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Free Financial Templates for a Business Plan

By Andy Marker | July 29, 2020

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In this article, we’ve rounded up expert-tested financial templates for your business plan, all of which are free to download in Excel, Google Sheets, and PDF formats.

Included on this page, you’ll find the essential financial statement templates, including income statement templates , cash flow statement templates , and balance sheet templates . Plus, we cover the key elements of the financial section of a business plan .

Financial Plan Templates

Download and prepare these financial plan templates to include in your business plan. Use historical data and future projections to produce an overview of the financial health of your organization to support your business plan and gain buy-in from stakeholders

Business Financial Plan Template

Use this financial plan template to organize and prepare the financial section of your business plan. This customizable template has room to provide a financial overview, any important assumptions, key financial indicators and ratios, a break-even analysis, and pro forma financial statements to share key financial data with potential investors.

Download Financial Plan Template

Word | PDF | Smartsheet

Financial Plan Projections Template for Startups

This financial plan projections template comes as a set of pro forma templates designed to help startups. The template set includes a 12-month profit and loss statement, a balance sheet, and a cash flow statement for you to detail the current and projected financial position of a business.

‌ Download Startup Financial Projections Template

Excel | Smartsheet

Income Statement Templates for Business Plan

Also called profit and loss statements , these income statement templates will empower you to make critical business decisions by providing insight into your company, as well as illustrating the projected profitability associated with business activities. The numbers prepared in your income statement directly influence the cash flow and balance sheet forecasts.

Pro Forma Income Statement/Profit and Loss Sample

Use this pro forma income statement template to project income and expenses over a three-year time period. Pro forma income statements consider historical or market analysis data to calculate the estimated sales, cost of sales, profits, and more.

‌ Download Pro Forma Income Statement Sample - Excel

Small Business Profit and Loss Statement

Small businesses can use this simple profit and loss statement template to project income and expenses for a specific time period. Enter expected income, cost of goods sold, and business expenses, and the built-in formulas will automatically calculate the net income.

‌ Download Small Business Profit and Loss Template - Excel

3-Year Income Statement Template

Use this income statement template to calculate and assess the profit and loss generated by your business over three years. This template provides room to enter revenue and expenses associated with operating your business and allows you to track performance over time.

Download 3-Year Income Statement Template

For additional resources, including how to use profit and loss statements, visit “ Download Free Profit and Loss Templates .”

Cash Flow Statement Templates for Business Plan

Use these free cash flow statement templates to convey how efficiently your company manages the inflow and outflow of money. Use a cash flow statement to analyze the availability of liquid assets and your company’s ability to grow and sustain itself long term.

Simple Cash Flow Template

Use this basic cash flow template to compare your business cash flows against different time periods. Enter the beginning balance of cash on hand, and then detail itemized cash receipts, payments, costs of goods sold, and expenses. Once you enter those values, the built-in formulas will calculate total cash payments, net cash change, and the month ending cash position.

Download Simple Cash Flow Template

12-Month Cash Flow Forecast Template

Use this cash flow forecast template, also called a pro forma cash flow template, to track and compare expected and actual cash flow outcomes on a monthly and yearly basis. Enter the cash on hand at the beginning of each month, and then add the cash receipts (from customers, issuance of stock, and other operations). Finally, add the cash paid out (purchases made, wage expenses, and other cash outflow). Once you enter those values, the built-in formulas will calculate your cash position for each month with.

‌ Download 12-Month Cash Flow Forecast

3-Year Cash Flow Statement Template Set

Use this cash flow statement template set to analyze the amount of cash your company has compared to its expenses and liabilities. This template set contains a tab to create a monthly cash flow statement, a yearly cash flow statement, and a three-year cash flow statement to track cash flow for the operating, investing, and financing activities of your business.

Download 3-Year Cash Flow Statement Template

For additional information on managing your cash flow, including how to create a cash flow forecast, visit “ Free Cash Flow Statement Templates .”

Balance Sheet Templates for a Business Plan

Use these free balance sheet templates to convey the financial position of your business during a specific time period to potential investors and stakeholders.

Small Business Pro Forma Balance Sheet

Small businesses can use this pro forma balance sheet template to project account balances for assets, liabilities, and equity for a designated period. Established businesses can use this template (and its built-in formulas) to calculate key financial ratios, including working capital.

Download Pro Forma Balance Sheet Template

Monthly and Quarterly Balance Sheet Template

Use this balance sheet template to evaluate your company’s financial health on a monthly, quarterly, and annual basis. You can also use this template to project your financial position for a specified time in the future. Once you complete the balance sheet, you can compare and analyze your assets, liabilities, and equity on a quarter-over-quarter or year-over-year basis.

Download Monthly/Quarterly Balance Sheet Template - Excel

Yearly Balance Sheet Template

Use this balance sheet template to compare your company’s short and long-term assets, liabilities, and equity year-over-year. This template also provides calculations for common financial ratios with built-in formulas, so you can use it to evaluate account balances annually.

Download Yearly Balance Sheet Template - Excel

For more downloadable resources for a wide range of organizations, visit “ Free Balance Sheet Templates .”

Sales Forecast Templates for Business Plan

Sales projections are a fundamental part of a business plan, and should support all other components of your plan, including your market analysis, product offerings, and marketing plan . Use these sales forecast templates to estimate future sales, and ensure the numbers align with the sales numbers provided in your income statement.

Basic Sales Forecast Sample Template

Use this basic forecast template to project the sales of a specific product. Gather historical and industry sales data to generate monthly and yearly estimates of the number of units sold and the price per unit. Then, the pre-built formulas will calculate percentages automatically. You’ll also find details about which months provide the highest sales percentage, and the percentage change in sales month-over-month. 

Download Basic Sales Forecast Sample Template

12-Month Sales Forecast Template for Multiple Products

Use this sales forecast template to project the future sales of a business across multiple products or services over the course of a year. Enter your estimated monthly sales, and the built-in formulas will calculate annual totals. There is also space to record and track year-over-year sales, so you can pinpoint sales trends.

Download 12-Month Sales Forecasting Template for Multiple Products

3-Year Sales Forecast Template for Multiple Products

Use this sales forecast template to estimate the monthly and yearly sales for multiple products over a three-year period. Enter the monthly units sold, unit costs, and unit price. Once you enter those values, built-in formulas will automatically calculate revenue, margin per unit, and gross profit. This template also provides bar charts and line graphs to visually display sales and gross profit year over year.

Download 3-Year Sales Forecast Template - Excel

For a wider selection of resources to project your sales, visit “ Free Sales Forecasting Templates .”

Break-Even Analysis Template for Business Plan

A break-even analysis will help you ascertain the point at which a business, product, or service will become profitable. This analysis uses a calculation to pinpoint the number of service or unit sales you need to make to cover costs and make a profit.

Break-Even Analysis Template

Use this break-even analysis template to calculate the number of sales needed to become profitable. Enter the product's selling price at the top of the template, and then add the fixed and variable costs. Once you enter those values, the built-in formulas will calculate the total variable cost, the contribution margin, and break-even units and sales values.

Download Break-Even Analysis Template

For additional resources, visit, “ Free Financial Planning Templates .”

Business Budget Templates for Business Plan

These business budget templates will help you track costs (e.g., fixed and variable) and expenses (e.g., one-time and recurring) associated with starting and running a business. Having a detailed budget enables you to make sound strategic decisions, and should align with the expense values listed on your income statement.

Startup Budget Template

Use this startup budget template to track estimated and actual costs and expenses for various business categories, including administrative, marketing, labor, and other office costs. There is also room to provide funding estimates from investors, banks, and other sources to get a detailed view of the resources you need to start and operate your business.

Download Startup Budget Template

Small Business Budget Template

This business budget template is ideal for small businesses that want to record estimated revenue and expenditures on a monthly and yearly basis. This customizable template comes with a tab to list income, expenses, and a cash flow recording to track cash transactions and balances.

Download Small Business Budget Template

Professional Business Budget Template

Established organizations will appreciate this customizable business budget template, which  contains a separate tab to track projected business expenses, actual business expenses, variances, and an expense analysis. Once you enter projected and actual expenses, the built-in formulas will automatically calculate expense variances and populate the included visual charts. 

‌ Download Professional Business Budget Template

For additional resources to plan and track your business costs and expenses, visit “ Free Business Budget Templates for Any Company .”

Other Financial Templates for Business Plan

In this section, you’ll find additional financial templates that you may want to include as part of your larger business plan.

Startup Funding Requirements Template

This simple startup funding requirements template is useful for startups and small businesses that require funding to get business off the ground. The numbers generated in this template should align with those in your financial projections, and should detail the allocation of acquired capital to various startup expenses.

Download Startup Funding Requirements Template - Excel

Personnel Plan Template

Use this customizable personnel plan template to map out the current and future staff needed to get — and keep — the business running. This information belongs in the personnel section of a business plan, and details the job title, amount of pay, and hiring timeline for each position. This template calculates the monthly and yearly expenses associated with each role using built-in formulas. Additionally, you can add an organizational chart to provide a visual overview of the company’s structure. 

Download Personnel Plan Template - Excel

Elements of the Financial Section of a Business Plan

Whether your organization is a startup, a small business, or an enterprise, the financial plan is the cornerstone of any business plan. The financial section should demonstrate the feasibility and profitability of your idea and should support all other aspects of the business plan. 

Below, you’ll find a quick overview of the components of a solid financial plan.

• Financial Overview: This section provides a brief summary of the financial section, and includes key takeaways of the financial statements. If you prefer, you can also add a brief description of each statement in the respective statement’s section.
• Key Assumptions: This component details the basis for your financial projections, including tax and interest rates, economic climate, and other critical, underlying factors.
• Break-Even Analysis: This calculation helps establish the selling price of a product or service, and determines when a product or service should become profitable.
• Pro Forma Income Statement: Also known as a profit and loss statement, this section details the sales, cost of sales, profitability, and other vital financial information to stakeholders.
• Pro Forma Cash Flow Statement: This area outlines the projected cash inflows and outflows the business expects to generate from operating, financing, and investing activities during a specific timeframe.
• Pro Forma Balance Sheet: This document conveys how your business plans to manage assets, including receivables and inventory.
• Key Financial Indicators and Ratios: In this section, highlight key financial indicators and ratios extracted from financial statements that bankers, analysts, and investors can use to evaluate the financial health and position of your business.

Need help putting together the rest of your business plan? Check out our free simple business plan templates to get started. You can learn how to write a successful simple business plan  here . 

Visit this  free non-profit business plan template roundup  or download a  fill-in-the-blank business plan template  to make things easy. If you are looking for a business plan template by file type, visit our pages dedicated specifically to  Microsoft Excel ,  Microsoft Word , and  Adobe PDF  business plan templates. Read our articles offering  startup business plan templates  or  free 30-60-90-day business plan templates  to find more tailored options.

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WHAT IS A FINANCIAL SUMMARY IN A BUSINESS PLAN: Best Practices

• by Folakemi Adegbaju
• August 10, 2023
• No comments
• 9 minute read

Table of Contents Hide

What is a financial summary in a business plan.

• #1. Introduction to the Financial Summary 

#2. Financial Statements and Analyses

#3. forecast profit and loss, #4. work out your cash-flow projections, #5. forecast balance sheet, why is financial summary important to a business, #1. profit and loss statement, #2. balance sheet, #3. cash flow statement, make financial planning a recurring part of your business, get professional help, final thoughts, what is financial overview in business plan, what are the six basic financial statements, what is meant by "financial summary".

Preparedness is key in order to succeed in your business in the long run. Also, having a sound financial summary is the key to that preparation for your new business. You can foresee growth, make investor pitches, and deal with cash flow problems thanks to it. It is important that you become familiar with a few foundational concepts of financial summary before you can begin. You can also help yourself write one by checking out the financial summary example in a business plan; it will get you prepared for yours. This article serves as a guideline to how you can write a financial summary in your business plan and makes you see the importance of preparing one in your business plan.

Let’s dig in deep..

The business’s profitability, aspects of debt and equity, projected operational costs, financial statement estimates, future growth projections, and business financing are all covered in the financial summary. This part contains extremely detailed and organised financial information. There may be graphs, tables, charts, calculations, and spreadsheets. To write it accurately, it could need the assistance of a financial specialist, like an accountant.

A financial summary is the lifeline of a business plan. It is what gives the company a sense of vitality and pragmatism. The financial part frequently appears near the end of the plan, but this does not lessen the significance of what it contains. In actuality, it is the part of the business plan that gets the greatest scrutiny. Due to the fact that a company’s value is in its financial statements, investors may actually give it more attention than other sections of the plan. Having a financial summary example in a business plan or getting someone to write one for you makes writing one easier.

How Do You Write a Financial Summary for a Business Plan?

A business plan’s financial section has advantages for both the owner of the company and investors and financiers. It helps them gain a better understanding of their company. It is also a crucial tool for managing the company. When writing the financial part and, by extension, the entire business plan, the majority of authors favour the Turabian paper format.

Your level of realism in writing the financial section will be the only factor determining its trustworthiness. You can accomplish this by decomposing the figures into different parts that you can examine separately. Having a financial summary example in a business plan or getting someone to write for you makes writing one easier.

The following are steps to take when you want to write the financial summary for your business plan:

#1. Introduction to the Financial Summary  

Firstly, the introduction to the financial plan typically comes first in a business plan’s financial overview. The business plan drawer is the only source for the introduction’s structure and format. You’re giving the reader an overview of the section’s contents in the introduction.

The predicted financial statements and analyses will be the focus of the second part of the financial summary.  Here, the financial statements and analyses listed below are provided.

• Forecasted income statement
• Cash flow statement (Forecasted)
• Forecasted balance sheet
• Sensitivity analysis
• Breakeven analysis
• Ratio analysis

To determine if you can anticipate making a profit or loss for any of these time periods, estimate your sales and expenses on a monthly, quarterly, or annual basis. You can use this to set sales goals, pricing, and probable profit margins. You can use industry benchmarks, market research, and industry analysis to base your estimates on the success of similar companies in your industry.

Even a profitable company may run out of money. For instance, you can earn a lot of sales in the first month without any payment for them until the following month. You can determine if you’ll have enough money to run your firm or if you’ll need additional funding by doing cash-flow estimates.

Among the helpful pointers to bear in mind are:

• To account for any seasonality, project your cash flow at least 12 months in advance.
• Be realistic; some clients might take longer to pay
• If you discover a financial shortage, take steps to regulate your cash flow.

To develop a financial picture of your business after the first 12 months, list all of your anticipated assets and liabilities . It’s a good idea to use your balance sheet statistics to determine whether you’ll have enough money after a year to carry out your daily operations. This will help you assess the financial viability of your business plan.

These three sections should be on your balance sheet:

• Assets : This is what your company owns, including assets like money, merchandise, and buildings as examples.
• Liabilities : What your company owes, with loans and accounts payable as examples
• Ownership stake : This is the part of the assets that the business owner is entitled to. Add up all of your assets, then deduct all of your debts to arrive at this calculation.

#6. Find Your Break-even Point

The amount of sales required to cover costs is revealed by performing a break-even analysis; anything above this point is considered a profit. In order to determine whether your business plan is practical, you can utilise the break-even point to analyse the sales, cost, and pricing figures from your prior estimates. You might wish to check your calculations to determine if there are any ways to increase your company’s profitability, for instance, if your break-even point is years away.

Things to think about are:

• realistically estimating sales. If you run a service business, for instance, you might choose to base your calculations on a 60–70% utilisation rate rather than assuming that all of your time can be charged.
• Changing your rates and costs will make it simple for you to test various situations.

You can also check our Jewelry business plan to see what a financial summary in a business plan looks like.

A well-organized financial summary can boost your company’s confidence while providing you with a clearer picture of how to distribute resources. It demonstrates your company’s dedication to prudent expenditure and its capacity to fulfil financial commitments. A financial summary enables you to identify which decisions will have an influence on your income and which situations necessitate using reserve cash.

It’s also a crucial tool when requesting funding for your company. You must outline your company’s spending control and income generation processes in your financial summary of your business plan. It reveals the state of your company and the number of sales and investors it requires to reach significant financial milestones.

What Financials Should Be Included In A Business Plan?

There are three major financials you must include in a business plan, they are :

• Profit and loss statement
• Balance sheet 
• Cash flow statement

Your profit and loss statement is a summary of the activities of your business over a predetermined time period, typically one year. It is an indicator of the health or performance of the company’s finances. Although you can use it to make projections as well, it is typically used as a look back.

Your profit and loss statement provides a summary of your revenue, total expenses, and profit (or loss), which is the amount left over after deducting expenses from revenue.

The profit and loss statement is also a helpful tool for evaluating growth and comparing performance. To determine if your organisation is expanding or contracting, you can compare the profit and loss statement data from prior years to your present and next years.

The balance sheet will also show the effects of any profits made on increasing assets, reinvesting in the company, reducing obligations, or paying dividends or bonuses to shareholders. The two documents are related in that way.

Your balance sheet is a description of what your company owns and what it owes at a specific point in time, as opposed to your profit and loss statement, which shows how much money was brought in and spent over the course of a year, a quarter, or a month. List all of your company’s assets, the stuff you own, at the top of the statement. This comprises your long-term assets, such as your property, plant, and machinery. This list would also contain any machinery, raw materials, merchandise, real estate, or computer equipment. Accounts receivable, or what your clients owe you, is another example of a short-term asset. Assets should include anything you use to make money.

The shareholders’ equity and liabilities are listed on the balance sheet’s bottom half. What you owe is considered a liability. This covers costs such as loans, unpaid taxes, unpaid invoices, leases on property or equipment, and so forth. The value your business has created is shared by all of your shareholders, who are also known as your partners or owners in the company. This value is known as your shareholders’ (or owners’) equity.

You should also take note that assets are always equal to shareholders’ equity plus liabilities. The more equity that the shareholders own, the more value the company is producing.

The cash flow statement shows all of the money that the company has taken in and spent over a certain period of time. When making projections, cash flow statements are typically utilised to try and foresee when the company could require a financial infusion or be able to afford a significant investment. As a result, monthly breakdowns of cash inflow and outflow are common in cash flow statements.

Operations (what you sell to clients) can produce cash for the business, as can assets (such as stocks or real estate) and/or finance (such as when you receive a loan or take on an investor).

Cash paid to purchase additional assets or to repay a loan or extended credit falls under the category of cash outflow.

You, the company’s lenders, or investors can get a sense of how cash healthy the business is by examining variations in cash flow over multiple time frames, like months or quarters.

Also, know that each statement offers information about the company’s performance that can aid owners and managers in figuring out how to enhance operations. However, because each statement has a distinct function, it’s crucial to understand how to use each one.

These three financial statements are crucial business tools that can show you where you need to focus your attention in order to expand your company. You also need to update and review them frequently to keep money coming in steadily, fill out your profit and loss statement and balance sheet, and help ensure that your company survives and prospers.

When you first begin, your financial plan may seem intimidating, but this part of your business plan is actually crucial to comprehend.

You, as the business owner, should be able to read and comprehend these records and make decisions based on what you learn from them, even if you decide to outsource your bookkeeping and routine financial analysis to an accounting firm. Though it might seem so confusing and hard, having a financial summary example in a business plan or getting someone to write for you makes writing one easier.

Did you have any issues with it? We’re here to help you.

Having a financial summary example in a business plan might not be enough to write a strong financial summary that will attract the attention of your investors. However, our professional business plan writers are always at your service to help you out with one without any delay or disappointment. BUSINESS YIELD CONSULT is always at your service.

Your chances of getting money from investors or lenders are significantly increased if you produce and present a financial summary that all works together to tell the tale of your firm and if you can respond to inquiries regarding the sources of your figures. However, we recommend you reach out to a professional like BUSINESS YELD CONSULT their expertise is always available to guide you on how to write a strong and convincing financial summary for your business plan.

A financial plan is nothing more than a summary of your company’s present financial situation and growth expectations. Consider any records that show your current financial status as a snapshot of the state of your business and the projections as your hopes for the future.

The following components of the financial statements of business enterprises have been specified by the Financial Accounting Standards Board (FASB): assets, liabilities, equity, revenues, expenses, gains, losses, investment by owners, distribution to owners, and comprehensive income.

Financial statements are a group of summaries of information regarding the cash flows, financial position, and financial outcomes of a company. They consist of the cash flow statement, balance sheet, and income statement.

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How to Prepare a Financial Plan for Startup Business (w/ example)

Free Financial Statements Template

Ajay Jagtap

• December 7, 2023

13 Min Read

If someone were to ask you about your business financials, could you give them a detailed answer?

Let’s say they ask—how do you allocate your operating expenses? What is your cash flow situation like? What is your exit strategy? And a series of similar other questions.

Instead of mumbling what to answer or shooting in the dark, as a founder, you must prepare yourself to answer this line of questioning—and creating a financial plan for your startup is the best way to do it.

A business plan’s financial plan section is no easy task—we get that.

But, you know what—this in-depth guide and financial plan example can make forecasting as simple as counting on your fingertips.

Ready to get started? Let’s begin by discussing startup financial planning.

What is Startup Financial Planning?

Startup financial planning, in simple terms, is a process of planning the financial aspects of a new business. It’s an integral part of a business plan and comprises its three major components: balance sheet, income statement, and cash-flow statement.

Apart from these statements, your financial section may also include revenue and sales forecasts, assets & liabilities, break-even analysis , and more. Your first financial plan may not be very detailed, but you can tweak and update it as your company grows.

Key Takeaways

• Realistic assumptions, thorough research, and a clear understanding of the market are the key to reliable financial projections.
• Cash flow projection, balance sheet, and income statement are three major components of a financial plan.
• Preparing a financial plan is easier and faster when you use a financial planning tool.
• Exploring “what-if” scenarios is an ideal method to understand the potential risks and opportunities involved in the business operations.

Why is Financial Planning Important to Your Startup?

Poor financial planning is one of the biggest reasons why most startups fail. In fact, a recent CNBC study reported that running out of cash was the reason behind 44% of startup failures in 2022.

A well-prepared financial plan provides a clear financial direction for your business, helps you set realistic financial objectives, create accurate forecasts, and shows your business is committed to its financial objectives.

It’s a key element of your business plan for winning potential investors. In fact, YC considered recent financial statements and projections to be critical elements of their Series A due diligence checklist .

Your financial plan demonstrates how your business manages expenses and generates revenue and helps them understand where your business stands today and in 5 years.

Makes sense why financial planning is important to your startup, doesn’t it? Let’s cut to the chase and discuss the key components of a startup’s financial plan.

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Key Components of a Startup Financial Plan

Whether creating a financial plan from scratch for a business venture or just modifying it for an existing one, here are the key components to consider including in your startup’s financial planning process.

Income Statement

An Income statement , also known as a profit-and-loss statement(P&L), shows your company’s income and expenditures. It also demonstrates how your business experienced any profit or loss over a given time.

Consider it as a snapshot of your business that shows the feasibility of your business idea. An income statement can be generated considering three scenarios: worst, expected, and best.

Your income or P&L statement must list the following:

• Cost of goods or cost of sale
• Gross margin
• Operating expenses
• Revenue streams
• EBITDA (Earnings before interest, tax, depreciation , & amortization )

Established businesses can prepare annual income statements, whereas new businesses and startups should consider preparing monthly statements.

Cash flow Statement

A cash flow statement is one of the most critical financial statements for startups that summarize your business’s cash in-and-out flows over a given time.

This section provides details on the cash position of your business and its ability to meet monetary commitments on a timely basis.

Your cash flow projection consists of the following three components:

✅ Cash revenue projection: Here, you must enter each month’s estimated or expected sales figures.

✅ Cash disbursements: List expenditures that you expect to pay in cash for each month over one year.

✅ Cash flow reconciliation: Cash flow reconciliation is a process used to ensure the accuracy of cash flow projections. The adjusted amount is the cash flow balance carried over to the next month.

Furthermore, a company’s cash flow projections can be crucial while assessing liquidity, its ability to generate positive cash flows and pay off debts, and invest in growth initiatives.

Balance Sheet

Your balance sheet is a financial statement that reports your company’s assets, liabilities, and shareholder equity at a given time.

Consider it as a snapshot of what your business owns and owes, as well as the amount invested by the shareholders.

This statement consists of three parts: assets , liabilities, and the balance calculated by the difference between the first two. The final numbers on this sheet reflect the business owner’s equity or value.

Balance sheets follow the following accounting equation with assets on one side and liabilities plus Owner’s equity on the other:

Here is what’s the core purpose of having a balance-sheet:

• Indicates the capital need of the business
• It helps to identify the allocation of resources
• It calculates the requirement of seed money you put up, and
• How much finance is required?

Since it helps investors understand the condition of your business on a given date, it’s a financial statement you can’t miss out on.

Break-even Analysis

Break-even analysis is a startup or small business accounting practice used to determine when a company, product, or service will become profitable.

For instance, a break-even analysis could help you understand how many candles you need to sell to cover your warehousing and manufacturing costs and start making profits.

Remember, anything you sell beyond the break-even point will result in profit.

You must be aware of your fixed and variable costs to accurately determine your startup’s break-even point.

• Fixed costs: fixed expenses that stay the same no matter what.
• Variable costs: expenses that fluctuate over time depending on production or sales.

A break-even point helps you smartly price your goods or services, cover fixed costs, catch missing expenses, and set sales targets while helping investors gain confidence in your business. No brainer—why it’s a key component of your startup’s financial plan.

Having covered all the key elements of a financial plan, let’s discuss how you can create a financial plan for your startup.

How to Create a Financial Section of a Startup Business Plan?

1. determine your financial needs.

You can’t start financial planning without understanding your financial requirements, can you? Get your notepad or simply open a notion doc; it’s time for some critical thinking.

Start by assessing your current situation by—calculating your income, expenses , assets, and liabilities, what the startup costs are, how much you have against them, and how much financing you need.

Assessing your current financial situation and health will help determine how much capital you need for your startup and help plan fundraising activities and outreach.

Furthermore, determining financial needs helps prioritize operational activities and expenses, effectively allocate resources, and increase the viability and sustainability of a business in the long run.

Having learned to determine financial needs, let’s head straight to setting financial goals.

2. Define Your Financial Goals

Setting realistic financial goals is fundamental in preparing an effective financial plan. So, it would help to outline your long-term strategies and goals at the beginning of your financial planning process.

Let’s understand it this way—if you are a SaaS startup pursuing VC financing rounds, you may ask investors about what matters to them the most and prepare your financial plan accordingly.

However, a coffee shop owner seeking a business loan may need to create a plan that appeals to banks, not investors. At the same time, an internal financial plan designed to offer financial direction and resource allocation may not be the same as previous examples, seeing its different use case.

Feeling overwhelmed? Just define your financial goals—you’ll be fine.

You can start by identifying your business KPIs (key performance indicators); it would be an ideal starting point.

3. Choose the Right Financial Planning Tool

Let’s face it—preparing a financial plan using Excel is no joke. One would only use this method if they had all the time in the world.

Having the right financial planning software will simplify and speed up the process and guide you through creating accurate financial forecasts.

Many financial planning software and tools claim to be the ideal solution, but it’s you who will identify and choose a tool that is best for your financial planning needs.

Create a Financial Plan with Upmetrics in no time

Enter your Financial Assumptions, and we’ll calculate your monthly/quarterly and yearly financial projections.

Start Forecasting

4. Make Assumptions Before Projecting Financials

Once you have a financial planning tool, you can move forward to the next step— making financial assumptions for your plan based on your company’s current performance and past financial records.

You’re just making predictions about your company’s financial future, so there’s no need to overthink or complicate the process.

You can gather your business’ historical financial data, market trends, and other relevant documents to help create a base for accurate financial projections.

After you have developed rough assumptions and a good understanding of your business finances, you can move forward to the next step—projecting financials.

5. Prepare Realistic Financial Projections

It’s a no-brainer—financial forecasting is the most critical yet challenging aspect of financial planning. However, it’s effortless if you’re using a financial planning software.

Upmetrics’ forecasting feature can help you project financials for up to 7 years. However, new startups usually consider planning for the next five years. Although it can be contradictory considering your financial goals and investor specifications.

Following are the two key aspects of your financial projections:

Revenue Projections

In simple terms, revenue projections help investors determine how much revenue your business plans to generate in years to come.

It generally involves conducting market research, determining pricing strategy , and cash flow analysis—which we’ve already discussed in the previous steps.

The following are the key components of an accurate revenue projection report:

• Market analysis
• Sales forecast
• Pricing strategy
• Growth assumptions
• Seasonal variations

This is a critical section for pre-revenue startups, so ensure your projections accurately align with your startup’s financial model and revenue goals.

Expense Projections

Both revenue and expense projections are correlated to each other. As revenue forecasts projected revenue assumptions, expense projections will estimate expenses associated with operating your business.

Accurately estimating your expenses will help in effective cash flow analysis and proper resource allocation.

These are the most common costs to consider while projecting expenses:

• Fixed costs
• Variable costs
• Employee costs or payroll expenses
• Operational expenses
• Marketing and advertising expenses
• Emergency fund

Remember, realistic assumptions, thorough research, and a clear understanding of your market are the key to reliable financial projections.

6. Consider “What if” Scenarios

After you project your financials, it’s time to test your assumptions with what-if analysis, also known as sensitivity analysis.

Using what-if analysis with different scenarios while projecting your financials will increase transparency and help investors better understand your startup’s future with its best, expected, and worst-case scenarios.

Exploring “what-if” scenarios is the best way to better understand the potential risks and opportunities involved in business operations. This proactive exercise will help you make strategic decisions and necessary adjustments to your financial plan.

7. Build a Visual Report

If you’ve closely followed the steps leading to this, you know how to research for financial projections, create a financial plan, and test assumptions using “what-if” scenarios.

Now, we’ll prepare visual reports to present your numbers in a visually appealing and easily digestible format.

Don’t worry—it’s no extra effort. You’ve already made a visual report while creating your financial plan and forecasting financials.

Check the dashboard to see the visual presentation of your projections and reports, and use the necessary financial data, diagrams, and graphs in the final draft of your financial plan.

Here’s what Upmetrics’ dashboard looks like:

8. Monitor and Adjust Your Financial Plan

Even though it’s not a primary step in creating a good financial plan, it’s quite essential to regularly monitor and adjust your financial plan to ensure the assumptions you made are still relevant, and you are heading in the right direction.

There are multiple ways to monitor your financial plan.

For instance, you can compare your assumptions with actual results to ensure accurate projections based on metrics like new customers acquired and acquisition costs, net profit, and gross margin.

Consider making necessary adjustments if your assumptions are not resonating with actual numbers.

Also, keep an eye on whether the changes you’ve identified are having the desired effect by monitoring their implementation.

And that was the last step in our financial planning guide. However, it’s not the end. Have a look at this financial plan example.

Startup Financial Plan Example

Having learned about financial planning, let’s quickly discuss a coffee shop startup financial plan example prepared using Upmetrics.

Important Assumptions

• The sales forecast is conservative and assumes a 5% increase in Year 2 and a 10% in Year 3.
• The analysis accounts for economic seasonality – wherein some months revenues peak (such as holidays ) and wanes in slower months.
• The analysis assumes the owner will not withdraw any salary till the 3rd year; at any time it is assumed that the owner’s withdrawal is available at his discretion.
• Sales are cash basis – nonaccrual accounting
• Moderate ramp- up in staff over the 5 years forecast
• Barista salary in the forecast is $36,000 in 2023.
• In general, most cafes have an 85% gross profit margin
• In general, most cafes have a 3% net profit margin

Projected Balance Sheet

Projected Cash-Flow Statement

Projected Profit & Loss Statement

Break Even Analysis

Start Preparing Your Financial Plan

We covered everything about financial planning in this guide, didn’t we? Although it doesn’t fulfill our objective to the fullest—we want you to finish your financial plan.

Sounds like a tough job? We have an easy way out for you—Upmetrics’ financial forecasting feature. Simply enter your financial assumptions, and let it do the rest.

So what are you waiting for? Try Upmetrics and create your financial plan in a snap.

Build your Business Plan Faster

with step-by-step Guidance & AI Assistance.

Frequently Asked Questions

How often should i update my financial projections.

Well, there is no particular rule about it. However, reviewing and updating your financial plan once a year is considered an ideal practice as it ensures that the financial aspirations you started and the projections you made are still relevant.

How do I estimate startup costs accurately?

You can estimate your startup costs by identifying and factoring various one-time, recurring, and hidden expenses. However, using a financial forecasting tool like Upmetrics will ensure accurate costs while speeding up the process.

What financial ratios should startups pay attention to?

Here’s a list of financial ratios every startup owner should keep an eye on:

• Net profit margin
• Current ratio
• Quick ratio
• Working capital
• Return on equity
• Debt-to-equity ratio
• Return on assets
• Debt-to-asset ratio

What are the 3 different scenarios in scenario analysis?

As discussed earlier, Scenario analysis is the process of ascertaining and analyzing possible events that can occur in the future. Startups or businesses often consider analyzing these three scenarios:

• base-case (expected) scenario
• Worst-case scenario
• best case scenario.

About the Author

Ajay is a SaaS writer and personal finance blogger who has been active in the space for over three years, writing about startups, business planning, budgeting, credit cards, and other topics related to personal finance. If not writing, he’s probably having a power nap. Read more

Reach Your Goals with Accurate Planning

Business Plan Example and Template

Learn how to create a business plan

What is a Business Plan?

A business plan is a document that contains the operational and financial plan of a business, and details how its objectives will be achieved. It serves as a road map for the business and can be used when pitching investors or financial institutions for debt or equity financing .

A business plan should follow a standard format and contain all the important business plan elements. Typically, it should present whatever information an investor or financial institution expects to see before providing financing to a business.

Contents of a Business Plan

A business plan should be structured in a way that it contains all the important information that investors are looking for. Here are the main sections of a business plan:

1. Title Page

The title page captures the legal information of the business, which includes the registered business name, physical address, phone number, email address, date, and the company logo.

2. Executive Summary

The executive summary is the most important section because it is the first section that investors and bankers see when they open the business plan. It provides a summary of the entire business plan. It should be written last to ensure that you don’t leave any details out. It must be short and to the point, and it should capture the reader’s attention. The executive summary should not exceed two pages.

3. Industry Overview

The industry overview section provides information about the specific industry that the business operates in. Some of the information provided in this section includes major competitors, industry trends, and estimated revenues. It also shows the company’s position in the industry and how it will compete in the market against other major players.

4. Market Analysis and Competition

The market analysis section details the target market for the company’s product offerings. This section confirms that the company understands the market and that it has already analyzed the existing market to determine that there is adequate demand to support its proposed business model.

Market analysis includes information about the target market’s demographics , geographical location, consumer behavior, and market needs. The company can present numbers and sources to give an overview of the target market size.

A business can choose to consolidate the market analysis and competition analysis into one section or present them as two separate sections.

5. Sales and Marketing Plan

The sales and marketing plan details how the company plans to sell its products to the target market. It attempts to present the business’s unique selling proposition and the channels it will use to sell its goods and services. It details the company’s advertising and promotion activities, pricing strategy, sales and distribution methods, and after-sales support.

6. Management Plan

The management plan provides an outline of the company’s legal structure, its management team, and internal and external human resource requirements. It should list the number of employees that will be needed and the remuneration to be paid to each of the employees.

Any external professionals, such as lawyers, valuers, architects, and consultants, that the company will need should also be included. If the company intends to use the business plan to source funding from investors, it should list the members of the executive team, as well as the members of the advisory board.

7. Operating Plan

The operating plan provides an overview of the company’s physical requirements, such as office space, machinery, labor, supplies, and inventory . For a business that requires custom warehouses and specialized equipment, the operating plan will be more detailed, as compared to, say, a home-based consulting business. If the business plan is for a manufacturing company, it will include information on raw material requirements and the supply chain.

8. Financial Plan

The financial plan is an important section that will often determine whether the business will obtain required financing from financial institutions, investors, or venture capitalists. It should demonstrate that the proposed business is viable and will return enough revenues to be able to meet its financial obligations. Some of the information contained in the financial plan includes a projected income statement , balance sheet, and cash flow.

9. Appendices and Exhibits

The appendices and exhibits part is the last section of a business plan. It includes any additional information that banks and investors may be interested in or that adds credibility to the business. Some of the information that may be included in the appendices section includes office/building plans, detailed market research , products/services offering information, marketing brochures, and credit histories of the promoters.

Business Plan Template

Here is a basic template that any business can use when developing its business plan:

Section 1: Executive Summary

• Present the company’s mission.
• Describe the company’s product and/or service offerings.
• Give a summary of the target market and its demographics.
• Summarize the industry competition and how the company will capture a share of the available market.
• Give a summary of the operational plan, such as inventory, office and labor, and equipment requirements.

Section 2: Industry Overview

• Describe the company’s position in the industry.
• Describe the existing competition and the major players in the industry.
• Provide information about the industry that the business will operate in, estimated revenues, industry trends, government influences, as well as the demographics of the target market.

Section 3: Market Analysis and Competition

• Define your target market, their needs, and their geographical location.
• Describe the size of the market, the units of the company’s products that potential customers may buy, and the market changes that may occur due to overall economic changes.
• Give an overview of the estimated sales volume vis-à-vis what competitors sell.
• Give a plan on how the company plans to combat the existing competition to gain and retain market share.

Section 4: Sales and Marketing Plan

• Describe the products that the company will offer for sale and its unique selling proposition.
• List the different advertising platforms that the business will use to get its message to customers.
• Describe how the business plans to price its products in a way that allows it to make a profit.
• Give details on how the company’s products will be distributed to the target market and the shipping method.

Section 5: Management Plan

• Describe the organizational structure of the company.
• List the owners of the company and their ownership percentages.
• List the key executives, their roles, and remuneration.
• List any internal and external professionals that the company plans to hire, and how they will be compensated.
• Include a list of the members of the advisory board, if available.

Section 6: Operating Plan

• Describe the location of the business, including office and warehouse requirements.
• Describe the labor requirement of the company. Outline the number of staff that the company needs, their roles, skills training needed, and employee tenures (full-time or part-time).
• Describe the manufacturing process, and the time it will take to produce one unit of a product.
• Describe the equipment and machinery requirements, and if the company will lease or purchase equipment and machinery, and the related costs that the company estimates it will incur.
• Provide a list of raw material requirements, how they will be sourced, and the main suppliers that will supply the required inputs.

Section 7: Financial Plan

• Describe the financial projections of the company, by including the projected income statement, projected cash flow statement, and the balance sheet projection.

Section 8: Appendices and Exhibits

• Quotes of building and machinery leases
• Proposed office and warehouse plan
• Market research and a summary of the target market
• Credit information of the owners
• List of product and/or services

Related Readings

Thank you for reading CFI’s guide to Business Plans. To keep learning and advancing your career, the following CFI resources will be helpful:

• Corporate Structure
• Three Financial Statements
• Business Model Canvas Examples
• See all management & strategy resources
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How to Craft the Financial Section of Business Plan (Hint: It’s All About the Numbers)

Writing a small business plan takes time and effort … especially when you have to dive into the numbers for the financial section. But, working on the financial section of business plan could lead to a big payoff for your business.

Read on to learn what is the financial section of a business plan, why it matters, and how to write one for your company.  

What is the financial section of business plan?

Generally, the financial section is one of the last sections in a business plan. It describes a business’s historical financial state (if applicable) and future financial projections. Businesses include supporting documents such as budgets and financial statements, as well as funding requests in this section of the plan.  

The financial part of the business plan introduces numbers. It comes after the executive summary, company description , market analysis, organization structure, product information, and marketing and sales strategies.

Businesses that are trying to get financing from lenders or investors use the financial section to make their case. This section also acts as a financial roadmap so you can budget for your business’s future income and expenses. 

Why it matters 

The financial section of the business plan is critical for moving beyond wordy aspirations and into hard data and the wonderful world of numbers. 

Through the financial section, you can:

• Forecast your business’s future finances
• Budget for expenses (e.g., startup costs)
• Get financing from lenders or investors
• Grow your business

• Growth : 64% of businesses with a business plan were able to grow their business, compared to 43% of businesses without a business plan.
• Financing : 36% of businesses with a business plan secured a loan, compared to 18% of businesses without a plan.

So, if you want to possibly double your chances of securing a business loan, consider putting in a little time and effort into your business plan’s financial section. 

Writing your financial section

To write the financial section, you first need to gather some information. Keep in mind that the information you gather depends on whether you have historical financial information or if you’re a brand-new startup. 

Your financial section should detail:

• Business expenses 

Financial projections

Financial statements, break-even point, funding requests, exit strategy, business expenses.

Whether you’ve been in business for one day or 10 years, you have expenses. These expenses might simply be startup costs for new businesses or fixed and variable costs for veteran businesses. 

Take a look at some common business expenses you may need to include in the financial section of business plan:

• Licenses and permits
• Cost of goods sold 
• Rent or mortgage payments
• Payroll costs (e.g., salaries and taxes)
• Utilities 
• Equipment 
• Supplies 
• Advertising 

Write down each type of expense and amount you currently have as well as expenses you predict you’ll have. Use a consistent time period (e.g., monthly costs). 

Indicate which expenses are fixed (unchanging month-to-month) and which are variable (subject to changes). 

How much do you anticipate earning from sales each month? 

If you operate an existing business, you can look at previous monthly revenue to make an educated estimate. Take factors into consideration, like seasonality and economic ups and downs, when basing projections on previous cash flow.

Coming up with your financial projections may be a bit trickier if you are a startup. After all, you have nothing to go off of. Come up with a reasonable monthly goal based on things like your industry, competitors, and the market. Hint : Look at your market analysis section of the business plan for guidance. 

A financial statement details your business’s finances. The three main types of financial statements are income statements, cash flow statements, and balance sheets.

Income statements summarize your business’s income and expenses during a period of time (e.g., a month). This document shows whether your business had a net profit or loss during that time period. 

Cash flow statements break down your business’s incoming and outgoing money. This document details whether your company has enough cash on hand to cover expenses.

The balance sheet summarizes your business’s assets, liabilities, and equity. Balance sheets help with debt management and business growth decisions. 

If you run a startup, you can create “pro forma financial statements,” which are statements based on projections.

If you’ve been in business for a bit, you should have financial statements in your records. You can include these in your business plan. And, include forecasted financial statements. 

You’re just in luck. Check out our FREE guide, Use Financial Statements to Assess the Health of Your Business , to learn more about the different types of financial statements for your business.

Potential investors want to know when your business will reach its break-even point. The break-even point is when your business’s sales equal its expenses. 

Estimate when your company will reach its break-even point and detail it in the financial section of business plan.

If you’re looking for financing, detail your funding request here. Include how much you are looking for, list ideal terms (e.g., 10-year loan or 15% equity), and how long your request will cover. 

Remember to discuss why you are requesting money and what you plan on using the money for (e.g., equipment). 

Back up your funding request by emphasizing your financial projections. 

Last but not least, your financial section should also discuss your business’s exit strategy. An exit strategy is a plan that outlines what you’ll do if you need to sell or close your business, retire, etc. 

Investors and lenders want to know how their investment or loan is protected if your business doesn’t make it. The exit strategy does just that. It explains how your business will make ends meet even if it doesn’t make it. 

When you’re working on the financial section of business plan, take advantage of your accounting records to make things easier on yourself. For organized books, try Patriot’s online accounting software . Get your free trial now!

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How to Write a Business Plan: Step-by-Step Guide + Examples

Noah Parsons

24 min. read

Updated May 7, 2024

Writing a business plan doesn’t have to be complicated. 

In this step-by-step guide, you’ll learn how to write a business plan that’s detailed enough to impress bankers and potential investors, while giving you the tools to start, run, and grow a successful business.

• The basics of business planning

If you’re reading this guide, then you already know why you need a business plan . 

You understand that planning helps you: 

• Raise money
• Grow strategically
• Keep your business on the right track 

As you start to write your plan, it’s useful to zoom out and remember what a business plan is .

At its core, a business plan is an overview of the products and services you sell, and the customers that you sell to. It explains your business strategy: how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

Most business plans also include financial forecasts for the future. These set sales goals, budget for expenses, and predict profits and cash flow. 

A good business plan is much more than just a document that you write once and forget about. It’s also a guide that helps you outline and achieve your goals. 

After completing your plan, you can use it as a management tool to track your progress toward your goals. Updating and adjusting your forecasts and budgets as you go is one of the most important steps you can take to run a healthier, smarter business. 

We’ll dive into how to use your plan later in this article.

There are many different types of plans , but we’ll go over the most common type here, which includes everything you need for an investor-ready plan. However, if you’re just starting out and are looking for something simpler—I recommend starting with a one-page business plan . It’s faster and easier to create. 

It’s also the perfect place to start if you’re just figuring out your idea, or need a simple strategic plan to use inside your business.

Dig deeper : How to write a one-page business plan

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• What to include in your business plan

Executive summary

The executive summary is an overview of your business and your plans. It comes first in your plan and is ideally just one to two pages. Most people write it last because it’s a summary of the complete business plan.

Ideally, the executive summary can act as a stand-alone document that covers the highlights of your detailed plan. 

In fact, it’s common for investors to ask only for the executive summary when evaluating your business. If they like what they see in the executive summary, they’ll often follow up with a request for a complete plan, a pitch presentation , or more in-depth financial forecasts .

Your executive summary should include:

• A summary of the problem you are solving
• A description of your product or service
• An overview of your target market
• A brief description of your team
• A summary of your financials
• Your funding requirements (if you are raising money)

Dig Deeper: How to write an effective executive summary

Products and services description

This is where you describe exactly what you’re selling, and how it solves a problem for your target market. The best way to organize this part of your plan is to start by describing the problem that exists for your customers. After that, you can describe how you plan to solve that problem with your product or service. 

This is usually called a problem and solution statement .

To truly showcase the value of your products and services, you need to craft a compelling narrative around your offerings. How will your product or service transform your customers’ lives or jobs? A strong narrative will draw in your readers.

This is also the part of the business plan to discuss any competitive advantages you may have, like specific intellectual property or patents that protect your product. If you have any initial sales, contracts, or other evidence that your product or service is likely to sell, include that information as well. It will show that your idea has traction , which can help convince readers that your plan has a high chance of success.

Market analysis

Your target market is a description of the type of people that you plan to sell to. You might even have multiple target markets, depending on your business. 

A market analysis is the part of your plan where you bring together all of the information you know about your target market. Basically, it’s a thorough description of who your customers are and why they need what you’re selling. You’ll also include information about the growth of your market and your industry .

Try to be as specific as possible when you describe your market. 

Include information such as age, income level, and location—these are what’s called “demographics.” If you can, also describe your market’s interests and habits as they relate to your business—these are “psychographics.” 

Related: Target market examples

Essentially, you want to include any knowledge you have about your customers that is relevant to how your product or service is right for them. With a solid target market, it will be easier to create a sales and marketing plan that will reach your customers. That’s because you know who they are, what they like to do, and the best ways to reach them.

Next, provide any additional information you have about your market. 

What is the size of your market ? Is the market growing or shrinking? Ideally, you’ll want to demonstrate that your market is growing over time, and also explain how your business is positioned to take advantage of any expected changes in your industry.

Dig Deeper: Learn how to write a market analysis

Competitive analysis

Part of defining your business opportunity is determining what your competitive advantage is. To do this effectively, you need to know as much about your competitors as your target customers. 

Every business has some form of competition. If you don’t think you have competitors, then explore what alternatives there are in the market for your product or service. 

For example: In the early years of cars, their main competition was horses. For social media, the early competition was reading books, watching TV, and talking on the phone.

A good competitive analysis fully lays out the competitive landscape and then explains how your business is different. Maybe your products are better made, or cheaper, or your customer service is superior. Maybe your competitive advantage is your location – a wide variety of factors can ultimately give you an advantage.

Dig Deeper: How to write a competitive analysis for your business plan

Marketing and sales plan

The marketing and sales plan covers how you will position your product or service in the market, the marketing channels and messaging you will use, and your sales tactics. 

The best place to start with a marketing plan is with a positioning statement . 

This explains how your business fits into the overall market, and how you will explain the advantages of your product or service to customers. You’ll use the information from your competitive analysis to help you with your positioning. 

For example: You might position your company as the premium, most expensive but the highest quality option in the market. Or your positioning might focus on being locally owned and that shoppers support the local economy by buying your products.

Once you understand your positioning, you’ll bring this together with the information about your target market to create your marketing strategy . 

This is how you plan to communicate your message to potential customers. Depending on who your customers are and how they purchase products like yours, you might use many different strategies, from social media advertising to creating a podcast. Your marketing plan is all about how your customers discover who you are and why they should consider your products and services. 

While your marketing plan is about reaching your customers—your sales plan will describe the actual sales process once a customer has decided that they’re interested in what you have to offer. 

If your business requires salespeople and a long sales process, describe that in this section. If your customers can “self-serve” and just make purchases quickly on your website, describe that process. 

A good sales plan picks up where your marketing plan leaves off. The marketing plan brings customers in the door and the sales plan is how you close the deal.

Together, these specific plans paint a picture of how you will connect with your target audience, and how you will turn them into paying customers.

Dig deeper: What to include in your sales and marketing plan

Business operations

The operations section describes the necessary requirements for your business to run smoothly. It’s where you talk about how your business works and what day-to-day operations look like. 

Depending on how your business is structured, your operations plan may include elements of the business like:

• Supply chain management
• Manufacturing processes
• Equipment and technology
• Distribution

Some businesses distribute their products and reach their customers through large retailers like Amazon.com, Walmart, Target, and grocery store chains. 

These businesses should review how this part of their business works. The plan should discuss the logistics and costs of getting products onto store shelves and any potential hurdles the business may have to overcome.

If your business is much simpler than this, that’s OK. This section of your business plan can be either extremely short or more detailed, depending on the type of business you are building.

For businesses selling services, such as physical therapy or online software, you can use this section to describe the technology you’ll leverage, what goes into your service, and who you will partner with to deliver your services.

Dig Deeper: Learn how to write the operations chapter of your plan

Key milestones and metrics

Although it’s not required to complete your business plan, mapping out key business milestones and the metrics can be incredibly useful for measuring your success.

Good milestones clearly lay out the parameters of the task and set expectations for their execution. You’ll want to include:

• A description of each task
• The proposed due date
• Who is responsible for each task

If you have a budget, you can include projected costs to hit each milestone. You don’t need extensive project planning in this section—just list key milestones you want to hit and when you plan to hit them. This is your overall business roadmap. 

Possible milestones might be:

• Website launch date
• Store or office opening date
• First significant sales
• Break even date
• Business licenses and approvals

You should also discuss the key numbers you will track to determine your success. Some common metrics worth tracking include:

• Conversion rates
• Customer acquisition costs
• Profit per customer
• Repeat purchases

It’s perfectly fine to start with just a few metrics and grow the number you are tracking over time. You also may find that some metrics simply aren’t relevant to your business and can narrow down what you’re tracking.

Dig Deeper: How to use milestones in your business plan

Organization and management team

Investors don’t just look for great ideas—they want to find great teams. Use this chapter to describe your current team and who you need to hire . You should also provide a quick overview of your location and history if you’re already up and running.

Briefly highlight the relevant experiences of each key team member in the company. It’s important to make the case for why yours is the right team to turn an idea into a reality. 

Do they have the right industry experience and background? Have members of the team had entrepreneurial successes before? 

If you still need to hire key team members, that’s OK. Just note those gaps in this section.

Your company overview should also include a summary of your company’s current business structure . The most common business structures include:

• Sole proprietor
• Partnership

Be sure to provide an overview of how the business is owned as well. Does each business partner own an equal portion of the business? How is ownership divided? 

Potential lenders and investors will want to know the structure of the business before they will consider a loan or investment.

Dig Deeper: How to write about your company structure and team

Financial plan

Last, but certainly not least, is your financial plan chapter. 

Entrepreneurs often find this section the most daunting. But, business financials for most startups are less complicated than you think, and a business degree is certainly not required to build a solid financial forecast. 

A typical financial forecast in a business plan includes the following:

• Sales forecast : An estimate of the sales expected over a given period. You’ll break down your forecast into the key revenue streams that you expect to have.
• Expense budget : Your planned spending such as personnel costs , marketing expenses, and taxes.
• Profit & Loss : Brings together your sales and expenses and helps you calculate planned profits.
• Cash Flow : Shows how cash moves into and out of your business. It can predict how much cash you’ll have on hand at any given point in the future.
• Balance Sheet : A list of the assets, liabilities, and equity in your company. In short, it provides an overview of the financial health of your business. 

A strong business plan will include a description of assumptions about the future, and potential risks that could impact the financial plan. Including those will be especially important if you’re writing a business plan to pursue a loan or other investment.

Dig Deeper: How to create financial forecasts and budgets

This is the place for additional data, charts, or other information that supports your plan.

Including an appendix can significantly enhance the credibility of your plan by showing readers that you’ve thoroughly considered the details of your business idea, and are backing your ideas up with solid data.

Just remember that the information in the appendix is meant to be supplementary. Your business plan should stand on its own, even if the reader skips this section.

Dig Deeper : What to include in your business plan appendix

Optional: Business plan cover page

Adding a business plan cover page can make your plan, and by extension your business, seem more professional in the eyes of potential investors, lenders, and partners. It serves as the introduction to your document and provides necessary contact information for stakeholders to reference.

Your cover page should be simple and include:

• Company logo
• Business name
• Value proposition (optional)
• Business plan title
• Completion and/or update date
• Address and contact information
• Confidentiality statement

Just remember, the cover page is optional. If you decide to include it, keep it very simple and only spend a short amount of time putting it together.

Dig Deeper: How to create a business plan cover page

How to use AI to help write your business plan

Generative AI tools such as ChatGPT can speed up the business plan writing process and help you think through concepts like market segmentation and competition. These tools are especially useful for taking ideas that you provide and converting them into polished text for your business plan.

The best way to use AI for your business plan is to leverage it as a collaborator , not a replacement for human creative thinking and ingenuity. 

AI can come up with lots of ideas and act as a brainstorming partner. It’s up to you to filter through those ideas and figure out which ones are realistic enough to resonate with your customers. 

There are pros and cons of using AI to help with your business plan . So, spend some time understanding how it can be most helpful before just outsourcing the job to AI.

Learn more: 10 AI prompts you need to write a business plan

• Writing tips and strategies

To help streamline the business plan writing process, here are a few tips and key questions to answer to make sure you get the most out of your plan and avoid common mistakes .  

Determine why you are writing a business plan

Knowing why you are writing a business plan will determine your approach to your planning project. 

For example: If you are writing a business plan for yourself, or just to use inside your own business , you can probably skip the section about your team and organizational structure. 

If you’re raising money, you’ll want to spend more time explaining why you’re looking to raise the funds and exactly how you will use them.

Regardless of how you intend to use your business plan , think about why you are writing and what you’re trying to get out of the process before you begin.

Keep things concise

Probably the most important tip is to keep your business plan short and simple. There are no prizes for long business plans . The longer your plan is, the less likely people are to read it. 

So focus on trimming things down to the essentials your readers need to know. Skip the extended, wordy descriptions and instead focus on creating a plan that is easy to read —using bullets and short sentences whenever possible.

Have someone review your business plan

Writing a business plan in a vacuum is never a good idea. Sometimes it’s helpful to zoom out and check if your plan makes sense to someone else. You also want to make sure that it’s easy to read and understand.

Don’t wait until your plan is “done” to get a second look. Start sharing your plan early, and find out from readers what questions your plan leaves unanswered. This early review cycle will help you spot shortcomings in your plan and address them quickly, rather than finding out about them right before you present your plan to a lender or investor.

If you need a more detailed review, you may want to explore hiring a professional plan writer to thoroughly examine it.

Use a free business plan template and business plan examples to get started

Knowing what information to include in a business plan is sometimes not quite enough. If you’re struggling to get started or need additional guidance, it may be worth using a business plan template. 

There are plenty of great options available (we’ve rounded up our 8 favorites to streamline your search).

But, if you’re looking for a free downloadable business plan template , you can get one right now; download the template used by more than 1 million businesses. 

Or, if you just want to see what a completed business plan looks like, check out our library of over 550 free business plan examples . 

We even have a growing list of industry business planning guides with tips for what to focus on depending on your business type.

Common pitfalls and how to avoid them

It’s easy to make mistakes when you’re writing your business plan. Some entrepreneurs get sucked into the writing and research process, and don’t focus enough on actually getting their business started. 

Here are a few common mistakes and how to avoid them:

Not talking to your customers : This is one of the most common mistakes. It’s easy to assume that your product or service is something that people want. Before you invest too much in your business and too much in the planning process, make sure you talk to your prospective customers and have a good understanding of their needs.

• Overly optimistic sales and profit forecasts: By nature, entrepreneurs are optimistic about the future. But it’s good to temper that optimism a little when you’re planning, and make sure your forecasts are grounded in reality. 
• Spending too much time planning: Yes, planning is crucial. But you also need to get out and talk to customers, build prototypes of your product and figure out if there’s a market for your idea. Make sure to balance planning with building.
• Not revising the plan: Planning is useful, but nothing ever goes exactly as planned. As you learn more about what’s working and what’s not—revise your plan, your budgets, and your revenue forecast. Doing so will provide a more realistic picture of where your business is going, and what your financial needs will be moving forward.
• Not using the plan to manage your business: A good business plan is a management tool. Don’t just write it and put it on the shelf to collect dust – use it to track your progress and help you reach your goals.
• Presenting your business plan

The planning process forces you to think through every aspect of your business and answer questions that you may not have thought of. That’s the real benefit of writing a business plan – the knowledge you gain about your business that you may not have been able to discover otherwise.

With all of this knowledge, you’re well prepared to convert your business plan into a pitch presentation to present your ideas. 

A pitch presentation is a summary of your plan, just hitting the highlights and key points. It’s the best way to present your business plan to investors and team members.

Dig Deeper: Learn what key slides should be included in your pitch deck

Use your business plan to manage your business

One of the biggest benefits of planning is that it gives you a tool to manage your business better. With a revenue forecast, expense budget, and projected cash flow, you know your targets and where you are headed.

And yet, nothing ever goes exactly as planned – it’s the nature of business.

That’s where using your plan as a management tool comes in. The key to leveraging it for your business is to review it periodically and compare your forecasts and projections to your actual results.

Start by setting up a regular time to review the plan – a monthly review is a good starting point. During this review, answer questions like:

• Did you meet your sales goals?
• Is spending following your budget?
• Has anything gone differently than what you expected?

Now that you see whether you’re meeting your goals or are off track, you can make adjustments and set new targets. 

Maybe you’re exceeding your sales goals and should set new, more aggressive goals. In that case, maybe you should also explore more spending or hiring more employees. 

Or maybe expenses are rising faster than you projected. If that’s the case, you would need to look at where you can cut costs.

A plan, and a method for comparing your plan to your actual results , is the tool you need to steer your business toward success.

Learn More: How to run a regular plan review

Free business plan templates and examples

Kickstart your business plan writing with one of our free business plan templates or recommended tools.

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How to write a business plan FAQ

What is a business plan?

A document that describes your business , the products and services you sell, and the customers that you sell to. It explains your business strategy, how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

What are the benefits of a business plan?

A business plan helps you understand where you want to go with your business and what it will take to get there. It reduces your overall risk, helps you uncover your business’s potential, attracts investors, and identifies areas for growth.

Having a business plan ultimately makes you more confident as a business owner and more likely to succeed for a longer period of time.

What are the 7 steps of a business plan?

The seven steps to writing a business plan include:

• Write a brief executive summary
• Describe your products and services.
• Conduct market research and compile data into a cohesive market analysis.
• Describe your marketing and sales strategy.
• Outline your organizational structure and management team.
• Develop financial projections for sales, revenue, and cash flow.
• Add any additional documents to your appendix.

What are the 5 most common business plan mistakes?

There are plenty of mistakes that can be made when writing a business plan. However, these are the 5 most common that you should do your best to avoid:

• 1. Not taking the planning process seriously.
• Having unrealistic financial projections or incomplete financial information.
• Inconsistent information or simple mistakes.
• Failing to establish a sound business model.
• Not having a defined purpose for your business plan.

What questions should be answered in a business plan?

Writing a business plan is all about asking yourself questions about your business and being able to answer them through the planning process. You’ll likely be asking dozens and dozens of questions for each section of your plan.

However, these are the key questions you should ask and answer with your business plan:

• How will your business make money?
• Is there a need for your product or service?
• Who are your customers?
• How are you different from the competition?
• How will you reach your customers?
• How will you measure success?

How long should a business plan be?

The length of your business plan fully depends on what you intend to do with it. From the SBA and traditional lender point of view, a business plan needs to be whatever length necessary to fully explain your business. This means that you prove the viability of your business, show that you understand the market, and have a detailed strategy in place.

If you intend to use your business plan for internal management purposes, you don’t necessarily need a full 25-50 page business plan. Instead, you can start with a one-page plan to get all of the necessary information in place.

What are the different types of business plans?

While all business plans cover similar categories, the style and function fully depend on how you intend to use your plan. Here are a few common business plan types worth considering.

Traditional business plan: The tried-and-true traditional business plan is a formal document meant to be used when applying for funding or pitching to investors. This type of business plan follows the outline above and can be anywhere from 10-50 pages depending on the amount of detail included, the complexity of your business, and what you include in your appendix.

Business model canvas: The business model canvas is a one-page template designed to demystify the business planning process. It removes the need for a traditional, copy-heavy business plan, in favor of a single-page outline that can help you and outside parties better explore your business idea.

One-page business plan: This format is a simplified version of the traditional plan that focuses on the core aspects of your business. You’ll typically stick with bullet points and single sentences. It’s most useful for those exploring ideas, needing to validate their business model, or who need an internal plan to help them run and manage their business.

Lean Plan: The Lean Plan is less of a specific document type and more of a methodology. It takes the simplicity and styling of the one-page business plan and turns it into a process for you to continuously plan, test, review, refine, and take action based on performance. It’s faster, keeps your plan concise, and ensures that your plan is always up-to-date.

What’s the difference between a business plan and a strategic plan?

A business plan covers the “who” and “what” of your business. It explains what your business is doing right now and how it functions. The strategic plan explores long-term goals and explains “how” the business will get there. It encourages you to look more intently toward the future and how you will achieve your vision.

However, when approached correctly, your business plan can actually function as a strategic plan as well. If kept lean, you can define your business, outline strategic steps, and track ongoing operations all with a single plan.

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

Table of Contents

• Use AI to help write your plan
• Common planning mistakes
• Manage with your business plan
• Templates and examples

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Start » startup, business plan financials: 3 statements to include.

The finance section of your business plan is essential to securing investors and determining whether your idea is even viable. Here's what to include.

If your business plan is the blueprint of how to run your company, the financials section is the key to making it happen. The finance section of your business plan is essential to determining whether your idea is even viable in the long term. It’s also necessary to convince investors of this viability and subsequently secure the type and amount of funding you need. Here’s what to include in your business plan financials.

[Read: How to Write a One-Page Business Plan ]

What are business plan financials?

Business plan financials is the section of your business plan that outlines your past, current and projected financial state. This section includes all the numbers and hard data you’ll need to plan for your business’s future, and to make your case to potential investors. You will need to include supporting financial documents and any funding requests in this part of your business plan.

Business plan financials are vital because they allow you to budget for existing or future expenses, as well as forecast your business’s future finances. A strongly written finance section also helps you obtain necessary funding from investors, allowing you to grow your business.

Sections to include in your business plan financials

Here are the three statements to include in the finance section of your business plan:

Profit and loss statement

A profit and loss statement , also known as an income statement, identifies your business’s revenue (profit) and expenses (loss). This document describes your company’s overall financial health in a given time period. While profit and loss statements are typically prepared quarterly, you will need to do so at least annually before filing your business tax return with the IRS.

Common items to include on a profit and loss statement :

• Revenue: total sales and refunds, including any money gained from selling property or equipment.
• Expenditures: total expenses.
• Cost of goods sold (COGS): the cost of making products, including materials and time.
• Gross margin: revenue minus COGS.
• Operational expenditures (OPEX): the cost of running your business, including paying employees, rent, equipment and travel expenses.
• Depreciation: any loss of value over time, such as with equipment.
• Earnings before tax (EBT): revenue minus COGS, OPEX, interest, loan payments and depreciation.
• Profit: revenue minus all of your expenses.

Businesses that have not yet started should provide projected income statements in their financials section. Currently operational businesses should include past and present income statements, in addition to any future projections.

[Read: Top Small Business Planning Strategies ]

A strongly written finance section also helps you obtain necessary funding from investors, allowing you to grow your business.

Balance sheet

A balance sheet provides a snapshot of your company’s finances, allowing you to keep track of earnings and expenses. It includes what your business owns (assets) versus what it owes (liabilities), as well as how much your business is currently worth (equity).

On the assets side of your balance sheet, you will have three subsections: current assets, fixed assets and other assets. Current assets include cash or its equivalent value, while fixed assets refer to long-term investments like equipment or buildings. Any assets that do not fall within these categories, such as patents and copyrights, can be classified as other assets.

On the liabilities side of your balance sheet, include a total of what your business owes. These can be broken down into two parts: current liabilities (amounts to be paid within a year) and long-term liabilities (amounts due for longer than a year, including mortgages and employee benefits).

Once you’ve calculated your assets and liabilities, you can determine your business’s net worth, also known as equity. This can be calculated by subtracting what you owe from what you own, or assets minus liabilities.

Cash flow statement

A cash flow statement shows the exact amount of money coming into your business (inflow) and going out of it (outflow). Each cost incurred or amount earned should be documented on its own line, and categorized into one of the following three categories: operating activities, investment activities and financing activities. These three categories can all have inflow and outflow activities.

Operating activities involve any ongoing expenses necessary for day-to-day operations; these are likely to make up the majority of your cash flow statement. Investment activities, on the other hand, cover any long-term payments that are needed to start and run your business. Finally, financing activities include the money you’ve used to fund your business venture, including transactions with creditors or funders.

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How to Write an Executive Summary in 6 Steps

Page Grossman is a freelance writer.

Robert Beaupre leads the SMB team at NerdWallet. He has covered financial topics as an editor for more than a decade. Before joining NerdWallet, he served as senior editorial manager of QuinStreet's insurance sites and managing editor of Insure.com. In addition, he served as an online media manager for the University of Nevada, Reno.

Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money .

When you’re starting a business, one of the first things you need to do is write a business plan. Your business plan is like a roadmap for your business, so you can lay out your goals and a concrete plan for how you’ll reach them.

Not only is a business plan essential for any business owner, but it’s also a requirement if you decide to apply for small business funding or find investors. After all, before a bank or individual hands over any money, they’ll want to be sure your company is on solid ground (so they can get their money back).

A business plan consists of several pieces, from an executive summary and market analysis to a financial plan and projections. The executive summary will be the first part of your business plan.

If wondering how to write an executive summary has kept you from completing your business plan, we’re here to help. In this guide, we’ll explain what an executive summary is and provide tips for writing your own so your business plan can start strong.

What is an executive summary?

An executive summary is a short, informative, and easy-to-read opening statement to your business plan. Even though it’s just one to two pages, the executive summary is incredibly important.

An executive summary tells the story of what your business does, why an investor might be interested in giving funds to your business, why their investment will be well-spent, and why you do what you do. An executive summary should be informative, but it should also capture a busy reader’s attention.

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Why write an executive summary?

Anyone you’re sending your executive summary and business plan to is likely busy—very busy. An entire business plan is long, involved, and deals with a lot of numbers.

Someone busy wants to get an understanding of your business, and they want to do it quickly, which is to say not by diving into a complicated, 80-page business plan. That’s where your executive summary comes in.

An executive summary provides just the opportunity to hook someone’s interest, tell them about your business, and offer a clear selling point as to why they should consider investing in your business.

Your executive summary is your chance to sell your business to potential investors and show them your business is worth not only their money but also their time.

What to include in an executive summary

By its nature, an executive summary is short. You must be able to clearly communicate the idea of your business, what sets you apart, and how you plan to grow into a successful enterprise.

The subsequent sections of your business plan will go into more detail, but your executive summary should include the most critical pieces of your business plan—enough to stand on its own, as it’s often the only thing a prospective investor will read. Here’s what your executive summary should include—consider it an executive summary template from which you can model your own.

1. The hook

The first sentence and paragraph of your executive summary determine whether or not the entire executive summary gets read. That’s why the hook or introduction is so important.

In general, a hook is considered anything that will get a reader’s attention. While an executive summary is a formal business document, you do want your hook to make you stand out from the crowd—without wasting time.

Your hook can be sharing something creative about your company, an interesting fact, or just a very well-crafted description of your business. It’s crucial to craft your hook with the personality of your reader in mind. Give them something that will make your company stand out and be memorable among a sea of other business plans.

Grab their attention in the first paragraph, and you’re much more likely to get your executive summary read, which could lead to an investment.

2. Company description summary

Now that you’ve hooked your reader, it’s time to get into some general information about your business. If an investor is going to give you money, after all, they first need to understand what your company does or what product you sell and who is managing the company.

Your company description should include information about your business, such as when it was formed and where you’re located; your products or services; the founders or executive team, including names and specific roles; and any additional details about the management team or style.

3. Market analysis

Your market analysis in the executive summary is a brief description of what the market for your business looks like. You want to show that you have done your research and proven that there is a need for your specific product or services. Some questions you should answer:

Who are your competitors?

Is there a demand for your products or services?

What advantages do you have that make your business unique in comparison to others?

To reiterate, stick to the highlights of your market analysis in your executive summary. You’ll provide a complete analysis in a separate section of your business plan, but you should be able to communicate enough in the executive summary that a potential investor can gauge whether your business has potential.

4. Products and services

Now that you’ve established a need in the market, it’s time to show just how your business will fill it. This section of your executive summary is all about highlighting the product or service that your company offers. Talk about your current sales, the growth you’ve seen so far, and any other highlights that are a selling point for your company.

This is also a good time to identify what sets your business apart and gives you a competitive advantage. After all, it’s unlikely that your business is the first of its kind. Highlight what you do better than the competition and why potential customers will choose your product or service over the other options on the market.

5. Financial information and projections

In this section of your executive summary, you want to give the reader an overview of your current business financials. Again, you’ll go more in-depth into this section later in your business plan, so just provide some highlights. Include your current sales and profits (if you have any), as well as what funding you’re hoping to acquire and how this will affect your financials in the next few years.

This is also where you can explain what funding, if any, you’ve received in the past. If you paid back your loan on time, this is an especially bright selling point for potential lenders.

6. Future plans

While asking for what funding you need is essential, you’ve also got to make clear what you’re going to use that funding for. If you’re asking for money, you want the person to know you have a plan to put those funds to good use.

Are you hoping to open another location, expand your product line, invest in your marketing efforts? This final section of your executive summary should detail where you want your business to go in the future, as well as drive home how funding can help you get there.

Tips for writing an executive summary

Even if you include each part of a good executive summary, you might not get noticed. What is written can be just as important as how it’s written. An executive summary has to strike a delicate balance between formal, personable, confident, and humble.

1. Be concise

An executive summary should include everything that’s in your business plan, just in a much shorter format. Writing a concise executive summary is no easy task and will require many revisions to get to the final draft. And while this is the first section of your executive summary, you’ll want to write it last, after you’ve put together all the other elements.

To choose your most important points and what should be included in the executive summary, go through your business plan, and pull out single-line bullet points. Go back through those bullet points and eliminate everything unnecessary to understanding your business.

Once you have your list of bullet points narrowed down, you can start writing your executive summary. Once it’s written, go back in and remove any unnecessary information. Remember, you should only be including the highlights—you have the rest of your business plan to go into more detail. The shorter and clearer your executive summary is, the more likely someone is to read it.

2. Use bullet points

One simple way to make your executive summary more readable is to use bullet points. If someone is reading quickly or skimming your executive summary, extra whitespace can make the content faster and easier to read.

Short paragraphs, short sentences, and bullet points all make an executive summary easier to skim—which is likely what the reader is doing. If important numbers and convincing stats jump out at the reader, they’re more likely to keep reading.

3. Speak to your audience

When writing your executive summary, be sure to think about who will be reading it; that’s who you’re speaking to. If you can personalize your executive summary to the personality and interests of the person who will read it, you’re more likely to capture their attention.

Personalizing might come in the form of a name in the salutation, sharing details in a specific way you know that person likes and the tone of your writing. An executive summary deals with business, so it will generally have a formal tone. But, different industries may be comfortable with some creativity of language or using shorthand to refer to certain ideas.

Know who you’re speaking to and use the right tone to speak to them. That might be formal and deferential, expert and clipped, informal and personable, or any other appropriate tone. This may also involve writing different versions of your executive summary for different audiences.

4. Play to your strengths

One of the best ways to catch the attention of your reader is to share why your business is unique. What makes your business unique is also what makes your business strong, which can capture a reader’s interest and show them why your business is worth investing in. Be sure to highlight these strengths from the start of your executive summary.

5. Get a test reader

Once you’ve written and edited your executive summary, you need a test reader. While someone in your industry or another business owner can be a great resource, you should also consider finding a test reader with limited knowledge of your business and industry. Your executive summary should be so clear that anyone can understand it, so having a variety of test readers can help identify any confusing language.

If you don’t have access to a test reader, consider using tools such as Hemingway App and Grammarly to ensure you’ve written something that’s easy to read and uses proper grammar.

How long should an executive summary be?

There’s no firm rule on how long an executive summary should be, as it depends on the length of your business plan and the depth of understanding needed by the reader to fully grasp your ask.

That being said, it should be as short and concise as you can get it. In general, an executive summary should be one to two pages in length.

You can fudge the length slightly by adjusting the margin and font size, but don’t forget readability is just as important as length. You want to leave plenty of white space and have a large enough font that the reader is comfortable while reading your executive summary. If your executive summary is hard to read, it’s less likely your reader will take the time to read your business plan.

What to avoid in an executive summary

While the rules for writing a stellar executive summary can be fuzzy, there are a few clear rules for what to avoid in your executive summary.

Your executive summary should avoid:

Focusing on investment. Instead, focus on getting the reader to be interested enough to continue and read your business plan or at least schedule a meeting with you.

Clichés, superlatives, and claims that aren’t backed up by fact. Your executive summary isn’t marketing material. It should be straightforward and clear.

Avoiding the executive summary no-nos is just as important as striking the right tone and getting in the necessary information for your reader.

The bottom line

While an executive summary is short, it’s challenging to write. Your executive summary condenses your entire introduction, business description, business plan, market analysis, financial projections, and ask into one to two pages. Condensing information down to its most essential form takes time and many drafts. When you’re putting together your business plan’s executive summary, be sure to give yourself plenty of time to write it and to seek the help of friends or colleagues for editing it to perfection.

However, some tools make crafting a business plan, including your executive summary, a simpler process. A business plan template is a great place to start, and business plan software can especially help with the design of your business plan. After all, a well-written executive summary can make all the difference in obtaining funding for your business, so you’ll want all the help you can get.

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.

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• How to Write a Great Business Plan: Financial Analysis

The last article in a comprehensive series to help you craft the perfect business plan for your startup.

This article is part of a series on  how to write a great business plan .

Numbers tell the story. Bottom line results indicate the success or failure of any business.

Financial projections and estimates help entrepreneurs, lenders, and investors or lenders objectively evaluate a company's potential for success. If a business seeks outside funding, providing comprehensive financial reports and analysis is critical.

But most importantly, financial projections tell you whether your business has a chance of being viable--and if not let you know you have more work to do.

Most business plans include at least five basic reports or projections:

• Balance Sheet: Describes the company cash position including assets, liabilities, shareholders, and earnings retained to fund future operations or to serve as funding for expansion and growth. It indicates the financial health of a business.
• Income Statement: Also called a Profit and Loss statement, this report lists projected revenue and expenses. It shows whether a company will be profitable during a given time period.
• Cash Flow Statement: A projection of cash receipts and expense payments. It shows how and when cash will flow through the business; without cash, payments (including salaries) cannot be made.
• Operating Budget: A detailed breakdown of income and expenses; provides a guide for how the company will operate from a "dollars" point of view.
• Break-Even Analysis: A projection of the revenue required to cover all fixed and variable expenses. Shows when, under specific conditions, a business can expect to become profitable.

It's easy to find examples of all of the above. Even the most basic accounting software packages include templates and samples. You can also find templates in Excel and Google Docs. (A quick search like "google docs profit and loss statement" yields plenty of examples.)

Or you can work with an accountant to create the necessary financial projections and documents. Certainly feel free to do so... but I'd first recommend playing around with the reports yourself. While you don't need to be an accountant to run a business, you do need to understand your numbers... and the best way to understand your numbers is usually to actually work with your numbers.

But ultimately the tools you use to develop your numbers are not as important as whether those numbers are as accurate as possible--and whether those numbers help you decide whether to take the next step and put your business plan into action.

Then Financial Analysis can help you answer the most important business question: "Can we make a profit?"

Some business plans include less essential but potentially important information in an Appendix section. You may decide to include, as backup or additional information:

• Resumes of key leaders
• Additional descriptions of products and services
• Legal agreements
• Organizational charts
• Examples of marketing and advertising collateral
• Photographs of potential facilities, products, etc
• Backup for market research or competitive analysis
• Additional financial documents or projections

Keep in mind creating an Appendix is usually only necessary if you're seeking financing or hoping to bring in partners or investors. Initially the people reading your business plan don't wish to plow through reams and reams of charts, numbers, and backup information. If one does want to dig deeper, fine--he or she can check out the documents in the Appendix.

That way your business plan can share your story clearly and concisely.

Otherwise, since you created your business plan... you should already have the backup.

And one last thing: always remember the goal of your business plan is to convince you that your idea makes sense--because it's your time, your money, and your effort on the line.

More in this series:

• How to Write a Great Business Plan: Key Concepts
• How to Write a Great Business Plan: the Executive Summary
• How to Write a Great Business Plan: Overview and Objectives
• How to Write a Great Business Plan: Products and Services
• How to Write a Great Business Plan: Market Opportunities
• How to Write a Great Business Plan: Sales and Marketing
• How to Write a Great Business Plan: Competitive Analysis
• How to Write a Great Business Plan: Operations
• How to Write a Great Business Plan: Management Team

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Home > Business Plan > Business Plan Financials Summary

Business Plan Financials Summary

… our financials show this …

Business Plan Financials Summary Presentation

The presentation of the business plan financials summary will depend on the nature of the business and the information selected from the detailed financial projections. In order to gain an understanding of the business, the investor will want to see the numbers for between three and five years ahead, and if available, two years back.

This is part of the financial projections and Contents of a Business Plan Guide , a series of posts on what each section of a simple business plan should include. The next post in this series sets out a summary of the existing investors in the business.

About the Author

Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.

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How to Write a Business Plan: Your Step-by-Step Guide

So, you’ve got an idea and you want to start a business —great! Before you do anything else, like seek funding or build out a team, you'll need to know how to write a business plan. This plan will serve as the foundation of your company while also giving investors and future employees a clear idea of your purpose.

Below, Lauren Cobello, Founder and CEO of Leverage with Media PR , gives her best advice on how to make a business plan for your company.

Build your dream business with the help of a high-paying job—browse open jobs on The Muse »

What is a business plan, and when do you need one?

According to Cobello, a business plan is a document that contains the mission of the business and a brief overview of it, as well as the objectives, strategies, and financial plans of the founder. A business plan comes into play very early on in the process of starting a company—more or less before you do anything else.

“You should start a company with a business plan in mind—especially if you plan to get funding for the company,” Cobello says. “You’re going to need it.”

Whether that funding comes from a loan, an investor, or crowdsourcing, a business plan is imperative to secure the capital, says the U.S. Small Business Administration . Anyone who’s considering giving you money is going to want to review your business plan before doing so. That means before you head into any meeting, make sure you have physical copies of your business plan to share.

Different types of business plans

The four main types of business plans are:

Startup Business Plans

Internal business plans, strategic business plans, one-page business plans.

Let's break down each one:

If you're wondering how to write a business plan for a startup, Cobello has advice for you. Startup business plans are the most common type, she says, and they are a critical tool for new business ventures that want funding. A startup is defined as a company that’s in its first stages of operations, founded by an entrepreneur who has a product or service idea.

Most startups begin with very little money, so they need a strong business plan to convince family, friends, banks, and/or venture capitalists to invest in the new company.

Internal business plans “are for internal use only,” says Cobello. This kind of document is not public-facing, only company-facing, and it contains an outline of the company’s business strategy, financial goals and budgets, and performance data.

Internal business plans aren’t used to secure funding, but rather to set goals and get everyone working there tracking towards them.

As the name implies, strategic business plans are geared more towards strategy and they include an assessment of the current business landscape, notes Jérôme Côté, a Business Advisor at BDC Advisory Services .

Unlike a traditional business plan, Cobello adds, strategic plans include a SWOT analysis (which stands for strengths, weaknesses, opportunities, and threats) and an in-depth action plan for the next six to 12 months. Strategic plans are action-based and take into account the state of the company and the industry in which it exists.

Although a typical business plan falls between 15 to 30 pages, some companies opt for the much shorter One-Page Business Plan. A one-page business plan is a simplified version of the larger business plan, and it focuses on the problem your product or service is solving, the solution (your product), and your business model (how you’ll make money).

A one-page plan is hyper-direct and easy to read, making it an effective tool for businesses of all sizes, at any stage.

How to create a business plan in 7 steps

Every business plan is different, and the steps you take to complete yours will depend on what type and format you choose. That said, if you need a place to start and appreciate a roadmap, here’s what Cobello recommends:

1. Conduct your research

Before writing your business plan, you’ll want to do a thorough investigation of what’s out there. Who will be the competitors for your product or service? Who is included in the target market? What industry trends are you capitalizing on, or rebuking? You want to figure out where you sit in the market and what your company’s value propositions are. What makes you different—and better?

2. Define your purpose for the business plan

The purpose of your business plan will determine which kind of plan you choose to create. Are you trying to drum up funding, or get the company employees focused on specific goals? (For the former, you’d want a startup business plan, while an internal plan would satisfy the latter.) Also, consider your audience. An investment firm that sees hundreds of potential business plans a day may prefer to see a one-pager upfront and, if they’re interested, a longer plan later.

3. Write your company description

Every business plan needs a company description—aka a summary of the company’s purpose, what they do/offer, and what makes it unique. Company descriptions should be clear and concise, avoiding the use of jargon, Cobello says. Ideally, descriptions should be a few paragraphs at most.

4. Explain and show how the company will make money

A business plan should be centered around the company’s goals, and it should clearly explain how the company will generate revenue. To do this, Cobello recommends using actual numbers and details, as opposed to just projections.

For instance, if the company is already making money, show how much and at what cost (e.g. what was the net profit). If it hasn’t generated revenue yet, outline the plan for how it will—including what the product/service will cost to produce and how much it will cost the consumer.

5. Outline your marketing strategy

How will you promote the business? Through what channels will you be promoting it? How are you going to reach and appeal to your target market? The more specific and thorough you can be with your plans here, the better, Cobello says.

6. Explain how you’ll spend your funding

What will you do with the money you raise? What are the first steps you plan to take? As a founder, you want to instill confidence in your investors and show them that the instant you receive their money, you’ll be taking smart actions that grow the company.

7. Include supporting documents

Creating a business plan is in some ways akin to building a legal case, but for your business. “You want to tell a story, and to be as thorough as possible, while keeping your plan succinct, clear, interesting, and visually appealing,” Cobello says. “Supporting documents could include financial projects, a competitive analysis of the market you’re entering into, and even any licenses, patents, or permits you’ve secured.”

A business plan is an individualized document—it’s ultimately up to you what information to include and what story you tell. But above all, Cobello says, your business plan should have a clear focus and goal in mind, because everything else will build off this cornerstone.

“Many people don’t realize how important business plans are for the health of their company,” she says. “Set aside time to make this a priority for your business, and make sure to keep it updated as you grow.”

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6 Small Business Financial Statements for Startup Financing

Financial Statements You'll Need for Your Startup Business Plan

You're ready to start your small business and your're working on a great business plan to take to a bank or other lender. A key part of that plan is the financial statements. These statements will be looked at carefully by the lender, so here are some tips for making these documents SELL your business plan . 

Financial Statements You Will Need

You may need several different types of statements, depending on the requirements of your lender and your own technical expertise. 

The statements you will certainly need are:

• A startup budget or cash flow statement
• A startup costs worksheet
• A pro forma (projected) profit and loss statement
• A pro forma (projected) balance sheet 

Your lender may also want these financial statements: 

• Sources and uses of funds statement
• Break-even analysis

Putting these Statements in Order

First, work on your startup budget and your startup costs worksheet. You'll need to do a lot of estimating.

The trick is to underestimate income and overestimate expenses, so you can create a more realistic picture of your business over the first year or two.

Then work on a profit and loss statement for the first year. A lender will definitely want to see this one. And, even though it's not going to be accurate, lenders like to see a startup balance sheet. 

Some lenders may ask for a break-even analysis, a cash flow statement, or a sources and uses of funds statement. We'll go over these statements so you can quickly provide them if asked.

Business Startup Budget

 A startup budget is like a projected cash flow statement, but with a little more guesswork.

Your lender wants to know your budget - that is, what you expect to bring in and how much to expect to spend each month. Lenders want to know that you can follow a budget and that you will not over-spend. 

They also want to see how much you will need to pay your bills while your business is starting out (working capital), and how long it will take you to have a positive cash flow (bring in more money than you are spending). 

Include some key information on your budget:

• What products or services you are selling, including prices and estimated volumes
• Key drivers for expenses, like how many employees you'll need and your marketing initiatives  

A typical budget worksheet should be carried through three years, so your lender can see how you expect to generate the cash to make your monthly loan payments.

Startup Costs Worksheet

A startup costs worksheet answers the question "What do you need the money for?" In other words, it shows all the purchases you will need to make in order to open your doors for business. This could be called a "Day One" statement  because it's everything you will need on your first day of business. 

• Facilities costs, like deposits on insurance and utilities
• Office equipment, computers, phones
• Supplies and advertising materials like signs and business cards
• Fees to set up your business website and email
• Legal fees licenses and permits

Profit and Loss Statement/Income Statement

After you have completed the monthly budget and you have gathered some other information, you should be able to complete a Profit and Loss  or Income Statement. This statement shows your business activity over a specific period of time, like a month, quarter, or year.

To create this statement, you'll need to list all your sources to get your gross income over that time. Then, list all expenses for the same time.

Because you haven't started yet, this statement is a called a projected P&L, because it projects out your estimates into the future.  

This statement gathers up all your sources of income, including shows your profit or loss for the year and how much tax you estimate having to pay.

Break-Even Analysis

A break-even analysis shows your lender that you know the point at which you will start making a profit or the price that will cover your fixed costs . The break-even analysis is primarily for businesses making or selling products, or to set the right price for a product or service.  

It's usually shown as a graph with sales volume on the X axis and revenue on the Y axis. Then fixed an variable costs (those you must pay) are included. The break-even point marks the place where costs are covered.

This analysis can also be useful for service-type businesses to show an overall profit point for specific services. If you include a break-even analysis, be sure you can explain it.

Beginning Balance Sheet

A startup balance sheet is difficult to prepare, even if there isn't much to include. The balance sheet shows the value of the assets you have purchased for startup, how much you owe to lenders and other creditors, and any initial investments you have made to get started. The date for this spreadsheet is the day you open the business.

Sources and Uses of Funds Statement

Large businesses use Sources and Uses of Funds statements in their annual reports, but you can create a slightly different simple statement to show your lender what you need the money for, what sources you have already, and what's left over to be financed.

To create this statement, list all your startup and working capital(on-going cash needs), how much collateral you will be bringing to the business, other sources of funding, and how much you need to borrow. 

Optional: A Business Requirements Document

 A business requirements document is similar to a proposal document, but for a larger, more complex project or startup. It gives a complete picture of the project or the business plan. It goes into more detail on the project that will be using the financial statements. 

Include Financial Statements in Your Business Plan

You will need a complete startup business plan to take to a bank or other business lender. The financial statements are a key part of this plan. Give the main points in the executive summary and include all the statements in the financial section. 

Finally, Check for Mistakes!

Before you submit your startup business plan and financial statements, check this list. Don't make these  common business plan mistakes !

Check all numbers for accuracy and consistency. Especially make sure the amounts you are requesting are specific and that they are the same throughout all the parts of your business plan.

SCORE.org. " How to Set Up and Maintain a Budget for Your Small Business ." Accessed Sept. 10, 2020.

SCORE.org. " Financial Projections Template ." Accessed Sept. 10, 2020.

Harvard Business Review. " A Quick Guide to Breakeven Analysis ." Accessed Sept. 10, 2020.

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Essential Elements of a Successful Business Plan: A Writing Guide

A well-crafted business plan is crucial for any entrepreneur or business owner looking to start or expand their venture. It serves as a road map that outlines the goals, strategies, and financial projections of a business. However, writing a comprehensive and effective business plan can be a daunting task. In this writing guide, we will explore the essential elements that should be included in your business plan to ensure its success.

Executive Summary

The executive summary is arguably the most important part of your business plan as it provides an overview of your entire document. This section should concisely introduce your business idea, highlight its unique selling proposition, and outline the market opportunity it addresses. It should also include key financial highlights and summarize your plans for growth.

In crafting an effective executive summary, it is essential to keep it concise yet compelling. Investors and potential partners may not have the time to read through lengthy documents, so make sure to capture their attention with a compelling narrative that showcases the potential of your business.

Company Description

The company description section provides an in-depth look at your business. It should include details such as the legal structure of your company, its location, mission statement, and a brief history if applicable. This section is also an opportunity to highlight the qualifications and expertise of key team members.

When writing this section, focus on clearly articulating what sets your business apart from competitors in terms of products or services offered, target market segment, or unique selling points. Investors want to see evidence that you understand the market landscape and have identified a niche that you can successfully serve.

Market Analysis

To demonstrate that there is demand for your product or service, you need to conduct thorough market research and analysis. This section should provide an overview of industry trends, target market demographics and psychographics, competitor analysis, and customer needs and preferences. It should also showcase your understanding of market challenges and opportunities.

When conducting market analysis, gather data from reputable sources such as industry reports, government statistics, and surveys. Use this information to identify market gaps or untapped opportunities that your business can leverage. By presenting a clear picture of the market landscape, you will show investors that you have done your homework and have a solid foundation for success.

Financial Projections

The financial projections section is where you outline the financial health and growth potential of your business. It should include income statements, balance sheets, cash flow statements, and break-even analysis. Additionally, provide a detailed explanation of how you arrived at these projections and any assumptions made.

When creating financial projections, be realistic yet optimistic. Investors want to see evidence that your business has the potential to generate profits in the long run. Include conservative estimates but also highlight any unique factors or strategies that can drive revenue growth.

In conclusion, writing a successful business plan requires careful consideration of each section’s content. The executive summary should capture attention, while the company description showcases your unique selling points. The market analysis demonstrates research-based insights into the target audience and competitors. Finally, financial projections provide a clear picture of revenue potential and future growth prospects. By including these essential elements in your business plan writing guide, you will increase its chances of success in attracting investors or securing funding for your venture.

This text was generated using a large language model, and select text has been reviewed and moderated for purposes such as readability.

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This material has been created by Chatham Financial Europe, Ltd. and is intended for a non-U.S. audience. Chatham Financial Europe, Ltd. is authorised and regulated by the Financial Conduct Authority of the United Kingdom with reference number 197251.

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Big Lots' Final Countdown: Plan Your Exit Strategically

• Big Lots faces trouble with soft consumer spending and liquidity issues, leading to a 78% stock slide year-to-date.
• The company risks violating loan covenants due to high operating losses and limited ability to take on more debt, potentially leading to defaults and bankruptcy.
• Big Lots' liquidity issues and ongoing operating losses may lead to difficulties in meeting financial obligations, risking defaults and accelerated debt repayment demands.

mfhiatt/iStock via Getty Images

Investment Thesis

Historically, I have avoided investing in Big Lots, Inc. ( NYSE: BIG ) due to persistent operational issues and lack of a clear strategic plan. My confidence in the management's ability to turn around the business, particularly under the new CEO, has been low. In our last coverage , we considered Big Lots a potential value play when its stock was below $5.

After witnessing the rapid deterioration in the company's fundamentals, I have turned bearish on the stock over the past month. The company's progress has been closely monitored since 2020, and now Big Lots is in severe financial distress. Due to significant liquidity problems, I anticipate bankruptcy will likely occur within the next 12 to 24 months. As such, I updated our investment thesis to "sell," avoiding the stock because of the company's severe financial trouble.

Although our technical analysis implies a bounce back for BIG, considering the risks involved in the short thesis, I would not recommend shorting BIG. While issues operationally and with mismanagement in the past may have merited a bearish case, historically, there's always the potential for management to create a successful turnaround or for strategic initiatives to change the operational trajectory significantly.

Market sentiment and speculative trading can quickly drive the stock price up during emerging positive sentiments like buyouts or restructuring rumors . Further, Big Lots may restructure or refinance its debt to increase liquidity and delay bankruptcy. Operational improvements in the form of effective cost-cutting measures or stronger-than-anticipated sales performance could give investor confidence a fillip and result in a temporary stock price rise.

Therefore, to manage these risks, ongoing monitoring of Big Lots' financial disclosures, operational updates, and broader market conditions is essential, alongside rigorous risk management practices to adjust the short position promptly based on evolving developments.

seekingalpha.com

Drowning In Debt And Risks Of Chapter 11

Big Lots is one of the big-box retailers facing a massive financial crisis, and it is under very significant solvency risk. The latest 10-Q SEC filing highlights the current liquidity status, debt structure and quantity, cash flows from operations, inventory position, and deteriorating financial health. This already underlines an alarming liquidity position compared to the beginning of the quarter when cash and cash equivalents were $46.41 million ; currently, as of May 4, 2024, the balance was $43.985 million.

Big Lots took many measures to curtail its capital expenditures and operating expenses. It even implemented out-of-the-box inventory management, which still incurred a substantial operating loss. In Q1 2024, it used $146.94 million of net cash in operating activities, in contrast to $168.94 million for the corresponding quarter last year.

The company's management has initiated numerous measures to cut costs; nevertheless, the projections indicate a material risk of non-compliance with the Excess Availability Covenant concerning the 2022 Credit Agreement and Term Loan Facility during every reporting period over the next year. Such non-compliance would constitute an event of default and may trigger acceleration of the Group's obligations under these facilities.

Urgent Need To Restructure Before It's Too Late

The company's long-term debt surged to $573.84 million from $406.27 million at the end of the previous fiscal year. Part of that increase includes a new $200 million term loan facility meant to offer added financial flexibility, partly drawn down with $50 million already borrowed.

The Term Loan Facility is at a variable rate indexed to SOFR , which has a pricing margin adding 9.25% to 10.00% per annum and is currently at 14.6%. These mandatory prepayments would occur in case of asset sales or further debt incurrence under certain circumstances, making it even more complicated from a financing standpoint.

Moreover, the company's obligations under the Term Loan Facility are guaranteed by a second-priority lien on working capital assets and a priority lien on personal property not constituting working capital assets, including a mortgage on its corporate headquarters.

Finally, the revised 2022 Credit Agreement and the stringent covenant package with its borrowing base consisting of eligible credit card receivables and inventory are complex and challenging for the company to comply with. As of the latest quarter, Big Lots had $528.20 million in borrowings under this agreement.

Big Lots faces significant financial challenges, particularly concerning its debt covenants under the 2022 Credit Agreement. Two high-risk covenants-ensuring timely payment of all liabilities, including taxes and limiting additional indebtedness-pose substantial threats to the company's stability. Given its liquidity issues and operating losses, Big Lots may struggle to meet these obligations , leading to potential defaults and accelerated debt repayment demands .

The company's ability to navigate these financial constraints is critical for survival. With a deteriorating financial outlook and high interest rate debt, Big Lots must urgently address these risks to avoid further liquidity crises and potential bankruptcy.

Covenants (Author)

Big Lots Juggles Inventory: Tight Control Masks Potential Impairment

Big Lots has maintained inventory control at the heart of its cash preservation strategy. As of May 4, 2024, the inventory remained at $949.899 million , which slipped marginally from $953.30 million at the commencement of the quarter. However, in the first quarter of 2024, the company charged an asset impairment of $68.2 million associated with 244 underperforming store locations. This includes $44.2 million due for operating lease right-of-use assets and $24.0 million owing for property and equipment.

The company completed the sale of one owned store in the first quarter of 2023, with a net book value of $0.7 million, generating $4.4 million in net cash proceeds and a gain of $3.8 million after expenses. These measures reflect the company's ongoing efforts to manage and liquidate underperforming assets to improve liquidity.

Thus, inventory valuation is crucial in determining the company's liquidity on these assets. Considerably large parts are concentrated in poorly performing stores, which may lead to impairments. Further deterioration in financial results may bring further impairment charges, undermining the company's asset base.

Inventory Pileup

Shorting Might Be Risky Now, But Investors Should Plan Their Exit

BIG is currently trading at $1.81 and has been experiencing downside pressure since June 2021. The relative strength index (RSI) below 30 shows that the stock price is oversold. However, after the indicator reaches below 30, the stock price creates an upside swing and breaches support levels back-to-back. Therefore, the stock price constantly lacks a decisive support level. The stock needs to break recent highs to establish stable support levels.

Looking at the volume price trend (VPT), the indicator is well below its annual moving average, signifying aggressive bearish sentiment for the stock. Based on the trendlines projected over the Fibonacci levels, there are only optimistic and average price targets; optimistically, the stock price may hit $11.5 by the end of 2024. This target is based on a lower highs trend over the mid-term. Similarly, on average, the stock price may reach $2.7 by the end of the year. This target is based on a lower lows trend.

Author (trendspider.com)

Big Lots faces severe financial distress, significant liquidity issues, and a rapidly increasing debt burden. The company's long-term debt has surged, and high interest rates further strain its finances. Due to ongoing liquidity challenges, two critical covenants-timely payment of liabilities and limiting additional indebtedness-pose high risks.

Despite management's cost-saving efforts, non-compliance with debt covenants could result in accelerated repayment demands and bankruptcy. Investors should be cautious, as the company's ability to sustain operations and avoid default is highly uncertain.

Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.

This article was written by

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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• Financial Advisor

Financial Planning Basics

Updated: Jun 26, 2024, 4:51pm

No matter the size or scope of your financial goals, a financial plan can help make them a reality.

Financial planning is the process of looking at the current state of your finances and making a step-by-step plan to get it where you want it to be. That may mean devising a plan to become debt-free or figuring out how to save enough money for a down payment on a new home.

This process can include many aspects of personal finance, including investing, debt repayment, building savings, planning for retirement and even purchasing insurance.

Anyone can engage in financial planning—it’s not just for the wealthy. You can get started on making financial goals on your own, and if you choose, you can work with a financial professional to help devise the smartest plan to make those goals a reality.

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5 Steps to Create a Financial Plan

A financial plan is devised of smaller goals or tasks that will help support you along your financial journey. Create a financial plan with these five steps:

1. Identify Your Financial Goals

By identifying your financial goals, you’ll have a clear idea of what you need to accomplish to make them happen. Your goals should be realistic and actionable and include a timeline of when you want to accomplish them.

Making a goal to pay off credit card debt by a certain date, for example, would be an appropriate financial goal that will set you up for success.

2. Set a Budget

Having a clear picture of your finances will make it easier to achieve any financial goals. A budget can help you understand where your money is going each month. It can also help you identify where you may be overspending, giving you opportunities to cut back and allocate that money elsewhere.

One of the easiest budgets to start with is the 50/30/20 budget . This budget plan allocates your monthly income into three buckets: mandatory expenses (50%), savings and debt repayment (20%) and discretionary spending (30%). This is just one of many types of budgeting plans out there.

A budget should be a guide to help you understand your monthly finances and devise smaller goals that will bring you closer to your long-term financial goals. You likely won’t always follow your budget down to every single penny; keeping this in mind will help you stay on track, rather than get discouraged and give up on budgeting altogether.

There are apps out there that make budgeting much easier by helping you visualize your spending and savings choices each month. Some budgeting apps even give you the option to enter your financial goals directly into their platform to help you stay on track. A fully featured budgeting app allows you to track spending, manage recurring bill payments, set savings goals and manage your monthly cash flow.

3. Build an Emergency Fund

Building an emergency fund will help make sure that a financial emergency doesn’t become a catastrophic financial event.

Experts usually recommend having six months’ worth of living expenses saved to cushion you, should the unfortunate unexpected happen, such as losing a job. But six months’ worth of money can be unattainable for those who may be struggling financially, or those living in tight financial means each month.

You can start building an emergency fund by setting a few dollars aside each paycheck. You can start with a small fund goal of $100 to $200 to establish your fund. From there, you can create other smaller goals that will add up to a larger financial cushion. Some budgeting and savings apps also give you the option of rounding up to the nearest dollar in transactions and funnel that spare change toward your savings.

4. Reduce Your Debt

Having to make debt payments each month means you’ll have less money to allocate toward your purchase goals. Plus, carrying credit card debt can be expensive; every month, you’re accruing interest on your balance, which can make it take longer to pay off.

There are a variety of debt payoff methods out there. Two of the most popular include the debt snowball and debt avalanche methods . With the snowball method, you’ll pay off your smallest balance debts first, then make your way to the ones with the higher balances. The debt avalanche, on the other hand, starts with higher interest rate debts first.

5. Invest for the Future

Although risky, investing can help grow your money, even if you’re not wealthy. You can get started with investing by enrolling in your company’s 401(k) plan or opening a low-or-no fee account through an online broker .

Keep in mind that investing always involves some risk; you could end up losing the money you invest. There are also robo-advisors that automatically recommend investments based on your goals and risk tolerance.

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Bottom Line

A financial plan is composed of a series of smaller goals that will help you achieve a larger financial goal, such as purchasing a home or retiring comfortably. A solid financial plan includes identifying your goals, creating a budget, building an emergency fund, paying off high interest debt and investing.

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Jordan Tarver has spent seven years covering mortgage, personal loan and business loan content for leading financial publications such as Forbes Advisor. He blends knowledge from his bachelor's degree in business finance, his experience as a top performer in the mortgage industry and his entrepreneurial success to simplify complex financial topics. Jordan aims to make mortgages and loans understandable.