Page 151 - Business Plans that Work A Guide for Small Business

142 • Business Plans that Work

entrepreneur should seek the next round of financing. Years three through
five only need to be illustrated on an annual basis as this communicates
your vision for growth, and a textured understanding of the forces that
you believe will drive the future of the business. The balance sheet can be
on an annual basis for all five years since it is reporting a snapshot on the
last day of a particular period, but it will inform the investor of the mag-
nitude of the resources you expect to marshal to fulfill your vision.
The key to constructing the actual financials is building the state-
ments on a spreadsheet and linking the different financial statements
together. This can be difficult, but Frank Moyes and Steve Lawrence at
the University of Colorado have developed an excellent Excel template
1
that you can download from their Web site.

Description of Statements

Once the financial spreadsheets are completed, you should write a de-
scription preceding each statement explaining the key drivers impacting
the numbers. Although you understand all the assumptions and compa-
rables that went into building the financial forecast, the reader needs the
background spelled out. The explanation should have four subheadings:
overview, income statement, cash flow, and balance sheet. The overview
section should highlight the major assumptions that drive your revenue
and expenses. This section should map to several of the critical risks you
identified earlier. The income statement description goes into more detail
as to some of the revenue and cost drivers that haven’t been discussed in
the overview section. The cash flow description talks about the timing of
cash infusions, accounts payable, accounts receivable, and so forth. The
balance sheet description illustrates how major ratios change as the firm
grows. For instance, talk about the inventory turn ratio. How long do you
hold inventory before it is sold? This conversion has a major impact on
your company’s cash position, because holding inventory means that cash
is tied up. Let’s examine the Lazybones financial plan.

1 As of the writing of this chapter, you could download the template at www.leeds-
faculty.colorado.edu/moyes/html/resources.htm. Hit the hotlink: Financial Projections
Model v6.8.9.