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Lesson 4 - Creating Your Business Plan: Part 2 - Writing the Finance Section of Your Plan

I.    Today we’re beginning to talk more about how to 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, as usual before we get started, I want to know how you are doing with the first part of laying out your financial inventory.  This section can be slightly complicated for some which is why we try to break it down to bare essentials.  However, please email us at comments@microbizcoach.com or you can comment in our blog as well at www.microbizcoachblog.com if you have any additional questions or concern about your financial section.

C.    In today’s episode, we’re going to go into more detail about the basic components needed for the Financial Section of your business plan.  This is the second of a 2 part series.  For the micro business, you do not necessarily have to focus on the 3 major financial statements as a larger business would.  Particularly starting out, you want to mainly have a good handle on your cash flow.  So for our purposes we will review the Cash Flow Statement.

I.    The Cash Flow Statement has 3 major components.  We will review each of those components in terms of income and expenses.

1.    Operations
a)    Income from operations would include any income related to operating your business.  If you sell cakes, the money you get from selling your cakes would be in this category.  If you sell widgets, the money made from selling your widgets would be in this category.  Let’s say you offer consulting services.  The money you get paid for these services should also be documented in this category.
b)    Operational expenses would then include any money used to pay for operating your business.  Again, if you sell cakes, the money you use to purchase your flour, eggs, cake pans, etc. would be part of this expense. Also the money you pay for your facility including utilities related to this place of business would also be in this category.

2.    Finance Component
a)    Have you gotten any loans?  These would be documented as income in the finance component of your Cash Flow Statement.  You can also include grants in this category.
b)    Finance Expenses would be any expenses paid as a result of obtaining financing for your business.  For example, the loan payment you’d make each month would be documented in this section.

3.    The Investments Component
a)    It is interesting that investing for companies is often overlooked.  However, if you are a savvy investor for your personal finances, you may want to carry this skill over to your business and generate income from investing company dollars.  The return from your investments would be documented in this section of your business plan.
b)    Any money required in order to make your investments or sell your stock would be part of your investment expenses.  For example brokerage fees.

4.    Visit us in our blog www.microbizcoachblog.com and send us a quick comment if you want to see an example of a Cash Flow Statement with these entries.

B.    Now, let’s talk briefly about forecasting.  For purposes of the micro business owner, we will review forecasting very generally instead of in terms of a financial statement.
1.    Use the tips we gave about forecasting in part 1 to create a forecast of your Cash Flow in 1 year then 3 to 5 years out.  This will of course be an educated guess based on industry trends and forecast along with general economic fluctuations.
2.    Forecasting is an important component of the financial section of your business plan because it gives you an idea of income & expenses to anticipate in the future.  When you know what to expect, you have a chance to adjust your expenses accordingly to prevent financial disaster.  It is also a good guideline to use for deciding when to quit your day job or even if it is possible to quit your day job.  More importantly, it allows you to see that whether you need to increase your income in order for your business to survive!
3.    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 5 of Creating Your Business Plan when we will talk about how to write the Executive Summary.
4.    Drop us a line at comments@microbizcoach.com to let us know how your business planning process is going.

II.    Micro Biz Newz
As you may know, Micro Biz Coach likes to keep you informed about opportunities to win money for your business and here is yet another . . .

Entrepreneur.com Woman of the Year Contest
The rules according to entrepreneur.com:
To qualify, a woman business owner must

    * be a founder of the business
    * own at least 51% of her business
    * be actively involved in day-to-day operations
    * have been in business for at least one full year
    * have 2006 sales of at least $1 million, and
    * have less than 100 employees.
So if you know of someone who fits this bill the deadline for entry is September 15, 2007. 
www.entrepreneur.com/womanoftheyear

III.    Micro Biz Spotlight
A.    Today in the Micro Biz Spotlight:  Your Coach for Success:  Media Training and Success Coaching by Annetta Wilson.
B.    Annetta is a talent coach for on-air journalists at CNN, CBS (WCBS-TV, New York) and has coached for Walt Disney World’s Ambassador program.  An award-winning journalist, Ms. Wilson has over three decades experience in the broadcast industry as a television news anchor, reporter, producer, talk show host and writer.
C.    Your Coach for Success offers Presentation Skills Coaching, Keynote Speaking, Media Training, Television Talent Coaching, DISC™ Assessments & Workshop Facilitations.
D.    Visit Your Coach for Success at yourcoachforsuccess.com to get your free copy of a special report, "Three of the Biggest Mistakes People Make in Public Speaking!" That’s Y-O-U-R-C-O-A-C-H-F-O-R-S-U-C-C-E-S-S.COM, YourCoachForSuccess.com.
E.    If you find a micro business you feel is worthy of our spotlight please email us at spotlight@microbizcoach.com.  That’s spotlight@microbizcoach.com.

 

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