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Checklists

Contributing Authors

	Tom Severance Author of Business Start-Up Guide
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	Stephanie Chandler Author of The Business Startup Checklist & Planning Guide
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	Steven D. Strauss Author of The Small Business Bible
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	Joe Kennedy Author of The Small Business Owner's Manual
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Tables and Charts

BUSINESS PLAN FINANCIALS

Following is a list of the most critical business plan tables. For functional tables that can calculate the math for you, please visit the BUSINESS PLAN BUILDER.

SOURCES & USE OF FUNDS

If you are writing a business plan for a startup or to raise funds for an existing business, this table will outline where you expect to raise funds (SOURCES) and how you plan to spend those funds (USE).

For Sources, you must distinguish between Equity Investment (money received from investors in exchange for ownership) and Debt (loans or other obligations).

Clearly explain the Use of these funds by breaking down Capital Expenditures and Working Capital. Capital Expenditures should list your spending on tangible property, such as real estate, equipment, vehicles or leasehold improvements (physical renovations made to your office or retail space). Working Capital shows how the remainder of your money is used for starting and operating your business. It may include legal expenses, web design, research, marketing costs, office expenses, rent, utilities, wages and other expenses. Keep this table simple by grouping the money that you set aside for day-to-day expenses under "Operating Capital". The specifics of these expenses can be shown later in your Cash Flow and Income Statements.

INCOME STATEMENT - MO-TO-MO

Your Income Statement (aka Profit & Loss Statement) is your most important financial statement. This worksheet shows your projected sales and spending once your business is operating. Although it may look complicated, it is really a simple worksheet that outlines how your SALES minus EXPENSES equals your PROFITS, or net income.

Most startups should create a Month-To-Month Income Statement for the first year as well as a 3 Year Income Statement to show your long term projections.

Complete your Month-To-Month Income Statement first, and then import the totals into your 3 Year Income Statement.

Total Sales - All sales without subtracting any costs.

Cost of Goods Sold - This is the actual cost of the inventory, raw materials or products that you sold during a particular period.

Gross Profit - This is the amount of sales you have left over after your direct selling costs. Hopefully, you will have enough remaining to cover your business operating expenses.

Operating Expenses - This is a list of overhead costs that allow you to be in business, such as wages, rent, utilities and other day-to-day business expenses.

Net Income - The amount of income remaining after subtracting all costs of doing business.

NOTE: Your expenses should not include investments in real estate, vehicles, major equipment, leasehold improvements or other large purchases. This worksheet tracks your spending on continuing operations, such as wages, advertising, rent, utilities and other expenses needed to stay in business. (However, you can write-off most capital investments over time through "Depreciation & Amortization" expenses, just not all in one year.)

INCOME STATEMENT - 3 YEAR

The 3 Year Income Statement projects your sales and expenses for the next three years. Complete your Month-To-Month Income Statement first, because it will help you to estimate your income and expenses more accurately for future years.

This worksheet follows the same structure as the Month-To-Month Income Statement, but only annual totals are shown.

CASH FLOW STATEMENT - MO-TO-MO

The Cash Flow Statement is similar to the Income Statement. The difference is that the Cash Flow Statement is used to evaluate the cash your company has on hand each month. This is important, because many companies allow customers to pay AFTER products or services are provided. If too many customers are slow to pay, a profitable company could actually run out of cash to cover its bills. This is especially relevant for startups, which may experience long payment delays from initial customers.

All startups should prepare a Cash Flow Statement to verify that the business won't run out of cash during the first year of operations.

BALANCE SHEET

Some people have trouble grasping the concept of a Balance Sheet, but there's a very simple analogy that most people will understand. A Balance Sheet is very similar to calculating equity in real estate. For example, if you own a house, your equity would be the value of your home minus your liabilities (debt). A Balance Sheet shows this exact calculation for your business at a given moment.

A Balance Sheet has three parts: ASSETS, LIABILITIES and NET WORTH. Just like the calculation for the equity in your home, your ASSETS minus LIABILITIES equals your NET WORTH (equity).

(Or, as accountants like to explain it, your Assets must equal your Liabilities plus Net Worth. If you are new to accounting, the real estate analogy might be easier to understand, but the math is the same.)

In a business example, most startups begin with cash from investors (called equity or net worth), loans (liabilities) or both. This initial cash is often spent on inventory, equipment and leasehold improvements (all assets). Upon starting operations, a Balance Sheet should calculate perfectly. At the end of the first year, assets will be increased to include cash and receivables earned through sales. The net worth will increase an equal amount, because the company is now worth more. This should make sense, because the company has worked to create cash (an asset) that it didn't have before. On the Balance Sheet, net worth is increased by inserting the proper dollar amount into a sub-category called "Retained Earnings" to reflect the profits that the company earned. (Other adjustments, such as changes in inventory, depreciation and liabilities should also balance properly.)