Financial Statements

The financial statements section is maybe the most problematic for many new small business owners. There are concepts and terms that you may not be familiar with and it sometimes feels overwhelming. My feeling on this is that if you can’t understand some of these fundamental concepts, you shouldn’t start your own business. The name of the game in business is keeping your eye on the ball – and the ball is the money.

You should include a minimum of three financial statements in this section of your business plan. These are:

• Statement of profit and loss
• Balance sheet
• Cash flow analysis

My preference is to include a couple of others:

• Personal financial statement
• Break even analysis
• Business ratios

For an ongoing business, these statements already exist and you should include historical data. For new concerns, you’ll have to forecast income and expenses to develop what is called a pro forma statement.

  A good source for all these forms can be found at the SCORE site (Service Corps of Retired Executives) which is also an excellent place for other startup advice.

Here is a sample pro forma profit and loss statement: