Page 146 - Business Plans that Work A Guide for Small Business

10 FINANCIAL PLAN:

TELLING YOUR

STORY IN NUMBERS

uch of your business plan is your verbal and graphic descrip-
tion of the opportunity and how you will execute it. The
Mfinancial plan is the mathematical equivalent. The growth in
revenues speaks to the upside of your opportunity. The expenses indicate
how much it costs to deliver the product or service. Cash flow statements
serve as an early warning system to potential problems (or critical risks),
and the balance sheet represents the resources required to put the delivery
system into place. That being said, generating realistic financials is one
of the most intimidating hurdles that many entrepreneurs face. There is a
temptation to hire an accountant to create your financials for you. Big mis-
take. Although painful, the deep learning that you acquire by struggling
through the numbers helps you really understand your business. Always
remember that the numbers in the financial statements are a reflection of
the actions you take in your business. You learn what actions drive revenue
and costs. You learn how cash flow can go negative even if you are growing
and profitable. Besides, you will be presenting your plan to investors and
bankers. You lose credibility if you can’t explain the numbers yourself.
This chapter will provide you a broad overview of how to gener-
ate realistic financials. We will highlight a dual-strategy approach to
building your model: comparable analysis and the buildup technique.

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