This is part 4 of writing a business plan for your home base business. If you missed the other post just click here.
The primary intimidation factor of the business plan is the financial section. There are 3 components to the financial plan: an income statement, balance sheet and the cash flow statement.
I’ll keep it simple.
The Income Statement (sometimes called a profit & loss statement or earnings statement) adds up all of your revenues from sales and other sources, subtracts your costs and your net income figure (the bottom line).
The Balance Sheet shows everything you own, subtracts what you owe and shows the difference as the net worth of the business.
The Cash Flow Statement shows the flow of cash that has come in (sources of cash); and the flow of cash that has gone out (uses of cash).
All 3 of these statements tells us where you’ve been. You can also use them to predict where you’re going. If you’ve been in business for some time you will use your numbers from the previous years. Determine the percentage of growth and project out into the next 3 years using that same percentage of growth.
But what if you’re a new start-up business and have no numbers? Where do you get the numbers to forecast income and project sales?
To help determine what your sales will be, you will have to do some research. What has been the experience of similar companies? What are the annual sales in your industry? Are sales in your industry stable? How frequently do customers in your industry buy what you sell?
You can ask your competitors (visit daycare centers as if you’re a future customer and ask questions). Ask former employees of competitors. Read the trade magazines. Ask distributors, wholesalers or sales representatives in your area. Or ask your potential customers to find out what they will buy. This could be done in person, by mail or phone.
The Department of Labor, Department of Commerce and even your city’s economic development agencies can give you great insights into your target market, their buying habits and their anticipated behaviors.
To do projections for your balance sheet you’ll have to research to find out industry norms to determine what’s typical for your type of business. Will taxes be raised on your industry? Have costs on holding, storing or buying inventory remained stable? Use those percentages as you project 3 years out.
This is very BASIC information to help you get comfortable with the idea of writing a business plan for your home business. For more information and to see some sample business plans go to the Small Business Administration page for small businesses.
If all of this is still intimidating for you then look at purchasing the REALLY, SIMPLE and easy to use software Buisness Plan Pro. It makes the entire process pretty painless!
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