Lesson 4 - Creating Your Business Plan: Part 1 - Writing the Finance Section of Your Plan
This entry was posted on 6/30/2007 10:35 PM and is filed under uncategorized.
Click to Listen to the Micro Biz Coach Podcast!Show NotesI. Today we’re beginning to talk about how to write the of the Financial Section of your business plan.
A. Remember this section will come just after the Organization Overview once you have a clear understanding of . . .
1. Your general business strategy
2. Your general marketing strategy
3. Your management team
B. So, before we get started, I want to know how you are doing with your Organization Overview. Many of you seem to have gotten through that section with ease. But, if anyone is having any problems with writing the Organization Overview section or have any questions, please email us at comments@microbizcoach.com or you can comment in our blog as well at
www.microbizcoachblog.com.
C. So, in today’s episode, we’re going to talk through the basic components needed for the Financial Section of your business plan. And when I say basic, I mean BASIC.
Because people generally find this section to be challenging, we have divided this lesson into 2 parts. Today we’ll talk about the general components needed for the Financial Section and in Part two we’ll get into some of the specifics like creating financial statements.
1. The first thing we need to understand before we begin creating the different financial statements is what is our actual income. I know this seems like such as easy question. And for those of you who are beyond this step humor me as I walk through the basics.
a) What are you getting paid for your products?
b) Do you also offer any services that you get paid for? Well these first two are rather obvious.
c) Have you gotten any loans? This would be part of income.
d) What about grants?
Okay, now let’s get into the income people often forget to add.
e) What about investments?
Has your company invested in other companies that might be creating periodic cash flow?
As a matter of fact some even forget that investment income is possible for businesses. It may prove to be a very good source of cash flow.
What about the interest from your savings account?
f) What about sale of equipment?
The business cou ld sell a piece of equipment that is no longer being used. This is of course income.
g) And of course any sell of stock would create income. Assuming you’re NOT selling at a loss.
2. The 2nd basic component of the Financial Section is Expenses.
a) Anything you have to purchase in order to provide you customer with you products and services. For example, if you build websites, you would probably be charging for
(1) hosting services
(2) your time (or your web developers time) to create the site
(3) any images you had to purchase to use on the site
(4) Any applications you are using to create the site
(5) Indirectly you are using internet connection
(6)
b) Of course all salaries and contract wages paid should be included in your expenses.
c) Office supplies
Anything you purchase to run your business or company is an expense.
(1) Cell phone
(2) Computers/Software – for example Client management software
d) Leases
(1) Company care leases
(2) Office rent
e) Educational & Organizational expenses
(1) Books
(2) Trade organization expenses
(3) Network organization expenses
(4) Certification Tests
(5) Licenses
3. The third thing you’ll want to consider is what will your income and expenses look like in 3 – 5 years.
The best way to predict these numbers is to look back at your general business, marketing and organization sections of your business plan. In those sections you talked about how things would changes in 3 – 5 years.
Decide what the economic value of these changes are and use those numbers to calculate your future income and expense.
For example, if you are planning to franchise your company you may predict your income to increase in year 3 by an order of magnitude because not only will you be making money from the sale of your products and services, but you’ll also be making more money from the sale of your business model. You’ll also have more expense in this case as you begin to train and develop others to run you franchise business according to the model you have created.
4. Well, again, you should take a week or two to complete this part of your business plan and stay tuned to the Micro Biz Coach podcast for Lesson 4 Part 2 of Creating Your Business Plan when we will talk about how to write the Financial statements.
5. Drop us a line at comments@microbizcoach.com to let us know how the business planning process is going.
II. Micro Biz Newz
This past Thursday the house approved $582 million in funding for SBA federal small-business loan and assistance programs. This funding includes money for small business develpment cents as well as loans for small and micro businesses and other Small Business Association initiatives. Visit
www.sba.gov for more details.
The funding approved this week includes $80 million for 7(a) loans -- the agency's main lending program for small businesses -- $16.5 million in loans and assistance for its microloan program, and $100 million for Small Business Development Centers, among other initiatives.
III. Micro Biz Spotlight
A. Today in the Micro Biz Spotlight: annesawyer.com
B. Annesawyer.com specializes in hats, jewelry and travel.
C. This company is one of the official hat designers of the Kentucky Derby. The hats have been purchased by some very notable people namely the late Anna Nicole Smith, Goldie Hawn, First Ladies Barbara and Laura Bush.
D. Go check out some of these fabulous hats at www.annesawyer.com.
E. If you find a micro business you feel is worthy of our spotlight please email us at spotlight@microbizcoach.com. Or visit us online at www.microbizcoach.com.
