Components of a Business Plan

General Business Plan Format

FINANCIAL PLAN

In addition to financial statements, your financial plan should include:

Various funding options and exit strategies for potential investors
Business valuation (be cautious not to over value your business)
Break-even analysis

Business Valuation

There are a multitude of sophisticated business valuation methodologies. A rule of thumb for business valuations is a multiple of its earnings. For example, if the chosen multiple is five and the business' earnings before taxes are $55M, the business' valuation would be approximately $275M.

Break-even Analysis

Break-Even Point = FC/(P-VC)

FC = Fixed Costs
P = Unit Price
VC = Variable Cost

Example: If the business' total fixed costs are $1,000,000.00, it costs $5.00 to produce the widget, and the business sells the widget for $7.00, the break-even point is 500,000 widgets.

It is nearly certain you will need to make monthly cash flow projections from business inception to possibly 3 years out. Your projections will show the months in which the activities shown on your fixed capital and working capital schedules will occur. This is nearly the only way to clearly estimate your working capital needs and, specifically, important things like the times when you will need to draw on or can pay down your operating loans and the months when you will need to take out longer-term loans with which to purchase your fixed assets. Without a tool like this you will be severely handicapped when talking with bankers about your expected needs. They will want to know how large of a line of credit you will need and when you anticipate needing to borrow longer-term money. It is only through doing cash flow projections will you be able to answer these questions. This information is also needed to determine things like the changes to your required loan payments and when you can take owner draws or pay dividends.
Your projected cash flows are also used to develop your projected income statements and balance sheets.

Overview

PROFORMA CASH FLOW STATEMENTS
PROFORMA INCOME STATEMENTS
PROFORMA BALANCE SHEETS
INVESTMENT ANALYSIS
PROJECTED FINANCIAL RATIOS AND INDUSTRY STANDARD RATIOS
CRITICAL SUCCESS FACTORS (SENSITIVITY ANALYSIS)

REFERENCES

APPENDICES

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