of your Business Plan by building the Spreadsheets needed from scratch, since it will provide you a good foundation for creating other Spreadsheets needed for your business down the road. However, if you find this absolutely too difficult to accomplish now, you can get the Templates for these Spreadsheets by visiting the Small Business Administration at the following link:  SBA Business Plan

However, if you use the Templates, I would advise you to take some time in the near future to learn how to create Spreadsheets in the program of your choice, as you will need to be able to do this for other areas of your business, such as for the creation of your Books to keep track of your Accounting.

 

OK. Let’s begin….

 

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Section 6:  Financial Projections

 

This Section includes four Spreadsheets:

1. Profit and Loss Projection Shows your company’s ability to generate a Net Profit, or your bottom

line. This is also known as an Income Statement.

2. Cash Flow Projection – Displays the Operating, Investing, and Financing Activities of your

company by detailing the Money coming in to and going out of your business

3. Projected Balance Sheet – Estimates Resources your business will need, where they will be needed,

and how they will be Financed.

4. Break-Even Analysis – Shows when your business will be able to cover all of its Expenses and

begin making a Profit.

 

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6. FINANCIAL PROJECTIONS

 

Keep your Font choice for all of your Spreadsheets something less ornate and easy to read. You can use cell Shading for your Title and Column Headers if you desire. Keep your Font Sizes consistent throughout all of your Spreadsheets.

I will use my choices for Font, Font Size, Shading etc. in the instructions, but you are certainly able to change things to whatever you are comfortable with. Keep in mind, that at some point and time, an Accountant may need to see these Spreadsheets, so it will be best to keep them simple and easy to read.

My Font choice is:  ‘Times New Roman

 

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1. Setup for Profit & Loss Spreadsheet

 

Begin by creating a Spreadsheet Titled: Profit & Loss for (the name of your business – without the .com).

Place the title in cell ‘A1’. Use 24pt. Font with a Bright Green Shading for all cells that include the Title.

Skip a Row, then create the following horizontal Categories (14 pt. Font, Centered, Bold, with alternating Shading between Turquoise and Yellow), from left to right:

    • Category
    • Year 1
    • Year 2
    • Year 3

 

Expand the width of Column A (Category) to 30 characters wide. Adjust as needed when all Categories have been entered to make sure that all entries are completely contained within the cells. The width of the other Columns should remain at 10.

 

Align ‘Left’ and create the following items under ‘Category’ (12 pt. Font, Bold and Capitalize as suggested):

    • (Skip a Row)
    • INCOME
    • Sales
    • Cost of goods sold
    • GROSS PROFIT
    • (Skip a Row)
    • OPERATING EXPENSES
    • Employees Salary
    • Home Office Expenses
    • Office Supplies
    • Accounting
    • Legal
    • Insurance
    • Taxes
    • Interest
    • Depreciation
    • Other
    • TOTAL EXPENSES
    • (Skip a Row)
    • NET PROFIT BEFORE TAXES
    • (Skip a Row)
    • Income Taxes
    • NET PROFIT AFTER TAXES
    • Owner Draw
    • ADJUSTED TO RETAINED

 

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6.1 PROFIT & LOSS

 

The Profit & Loss Statement summarizes your Annual Revenues, Costs and Expenses incurred during each specific year. It shows the ability of your business to generate Profits by increasing Revenue and reducing Costs. Certain items, like INCOME will be Projections. Be conservative in these Projections. You can always go back in and make changes after your 1st year, when you will really have a better handle on the figures.

As you are completing your Spreadsheet, list your Assumptions that you used for completing your Profit and Loss Spreadsheet in the Word Processing part of your Business Plan, in Section 6.5.1

(All of the following Categories listed here in the instructions have been Bolded, simply to call your attention to each of them. Do not change the Bolding Format on your Spreadsheet.)

 

Enter your figures in the following Categories:

INCOME

    • Sales – Estimated Sales and/or Potential Commissions that will be earned for each given period.
    • Cost of goods sold – Use only if you have products of your own that you will sell, and then, list any direct Labor and Material Costs. If you do not have products of your own that you are selling, leave this Row blank, or 0.
    • GROSS PROFIT – Sales minus Cost of goods sold.

 

OPERATING EXPENSES

Operating Expenses will include any Expenses directly related to your business. If you have mixed use items, such as a computer which may be used for your business as well as for personal use, you can only Deduct the Business Use Percentage portion.

Most major items, such as a computer, printer, office furniture, etc., must be Depreciated and Deducted in portions over their average Life Expectancy. Other quick use items, such as, paper, printer ink, pens, etc., are Deducted in the year that they are purchased.

There are certain items like Home Office Deductions that can only be taken if that area of your home is used strictly for business. See the Tax Laws or consult an Accountant for answers to any questions that you may have in these areas.

 

You can eliminate any Expenses listed here that do not apply to you or simply enter 0 if you think that you may incur an Expense in that Category at a later time, but do not have any now. You can add any other Expenses that you might have to the list:

    • Employees Salary – Compensation Paid to any Employees that you have. If you have none, Key in: 0.
    • Home Office Expenses – If you have a Home Office or area in your home that is used regularly and exclusively for your business, you can take a Tax Deduction for this usage. There are two different ways that you can calculate this Deduction. Click the following Link to view these two ways:  https://www.irs.gov/businesses…
    • Office Supplies – The Amount Paid for general purpose office supply items, such as: paper, printer ink, pens, paperclips, etc.
    • Accounting – Any Amount Paid for professional Accounting Services. This will also include Income Tax Preparations Fees.
    • Legal – Any Amount Paid for Legal Services relating to your business. This will include any Amount Paid for Business Licenses, Lawyer Fees for setting up an LLC or S-Corp, etc.
    • Insurance – This will include any Amount Paid for Insurance relating to your business, possibly excluding or including a portion of your Home Owner’s Insurance for Home Office (depending on Method used).
    • Taxes – This may include a portion of Home Owner’s Taxes for Home Office (depending on Method used).
    • Interest – This will be Interest on any Loans pertaining to your business.
    • Depreciation – This will include the amount of allocating the Cost of any Assets used in your business, such as: a computer, printer, office furniture, etc.
    • Other – Any other business Expenses that have not been included elsewhere on this Form. Delete ‘Other’and name these Expenses , using a separate line for each one that is added.
    • (Skip a Row)
    • TOTAL EXPENSES – All Expenses added for each period.
    • (Skip a Row)
    • NET PROFIT BEFORE TAXES – GROSS PROFIT minus TOTAL EXPENSES (excluding Income Taxes) for each period.
    • (Skip a Row)
    • Income Taxes – Federal, State, and Local Taxes.
    • NET PROFIT AFTER TAXES – Net Profit Before Taxes minus.Income Taxes
    • Owner Draw – Any Money that you Pay Yourself from the business.
    • ADJUSTED TO RETAINED – Your remaining business Profit after all Draws.

 

This concludes your Profit & Loss Spreadsheet. Please continue…

 

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2. Setup for Cash Flow Spreadsheet

 

This Spreadsheet will be Titled:  Cash Flow for (the name of your business – without the .com).

Set this Spreadsheet up in the same way as you did the Profit & Loss one, using the same Fonts, Shading, etc. (Place the Title in cell ‘A1’. Use 24pt. Font with a Bright Green Shading for all cells that include the Title.)

Skip a Row, then create the following horizontal Categories (12 pt. Font for ‘B’ and ‘F, all the rest are 14 pt., all Centered, Bold, with alternating Shading between Yellow and Turquoise), from left to right:

    • A. Category

    • B. Pre Startup EST
    • C. Year 1

    • D. Year 2

    • E. Year 3

    • F. Total Item EST

 

Expand the width of Column A (Category) to 30 characters wide. Also Expand Columns B and F to 12 characters wide and Wrap Text within cells. Adjust as needed when all Categories have been entered. The width of the other Columns should remain at 10.

 

Align ‘Left’ and create the following items under ‘Category’ (Bold as required):

    • Cash on Hand
    • (Skip a Row)
    • RECEIPTS
    • PayPal Account Deposits
    • Direct Deposits into Bank Account
    • Loans and other Cash Injections
    • TOTAL RECEIPTS
    • TOTAL AVAILABLE
    • (Skip a Row)
    • PAY OUTS
    • Purchases
    • Gross Wages
    • Outside Services
    • Supplies
    • Repairs & Maintenance
    • Advertising
    • Car Delivery & Travel
    • Accounting
    • Legal
    • Rent / Mortgage
    • Telephone
    • Utilities
    • Insurance
    • Taxes
    • Interest
    • Other Expenses
    • Other Expenses
    • SUB-TOTAL
    • (Skip a Row)
    • Loan Principle Payments
    • Capital Purchases
    • Other Startup Costs
    • Reserve/Escrow
    • Other Withdrawals
    • TOTAL PAID OUT
    • CASH POSITION

 

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6.2 CASH FLOW

 

The Cash Flow Spreadsheet shows how money will come in and go out of your business. This will indicate when your Expenses are too high and adjustments should be made.

As you are completing your Spreadsheet, list your Assumptions that you used for completing your Cash Flow Spreadsheet in the Word Processing part of your Business Plan, in Section 6.5.2

You can eliminate the items that do not apply to you or simply enter 0. Add any other needed items to the list.

 

Enter your figures in the following Categories:

    • Cash on Hand – The Amount of Money that is immediately available to you for your business.
    • (Skip a Row)

 

RECEIPTS

    • PayPal Account Deposits – Total Amount of Sales Deposited into your PayPal Account.
    • Direct Deposits into Bank Account – Total Amount of Sales Deposited directly into your Bank Account.
    • Loans and other Cash Injections – Total Amount of Funds provided by Loans or other Cash Injections.
    • TOTAL RECEIPTS – Total Amount Received from PayPal Deposits, Direct Deposits, and any Loans and other Injections.
    • TOTAL AVAILABLE – Cash on Hand plus Total Receipts.
    • (Skip a Row)

 

PAY OUTS

    • Home Office Equipment – Total Amount Spent for any items for your Home Office that are not Depreciated over time. These will be any items with a Life-Expectancy of a year or less, excluding supplies.
    • Gross Wages – Pretax Amount of any Employee Wages.
    • Outside Services – Amount Spent on any Outside Services.
    • Supplies – Total Amount Spent for home office supplies.
    • Repairs & Maintenance – Total Amount Spent on Home Office Repairs & Maintenance.
    • Advertising – Total Spent on business Advertising, such as: business cards, car magnets, etc.
    • Car Delivery & Travel – Total Amount Spent for cars, delivery services, and business related travel.
    • Accounting – Amount Paid for any Accounting Services.
    • Legal – Amount Paid for any Legal Expenses.
    • Rent / Mortgage – Business Amount Deductible for rent or mortgage.
    • Telephone – Business Use of phone.
    • Utilities – Business Amount Deductible for all Utilities (electric, gas, water, garbage, internet, etc.)
    • Insurance – Business Amount Deductible for any applicable business Insurance and/or house Insurance portion Deductible for Home Office use.
    • Taxes – Business Amount Deductible for home Taxes, and all other business related Taxes not Deducted elsewhere. You will also include Federal, State, and Local Taxes here.
    • Interest – Business Amount Deductible on any business Loans.
    • Other Expenses – Any other business Expenses  not accounted for elsewhere.
    • SUB-TOTAL – The Sum of all of the Payouts.
    • (Skip a Row)
    • Loan Principle Payments – Business Amount Deductible on any business Loans.
    • Capital Purchases – Total Amount Spent on Fixed Assets, such as: office furniture, computers, printers, cameras, etc.
    • Other Startup Costs – Any other miscellaneous Expenses not Deducted elsewhere.
    • Reserve/Escrow – Total Amount Paid for any Loan Reserves and Escrow Costs.
    • Other Withdrawals – Any other Withdrawals  not already accounted for.
    • TOTAL PAID OUT – The Sum of the Sub-Total of all of the Payouts plus all Payouts below that Sub-Total.
    • CASH POSITION – The Total Amount of Cash on Hand plus TOTAL PAID OUT. Year 3 must match End Date Cash in Bank on your Balance Sheet.

 

This concludes your Cash Flow Spreadsheet. Please continue…

 

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3. Setup for Balance Sheet Spreadsheet

 

This Spreadsheet will be Titled: Balance Sheet for (the name of your business – without the .com).

Set this Spreadsheet up in the same way as you did for the other Spreadsheets, using the same Fonts, Shading, etc. (Place the Title in cell ‘A1’. Use 24pt. Font with a Bright Green Shading for all cells that include the Title.)

Skip a Row, then create the following horizontal Categories (14 pt. Font, Centered, with alternating Shading between Turquoise and Yellow), from left to right:

    • Current Assets
    • On Start Date
    • On End Date

 

Expand the width of Column A (Current Assets) to 30 characters wide. Expand Columns B & C to 20 characters wide. Adjust as needed when all Categories have been entered.

 

Align ‘Left’ and create the following items under ‘Current Assets’:

    • Cash in the Bank
    • PayPal Account Assets
    • Other Current Assets
    • TOTAL CURRENT ASSETS
    • (Skip a Row)
    • FIXED ASSETS
    • Machinery & Equipment
    • Furniture & Fixtures
    • Other Fixed Assets
    • TOTAL FIXED ASSETS
    • (Skip a Row)
    • OTHER ASSETS
    • Intangible Assets
    • Other
    • TOTAL OTHER ASSETS
    • T0TAL ASSETS
    • (Skip 2 Rows)
    • LIABILITIES & EQUITY
    • (Skip a Row)
    • CURRENT LIABILITIES
    • Accounts Payable
    • Interest Payable
    • Taxes Payable
    • Short-Term Loans
    • Long-Term Loans
    • TOTAL CURRENT LIABILITIES
    • (Skip a Row)
    • Owner’s Equity
    • TOTAL LIABILITIES & EQUITY

 

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6.3 BALANCE SHEET

 

A Projected Balance Sheet indicates the future financial health of your business. Using your Profit and Loss and Cash Flow Spreadsheets, you can Project what your Balance Sheet will look like at the end of your first year. Enter the amounts for each Section of the Balance Sheet (Assets, Liabilities, and Equity).

As you are completing your Spreadsheet, list your Assumptions that you used for completing your Balance Sheet Spreadsheet in the Word Processing part of your Business Plan, in Section 6.5.3

 

Enter your figures in the following Categories:

    • Cash in the Bank – Total Amount of Funds Deposited into your Bank Account (End Date entry must match Cash Flow Cash position Year 3).
    • PayPal Account Assets – Total Amount of Funds Deposited into your PayPal Account.
    • TOTAL CURRENT ASSETS – Total Amount of Bank Account and PayPal Account Deposits.
    • FIXED ASSETS – All business related Assets will be broken down into the Categories under this Heading.
    • Machinery & Equipment – Items, such as: computers, printers, etc.
    • Furniture & Fixtures – Office furniture and fixtures.
    • Other Fixed Assets – Any other Fixed Assets  not included in other Categories.
    • TOTAL FIXED ASSETS – The Total of all your company’s Fixed Assets.
    • OTHER ASSETS – Any other Assets listed in the Categories directly below this Heading.
    • Intangible Assets – Assets such as intellectual property.
    • Other – Any other company Assets.
    • TOTAL OTHER ASSETS – The Total of all other Assets.
    • T0TAL ASSETS – The Sum of Current, Fixed, and Other Assets.

 

 

LIABILITIES & EQUITY

    • CURRENT LIABILITIES – Your business Debts and Obligations, broken down below this Heading into Categories, which include: Wages, Taxes, and Accounts Payable that are usually due within the year.
    • Accounts Payable – The Total Amount that the company owes it’s Creditors.
    • Interest Payable – The Total Amount of Interest that is due to be Paid within the year on any outstanding Loans.
    • Taxes Payable – The Total Amount of Taxes that is due to be Paid within the year.
    • Short-term Loans – The Total Amount of Short-Term Loans due to be Paid within the year.
    • Long-term Loans – The Total Amount of Long-Term Debt that is scheduled to be Paid within the time period stated on the Balance Sheet.
    • TOTAL CURRENT LIABILITIES – The Sum of all of the items in this Section.
    • Owner’s Equity – The Amount of Income that is retained by the company.
    • TOTAL LIABILITIES & EQUITY – The Sum of Total Liabilities plus Owner’s Equity.

 

This concludes your Balance Sheet Spreadsheet. Please continue…

 

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4. Setup for Break-Even Analysis

 

This Spreadsheet will be Titled: Break-Even Analysis for (the name of your business – without the .com).

Set this Spreadsheet up in the same way as you did for the other Spreadsheets, using the same Fonts, Shading, etc. (Place the Title in cell ‘A1’. Use 24pt. Font with a Bright Green Shading for all cells that include the Title.)

Skip a Row, then create the following horizontal Categories (14 pt. Font, Centered, with alternating Shading between Turquoise and Yellow), from left to right:

    • Costs
    • Fixed Costs
    • Variable Costs %

 

The Variable Cost Ratio is an expression of a company’s Variable Production Costs as a Percentage of Sales, calculated as Variable Costs divided by Total Revenues. It compares Costs that change with levels of Production to the Amount of Revenues Generated by Production. This contrasts with Fixed Costs that remain constant regardless of Production Levels.

Expand the width of Column A (Direct Costs) to 30 characters wide. Expand Columns B & C to 20 characters wide. Adjust as needed when all Costs have been entered.

 

Align ‘Left’ and create the following items under ‘Costs’:

    • DIRECT COSTS
    • Cost of goods sold
    • Inventory
    • Raw materials
    • Direct labor (includes payroll taxes)
    • (Skip a Row)
    • INDIRECT COSTS
    • Salaries (includes payroll taxes)
    • Supplies
    • Repairs & Maintenance
    • Advertising
    • Car delivery & travel
    • Rent/mortgage
    • Telephone
    • Utilities
    • Insurance
    • Taxes
    • Interest
    • Depreciation
    • Other Costs
    • TOTAL DIRECT COSTS
    • TOTAL INDIRECT COSTS
    • (Skip a Row)
    • BREAK-EVEN SALES – (Equals: Total Fixed Costs / (1 – Total Variable Costs/100))

 

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6.4 BREAK-EVEN ANALYSIS

 

A Breakeven Analysis indicates when your business will be able to cover all of its Expenses and begin making a Profit.

As you are completing your Spreadsheet, list your Assumptions that you used for completing your Break-Even Analysis in the Word Processing part of your Business Plan, in Section 6.5.4

 

Enter your figures in the following ‘CostsCategories:

    • DIRECT COSTS – This is a Header for the Overhead and Staff Costs listed below it, which change based on the volume of goods produced or sales. These Costs are only used if you are producing your own products.
    • Cost of Goods Sold – The amount of Production Costs to produce the inventory that was sold.
    • Inventory – The Total Assets held by the company for sale, including finished goods and works in progress.
    • Raw Materials – The Total Value of raw materials owned by the company.
    • Direct Labor (includes Payroll Taxes) – The Total Cost of Employees that work Hourly for the company.
    • (Skip a Row)
    • INDIRECT COSTS – This is a Header for the business Costs below, that do not change based on the volume of production or sales. These will be used by all businesses.
    • Salaries (includes Payroll Taxes) – The Total Cost of Employees that work for the company on a Salaried scale.
    • Supplies – Total Amount Spent for all company supplies.
    • Repairs & Maintenance – Total Amount Paid to complete Repairs and Maintenance work for your Home Office.
    • Advertising – Total Amount Paid for Advertising Costs.
    • Car Delivery & Travel – Total Amount Paid for business related car use, delivery services, and business related travel.
    • Rent/Mortgage – Business Portion for Home Office for rent/mortgage.
    • Telephone – Business Portion for telephone Expenses.
    • Utilities – Business Portion for Home Office for Utilities.
    • Insurance – Business Portion for Home Office for home Insurance plus any other relate business Insurance.
    • Taxes – Business Portion for Home Office for home Taxes, plus all other Taxes except Payroll Taxes.
    • Interest – Total Amount Paid for Interest on business Loans.
    • Depreciation – Total Amount Lost to Depreciation of Assets.
    • Other Costs – Total Amount Paid for any other Costs that do not fit into any other Category.
    • TOTAL DIRECT COSTS – The Sum of all Costs listed in the Direct Costs Categories.
    • TOTAL INDIRECT COSTS – The Sum of all Costs listed in the Indirect Costs Categories.
    • BREAK-EVEN SALES – The Amount of Revenue required for your company to cover all Costs.

(Equals: Total Fixed Costs / (1 – Total Variable Costs/100))

Breakeven Point = fixed costs/ (unit selling price – variable costs)

 

This concludes your Break-Even Analysis Spreadsheet.

 

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Great Job on Completing All of Your Spreadsheets!

You deserve a hearty pat on the back. That was no easy feat!

Now that those have been completed, go back to the end of the Part 2 Post:  How to Make a Business Plan – The Information, and scroll to the end Section Titled:  Number All Pages & Create Your ‘Table of Contentsand complete the final process.

Once you are finished, you can print your Business Plan out if you so desire, or simply file it in an appropriate Folder on your computer. Refer to it often in order to keep your business on track.

 

Best of Luck in All of Your Endeavors! I Wish You Much Success!

 

Please leave a Comment or ask a Question in the Comments section below.

 

If you run into a problem or have any Questions related to this Training, and would prefer to contact me personally, please feel free to Email me and I will attempt to walk you through to a solution. You may contact me at: cj@helpmegetmine.com

 

Great Work! Take a Well Deserved Break!

You Are All Setup and Ready to Begin Working On Your Website!

 

Phases 1 and 2 have been completed. Now, on to the fun stuff.

When you are ready see my next Post:  How to Design a Logo for Free – Phase 3 – Step 1

 

Sincerely,

CJ Dodaro

 

 

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About Author

CJ Dodaro
I am a semi-retired, 65 year young man who has owned and operated a variety of successful business throughout my life. Starting most from scratch, I have acquired extensive knowledge for what is required for setting up a business properly from the ground up. Since these businesses have been both the brick & mortar type as well as the online variety, I feel qualified to help people in almost any business area that they wish to pursue. I wish to share the information that I have acquired in order to help other aspiring entrepreneurs become successful.

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