Writing a business plan can be a time consuming and laborious process. It is for that very reason, in fact, that too many people try to start a business without one. They find out, sometimes too late, just how critical this particular element is to starting a new business. Perhaps the most important element of a business plan is the financial section. Your financial section doesn’t just tell potential investors how viable your business is, it also helps you better plan and understand what you need going in. It will also help you understand where best to spend any seed money you get and perhaps even more importantly, how much to set aside and for how long.
Like all the elements of a good business plan, the financial section is just as much for you as it is for investors. After all, it’s going to be awfully hard to pitch a business to investors that you aren’t fully convinced is going to work yourself. That being said, there are no 100% guarantees in business, but the more research you do, the more accurate your understanding will be of exactly what it will take to succeed. In fact, it is always a good idea to write a good business plan, even if you don’t need funding or to pitch your idea to investors. Writing a thorough and comprehensive business plan will give you a better idea of whether or not your business idea is truly viable.
Remember that your financial section, like most of your business plan, is just a highly educated guess, but a guess that is based on a significant amount of research. While it will include many of the same elements as an accounting statement, such as profit and loss, balance sheet, and cash flow, it is not the same. An accountant statement is an accounting of what actually happened; where money came in and where it went. The financial section of a business plan is a projection of what you believe will occur, based on your research. Where you plan on money coming in from (and how much) and where you anticipate it will go and how much of it will go there.