Business Plan Financials

The creation of a long-term plan and strategy is not enough to adequately prepare the small business for the ups and downs in their markets. By outlining different forecast scenarios, the small business can be better prepared for any volatility in their market.

Of all the components of a business plan it is the financials chapter that gives the reader the best chance of assessing the viability of your business proposition and rightly so because the numbers really speak volumes. What does this chapter involve and how do you go about compiling it?

Sound financial and cost management practices are crucial to the successful running of any business big or small. What do these practices involve and of what significance are they to a business that is just starting out?

Effective financial and cash flow management practices are of the essence if the continued smooth running of a small business is to be assured. Surprisingly, the entrepreneur need not go overboard with complex practices all in the name of keeping the business financially secure -- there are basic initiatives that can be employed to achieve the same intents with resounding success.

Financial ratio analysis involves the computation and comparison of ratios which are drawn from the information contained in a business' financial statements. These different financial ratios are helpful in making assessments about a business' overall financial soundness, the effectiveness of its operations, and its attractiveness as an investment consideration.

Do your business plan financial projections show you making zillions of dollars within a year or two? Stop the presses! Investors will appreciate it if you skip the hockeystick projections and provide more realistic pro forma financials.