financing strategy in a business plan

Everything that you need to know to start your own business. From business ideas to researching the competition.

Practical and real-world advice on how to run your business — from managing employees to keeping the books

Our best expert advice on how to grow your business — from attracting new customers to keeping existing customers happy and having the capital to do it.

Entrepreneurs and industry leaders share their best advice on how to take your company to the next level.

• Business Ideas
• Human Resources
• Business Financing
• Growth Studio
• Ask the Board

Looking for your local chamber?

Interested in partnering with us?

Run » business financing, financing strategies for every stage of your business.

Bootstrapping, seed funding, equity crowdfunding, Series A: You may recognize these terms as different financing options, but how do you know which are available to your business venture?  

The growth of a business can be categorized in roughly five stages; each stage brings new financing challenges and opportunities for investment. There are several ways to get financial support at various points of growth, and what’s right for one merchant might be unsustainable for another business owner. There are many paths to success for businesses; here are some of the most common, organized by each growth stage .

[Read more: Need to Raise Business Capital? Know These 5 Funding Rounds ]

Stage 1: Startup

In this phase, you’ve committed to making your idea a reality. Congratulations! This is where the hard work begins: Your business may exist, but as the owner, you’re responsible for finding customers , delivering a product or service and making enough money to survive.

At this stage, most business owners are bootstrapping their way to the next stage of growth. Bootstrapping means you are building the company using nothing but your personal savings and, hopefully, cash from your first sales. “More than 80% of startup operations are funded by the founders' personal finances; the median in start-up capital is about $10,000,” reports Investopedia .

In venture capitalist terms, this is also the “pre-seed” stage of financing. Merchants looking for pre-seed capital will draw from personal savings, friends and family members, and raise money through crowdfunding campaigns . Until you’ve verified that your business idea is something customers want, it’s generally not a good idea to take out a loan. Likewise, angel investors and venture capitalists will want to see some early business results before participating in a funding round.

Stage 2: Survival

A business that’s reached survival stage has verified that it has a workable business model. Your business idea is something that customers want and will continue to buy into. Now your challenge is to grow from simply existing to becoming a business with revenues, expenses, assets and employees.

Survival is also one of the hardest phases for new ventures. “It’s not uncommon for companies to grow broke at this stage. They don’t have enough money to cover the costs of building new products or hiring more people to provide more services,” writes American Express .

During the survival phase, your business will be in the seed phase of financing. In the venture capital world, the seed round is when business owners gather capital to get things up and running. Some venture capitalists and other investors may be interested in investing in your business at this stage, but there are a number of ways to get a quick injection of cash:

• Angel investors : An angel investor offers financial backing to small startups in exchange for ownership equity.
• Equity crowdfunding : Your business raises capital by selling securities, such as equity in the company and revenue shares.
• Grants: Apply for a grant from federal and state agencies, as well as some private companies.
• Micro-lenders : These very small loans, usually less than $50,000, are offered by individuals, not traditional lending institutions.

For most businesses in the stage, it’s too early to go for an SBA loan . The qualifications for an SBA loan include a certain number of years in business, a credit card score and at least $100,000 in annual revenue.

Bootstrapping means you are building the company using nothing but your personal savings and, hopefully, cash from your first sales.

Stage 3: Success

When your company can sustain itself profitably, it has reached the success stage. Ventures can stay at this stage indefinitely: Unless a natural disaster, economic downturn or other unforeseen catastrophe happens, this is the stage in which your business is stable and profitable.

Many entrepreneurs use financing in this phase to fuel even more growth. This might include launching a new product line, expanding to a new location or simply continuing to reach new customers and grow your profits. Investors will be seriously interested in your business’s track record of early success.

Financing options in this phase could include the following:

• Venture capital, Series A : A Series A investor wants to take your business revenue into the millions. According to Investopedia , the Series A round consists of anywhere between $2 million to $15 million in funding.
• SBA loan: It’s likely you’re ready for an SBA loan at this stage. Read more in our complete guide to SBA loans .
• Short-term business loans : If you just need extra cash for a big equipment purchase, for instance, consider a short-term small business loan that can increase your working capital.
• Bridge loans: Like a short-term business loan, a bridge loan can give you working capital while you’re waiting for more long-term funding to come. Read more in our guide to bridge loans .

[Read more: 3 Expert Strategies for Attracting Investors ]

Stage 4: Take-off

Once you’ve committed to expanding, the next phase is the “take-off” phase when many entrepreneurs choose between becoming a big business or selling their venture and starting anew. The best funding strategy at this stage is to work with a venture capitalist. They will be able to take you through Series B and Series C funding:

• Series B: This type of funding focuses on taking the business to the next level and meeting demand for your product or service. A Series B venture capitalist will ask for more market research and business development. Series B funding is typically between $7 million and $10 million.
• Series C: This funding is for businesses that are very successful and need more capital to continue scaling. Some businesses use their Series C funding to acquire or merge with a similar venture.

Outside of Series C, companies might also go through Series D and Series E financing rounds that accomplish similar goals.

Stage 5: Maturity

A mature company is no longer a small business. At this stage, your biggest challenge will be controlling your substantial finances. Some businesses at this stage choose to offer an initial public offering (IPO) . To go through that process, you will need roughly $100 million in revenue. Reaching this level of success takes years of hard work, a great idea and plenty of funding help along the way.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

Want to read more? Be sure to follow us on LinkedIn!

Applications are open for the CO—100! Now is your chance to join an exclusive group of outstanding small businesses. Share your story with us — apply today .

CO—is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. Chamber of Commerce, here .

Subscribe to our newsletter, Midnight Oil

Expert business advice, news, and trends, delivered weekly

By signing up you agree to the CO— Privacy Policy. You can opt out anytime.

More financing tips

How to use accounting software to generate accurate and timely financial reports, 20 funding options for black-owned businesses, what is alternative credit, and why does it matter for your smb.

By continuing on our website, you agree to our use of cookies for statistical and personalisation purposes. Know More

Welcome to CO—

Designed for business owners, CO— is a site that connects like minds and delivers actionable insights for next-level growth.

U.S. Chamber of Commerce 1615 H Street, NW Washington, DC 20062

Social links

Looking for local chamber, stay in touch.

Financial Strategy: Full Explanation with Examples

What is a Financial strategy?

A financial strategy refers to a business or individual’s approach to managing and using financial resources to achieve goals. It is an important part of the overall business strategy. It involves planning and decision-making related to investment, budgeting, fundraising, cost management, forecasting future financial scenarios, and managing financial risks.

The main objectives of a financial strategy are typically to increase shareholder value, secure the Company’s financial stability, and ensure the availability of funds for future growth or to deal with unpredicted situations.

Key components of a financial strategy might include:

• Investment strategy : Deciding what to invest in (equipment, personnel, research, development, etc.), when, and how much to invest. It can also refer to investment in financial assets, like stocks or bonds. Investment Strategy: Explained with Types and Examples
• Financing strategy : Determining how to raise the capital needed for investment, whether through equity (like selling company shares), debt (like loans or bonds), or internally generated cash flow. How to make a Financing strategy: Explained with a case study
• Risk management strategy : Identifying financial risks that the Company faces (like exchange rate risk, interest rate risk, or credit risk) and deciding how to mitigate them, typically through financial instruments like derivatives or operational changes. Risk Management Strategy in Finance: Explained with an Example  
• Cash flow management strategy : Managing the Company’s cash flow to ensure there is always enough cash available to meet its immediate needs, like payroll or debt payments. Cash flow management Strategy: Full Explanation  
• Capital structure strategy : Deciding what mix of equity and debt the company should have. This affects the risk and return of the Company and its valuation. Business Capital Structure  
• Dividend policy : Determining how much of the Company’s earnings should be paid out to shareholders as dividends and how much should be retained for reinvestment in the Company. Dividend Policy: Meaning | Types | Factor Affecting | Examples  

Remember, a well-designed financial strategy should align with the Company’s broader business goals and strategies, considering internal factors (like financial health, risk tolerance, and operational needs) and external factors (like market conditions, industry trends, and regulatory environment).

By the way, here is a course that will help you stand out in the world of strategy. The Strategic Thinking program for CxO by Cambridge Judge Business School maps your competitive advantage and teaches advanced techniques to formulate, evaluate, and execute winning strategies. Generate winning strategies and learn how to renew them in times of crisis for a competitive advantage.

How to make a financial strategy?

Creating a financial strategy is a multi-step process involving a deep understanding of the Company’s financial situation and business goals. Here are the steps to creating a financial strategy:

• Set clear goals : This is the first and perhaps the most crucial step. It involves identifying what the organization or individual wants to achieve financially. This could range from expanding the business, launching a new product, or improving financial stability. These goals should align with the broader business strategy.
• Understand your current financial situation : Analyze your current financial statements, including income statements, balance sheets, and cash flow statements. Assess your assets, liabilities, revenues, expenses, and cash flows to understand your financial standing.
• Forecast future scenarios : Based on historical data and expected market trends, project your future income, expenses, and cash flows. This can help you anticipate future financial needs and challenges.
• Identify investment needs and sources of capital : Based on your goals and forecasts, determine how much capital you will need and where you will invest it. Then, decide where this capital will come from, whether internal cash flows, debt, equity, or a combination.
• Manage financial risks : Identify the key financial risks you face, such as exchange rate risk, interest rate risk, or credit risk. Determine how you will mitigate these risks through financial instruments or operational changes.
• Create a budget : Based on the above steps, create a detailed budget that outlines your expected income and expenses. This will serve as a guide for your financial decision-making.
• Monitor and revise your strategy : Implement your strategy and monitor your financial performance regularly to ensure that you are on track to meet your goals. Adjust your strategy if your actual performance deviates from your plan or your business environment changes.

Creating a financial strategy is not a one-time task but an ongoing planning, implementation, and review process. It requires financial knowledge, strategic thinking, and careful management. It’s often beneficial to involve financial professionals in this process, either from within your organization or as external consultants.

By the way, to communicate our strategy effectively within the team, we all need a robust collaboration platform. Miro is the leading visual collaboration platform. Build anything together on Miro. It’s free and as easy to use as a whiteboard , but endlessly more powerful. Do use the Miro platform for strong communication within your team.

Examples of financial strategy

A financial strategy can take various forms depending on a business’s goals, needs, and circumstances. Here are some hypothetical examples:

• Tech Start-up’s Financial Strategy : A tech start-up might set a goal to develop and launch a new product within two years. To do so, it decides to invest heavily in research and development. Given the high upfront costs and uncertain short-term revenue, the Company might choose to fund these investments through venture capital. It plans to prioritize growth over profitability in the short term, expecting that this strategy will maximize its value in the long term. Financial Strategy of a Technology Startup  
• Manufacturing Company’s Financial Strategy : A manufacturing company might set a goal to expand its operations by opening a new factory. It decides to fund this expansion partly through internal cash flows and partly through a bank loan. The Company plans to manage the risk of this new debt by maintaining a conservative cash flow management strategy, ensuring it always has enough cash to make its debt payments.
• Retail Business’s Financial Strategy : A retail business might aim to improve its financial stability by reducing its debt. It chooses to do this by cutting costs, increasing prices, and using excess cash flows to repay its loans early. It might also decide to hedge its interest rate risk by switching from variable-rate to fixed-rate debt.
• Individual’s Financial Strategy : A personal financial strategy might involve an individual setting a goal to retire comfortably at age 60. To achieve this, they might invest a portion of their income in a diversified portfolio of stocks and bonds. They also might decide to purchase life and health insurance to manage the risk of unexpected costs. As they get closer to retirement, they gradually plan to shift their investments from riskier stocks to safer bonds.

These strategies are tailored to the entity’s specific goals, resources, and risk tolerance. The specific tactics used in each strategy (like raising venture capital, taking on debt, hedging risks, or investing in stocks and bonds) can be used in different ways to support different strategies. It’s the combination of these tactics with clear goals that form a coherent financial strategy.

Case study on a financial strategy

Let’s consider a case study of Apple Inc.’s financial strategy:

Apple Inc. is well known for its strong financial strategy. A key aspect of Apple’s financial strategy has been its effective use of capital to generate shareholder value.

Capital Allocation : Apple’s cash flow from operating activities for the twelve months ending Sep ’22 was $24.977 bn. This reserve provides Apple with financial flexibility and security, allowing it to invest in research and development, acquisitions, and other strategic opportunities as they arise.

Shareholder Returns : Apple has consistently returned a significant portion of its profits to shareholders. Since initiating its capital return program in 2012,  Apple has returned over $573 billion to shareholders through dividends and share repurchases . Share repurchases, in particular, have been a key part of Apple’s strategy. By repurchasing its own shares, Apple reduces the number of shares outstanding, which increases earnings per share and can lead to a higher stock price.

Investments and Acquisitions : While Apple is known for its conservative approach to acquisitions, the Company has used its strong balance sheet to make strategic purchases that support its product and service portfolio. This includes the acquisition of companies like LuxVue (for display technologies), Turi (for machine learning), and Anobit (for flash storage), among others.

Debt Financing : Apple has also strategically used debt despite its large cash reserves. The Company started issuing bonds in 2013 to help fund its capital return program, taking advantage of low-interest rates to borrow at a lower cost than repatriating overseas earnings would have incurred (prior to U.S. tax law changes in 2017). As of September 24, 2022, the Company had outstanding fixed-rate notes with varying maturities for an aggregate principal amount of $111.8 billion (collectively the “Notes”), with $11.1 billion payable within 12 months.

Risk Management : Apple manages financial risk through various methods, including using derivatives to hedge against foreign exchange risk and commodity price risk.

This case study illustrates how Apple’s financial strategy supports its business goals and creates shareholder value. The Company’s strategic use of capital — through a combination of capital returns, strategic investments, debt financing, and risk management — has played a key role in its financial success.

Related Posts

What is Margin Trading, and How Do You Trade On It?

Maximizing Your Entitlements: How to Use the Gratuity Calculator as a Private Sector Employee

Financial Strategy of a Technology Startup

Tax Loss Harvesting

Business Funding Strategies

Best Budgeting Strategy for Businesses

Cash Management Strategies

Working Capital Management Strategies

Type above and press Enter to search. Press Esc to cancel.

How to Write a Small Business Financial Plan

Noah Parsons

4 min. read

Updated April 22, 2024

Creating a financial plan is often the most intimidating part of writing a business plan.

It’s also one of the most vital. Businesses with well-structured and accurate financial statements are more prepared to pitch to investors, receive funding, and achieve long-term success.

Thankfully, you don’t need an accounting degree to successfully create your budget and forecasts.

Here is everything you need to include in your financial plan, along with optional performance metrics, funding specifics, mistakes to avoid , and free templates.

• Key components of a financial plan

A sound financial plan is made up of six key components that help you easily track and forecast your business financials. They include your:

Sales forecast

What do you expect to sell in a given period? Segment and organize your sales projections with a personalized sales forecast based on your business type.

Subscription sales forecast

While not too different from traditional sales forecasts—there are a few specific terms and calculations you’ll need to know when forecasting sales for a subscription-based business.

Expense budget

Create, review, and revise your expense budget to keep your business on track and more easily predict future expenses.

How to forecast personnel costs

How much do your current, and future, employees’ pay, taxes, and benefits cost your business? Find out by forecasting your personnel costs.

Profit and loss forecast

Track how you make money and how much you spend by listing all of your revenue streams and expenses in your profit and loss statement.

Cash flow forecast

Manage and create projections for the inflow and outflow of cash by building a cash flow statement and forecast.

Balance sheet

Need a snapshot of your business’s financial position? Keep an eye on your assets, liabilities, and equity within the balance sheet.

What to include if you plan to pursue funding

Do you plan to pursue any form of funding or financing? If the answer is yes, then there are a few additional pieces of information that you’ll need to include as part of your financial plan.

Highlight any risks and assumptions

Every entrepreneur takes risks with the biggest being assumptions and guesses about the future. Just be sure to track and address these unknowns in your plan early on.

Plan your exit strategy

Investors will want to know your long-term plans as a business owner. While you don’t need to have all the details, it’s worth taking the time to think through how you eventually plan to leave your business.

• Financial ratios and metrics

With your financial statements and forecasts in place, you have all the numbers needed to calculate insightful financial ratios.

While including these metrics in your plan is entirely optional, having them easily accessible can be valuable for tracking your performance and overall financial situation.

Key financial terms you should know

It’s not hard. Anybody who can run a business can understand these key financial terms. And every business owner and entrepreneur should know them.

Common business ratios

Unsure of which business ratios you should be using? Check out this list of key financial ratios that bankers, financial analysts, and investors will want to see.

Break-even analysis

Do you want to know when you’ll become profitable? Find out how much you need to sell to offset your production costs by conducting a break-even analysis.

How to calculate ROI

How much could a business decision be worth? Evaluate the efficiency or profitability by calculating the potential return on investment (ROI).

• How to improve your financial plan

Your financial statements are the core part of your business plan that you’ll revisit most often. Instead of worrying about getting it perfect the first time, check out the following resources to learn how to improve your projections over time.

Common mistakes with business forecasts

I was glad to be asked about common mistakes with startup financial projections. I read about 100 business plans per year, and I have this list of mistakes.

How to improve your financial projections

Learn how to improve your business financial projections by following these five basic guidelines.

Brought to you by

Create a professional business plan

Using ai and step-by-step instructions.

Secure funding

Validate ideas

Build a strategy

• Financial plan templates and tools

Download and use these free financial templates and calculators to easily create your own financial plan.

Sales forecast template

Download a free detailed sales forecast spreadsheet, with built-in formulas, to easily estimate your first full year of monthly sales.

Download Template

Accurate and easy financial forecasting

Get a full financial picture of your business with LivePlan's simple financial management tools.

Get Started

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

Table of Contents

• What to include for funding

Related Articles

10 Min. Read

How to Write the Company Overview for a Business Plan

24 Min. Read

The 10 AI Prompts You Need to Write a Business Plan

3 Min. Read

What to Include in Your Business Plan Appendix

How to Write a Competitive Analysis for Your Business Plan

The Bplans Newsletter

The Bplans Weekly

Subscribe now for weekly advice and free downloadable resources to help start and grow your business.

We care about your privacy. See our privacy policy .

The quickest way to turn a business idea into a business plan

Fill-in-the-blanks and automatic financials make it easy.

No thanks, I prefer writing 40-page documents.

Discover the world’s #1 plan building software

• Creating a Small Business Financial Plan

Written by True Tamplin, BSc, CEPF®

Reviewed by subject matter experts.

Updated on September 02, 2023

Get Any Financial Question Answered

Table of contents, financial plan overview.

A financial plan is a comprehensive document that charts a business's monetary objectives and the strategies to achieve them. It encapsulates everything from budgeting and forecasting to investments and resource allocation.

For small businesses, a solid financial plan provides direction, helping them navigate economic challenges, capitalize on opportunities, and ensure sustainable growth.

The strength of a financial plan lies in its ability to offer a clear roadmap for businesses.

Especially for small businesses that may not have a vast reserve of resources, prioritizing financial goals and understanding where every dollar goes can be the difference between growth and stagnation.

It lends clarity, ensures informed decision-making, and sets the stage for profitability and success.

Understanding the Basics of Financial Planning for Small Businesses

Role of financial planning in business success.

Financial planning is the backbone of any successful business endeavor. It serves as a compass, guiding businesses toward profitability, stability, and growth.

With proper financial planning, businesses can anticipate potential cash shortfalls, make informed investment decisions, and ensure they have the capital needed to seize new opportunities.

For small businesses, in particular, tight financial planning can mean the difference between thriving and shuttering. Given the limited resources, it's vital to maximize every dollar and anticipate financial challenges.

Through diligent planning, small businesses can position themselves competitively, adapt to market changes, and drive consistent growth.

Core Components of a Financial Plan for Small Businesses

Every financial plan comprises several core components that, together, provide a holistic view of a business's financial health and direction. These include setting clear objectives, estimating costs , preparing financial statements , and considering sources of financing.

Each component plays a pivotal role in ensuring a thorough and actionable financial strategy .

For small businesses, these components often need a more granular approach. Given the scale of operations, even minor financial missteps can have significant repercussions.

As such, it's essential to tailor each component, ensuring they address specific challenges and opportunities that small businesses face, from initial startup costs to revenue forecasting and budgetary constraints.

Setting Clear Small Business Financial Objectives

Identifying business's short-term and long-term financial goals.

Every business venture starts with a vision. Translating this vision into actionable financial goals is the essence of effective planning.

Short-term goals could range from securing initial funding and achieving a set monthly revenue to covering startup costs. These targets, usually spanning a year or less, set the immediate direction for the business.

On the other hand, long-term financial goals delve into the broader horizon. They might encompass aspirations like expanding to new locations, diversifying product lines, or achieving a specific market share within a decade.

By segmenting goals into short-term and long-term, businesses can craft a step-by-step strategy, making the larger vision more attainable and manageable.

Understanding the Difference Between Profitability and Cash Flow

Profitability and cash flow, while closely linked, are distinct concepts in the financial realm. Profitability pertains to the ability of a business to generate a surplus after deducting all expenses.

It's a metric of success and indicates the viability of a business model . Simply put, it answers whether a business is making more than it spends.

In contrast, cash flow represents the inflow and outflow of cash within a business. A company might be profitable on paper yet struggle with cash flow if, for instance, clients delay payments or unexpected expenses arise.

For small businesses, maintaining positive cash flow is paramount. It ensures that they can cover operational costs, pay employees, and reinvest in growth, even if they're awaiting payments or navigating financial hiccups.

Estimating Small Business Startup Costs (for New Businesses)

Fixed vs variable costs.

When embarking on a new business venture, understanding costs is paramount. Fixed costs remain consistent regardless of production levels. They include expenses like rent, salaries, and insurance . These are predictable outlays that don't fluctuate with business performance.

Variable costs , conversely, change in direct proportion to production or business activity. Think of costs associated with materials for manufacturing or commission for sales .

For a startup, delineating between fixed and variable costs aids in crafting a more dynamic budget, allowing for adaptability as the business scales and evolves.

One-Time Expenditures vs Ongoing Expenses

Startups often grapple with numerous upfront costs. From purchasing equipment and setting up a workspace to initial marketing campaigns, these one-time expenditures lay the foundation for business operations.

They differ from ongoing expenses like utility bills, raw materials, or employee wages that recur monthly or annually.

For a small business owner, distinguishing between these costs is critical. One-time expenditures often demand a larger chunk of initial capital, while ongoing expenses shape the monthly and annual budget.

By categorizing them separately, businesses can strategize funding needs more effectively, ensuring they're equipped to meet both immediate and recurrent financial obligations.

Funding Sources for Small Businesses

Personal savings.

This is often the most straightforward way to fund a startup. Entrepreneurs tap into their personal savings accounts to jumpstart their business.

While this method has the benefit of not incurring debt or diluting company ownership, it intertwines the individual's personal financial security with the business's fate.

The entrepreneur must be prepared for potential losses, and there's the evident psychological strain of putting one's hard-earned money on the line.

Loans can be sourced from various institutions, from traditional banks to credit unions . They offer a substantial sum of money that can be paid back over time, usually with interest .

The main advantage of taking a loan is that the entrepreneur retains full ownership and control of the business.

However, there's the obligation of monthly repayments, which can strain a business's cash flow, especially in its early days. Additionally, securing a loan often requires collateral and a sound credit history.

Investors, including angel investors and venture capitalists , offer capital in exchange for equity or a stake in the company.

Angel investors are typically high-net-worth individuals who provide funding in the initial stages, while venture capitalists come in when there's proven business potential, often injecting larger sums. The advantage is substantial funding without the immediate pressure of repayments.

However, in exchange for their investment, they often seek a say in business decisions, which might mean compromising on some aspects of the original business vision.

Grants are essentially 'free money' often provided by government programs, non-profit organizations, or corporations to promote innovation and support businesses in specific sectors.

The primary advantage of grants is that they don't need to be repaid, nor do they dilute company ownership. However, they can be highly competitive and might come with stipulations on how the funds should be used.

Moreover, the application process can be lengthy and requires showcasing the business's potential or alignment with the specific goals or missions of the granting institution.

Preparing Key Financial Statements for Small Businesses

Income statement (profit & loss).

An Income Statement , often termed as the Profit & Loss statement , showcases a business's financial performance over a specific time frame. It details revenues , expenses, and ultimately, profits or losses.

By analyzing this statement, business owners can pinpoint revenue drivers, identify exorbitant costs, and understand the net result of their operations.

For small businesses, this document is instrumental in making informed decisions. For instance, if a certain product line is consistently unprofitable, it might be prudent to discontinue it. Conversely, if another segment is thriving, it might warrant further investment.

The Income Statement, thus, serves as a financial mirror, reflecting the outcomes of business strategies and decisions.

Balance Sheet

The Balance Sheet offers a snapshot of a company's assets , liabilities , and equity at a specific point in time.

Assets include everything the business owns, from physical items like equipment to intangible assets like patents .

Liabilities, on the other hand, encompass what the company owes, be it bank loans or unpaid bills.

Equity represents the owner's stake in the business, calculated as assets minus liabilities.

This statement is crucial for small businesses as it offers insights into their financial health. A robust asset base, minimal liabilities, and growing equity signify a thriving enterprise.

In contrast, mounting liabilities or dwindling assets could be red flags, signaling the need for intervention and strategy recalibration.

Cash Flow Statement

While the Income Statement reveals profitability, the Cash Flow Statement tracks the actual movement of money.

It categorizes cash flows into operating (day-to-day business), investing (buying/selling assets), and financing (loans or equity transactions) activities. This statement unveils the liquidity of a business, indicating whether it has sufficient cash to meet immediate obligations.

For small businesses, maintaining positive cash flow is often more vital than showcasing profitability.

After all, a business might be profitable on paper yet struggle if clients delay payments or unforeseen expenses emerge.

By regularly reviewing the Cash Flow Statement, small business owners can anticipate cash crunches and strategize accordingly, ensuring seamless operations irrespective of revenue cycles.

Small Business Budgeting and Expense Management

Importance of budgeting for a small business.

Budgeting is the financial blueprint for any business, detailing anticipated revenues and expenses for a forthcoming period. It's a proactive approach, enabling businesses to allocate resources efficiently, plan for investments, and prepare for potential financial challenges.

For small businesses, a meticulous budget is often the linchpin of stability, ensuring they operate within their means and avoid financial pitfalls.

Having a well-defined budget also fosters discipline. It curtails frivolous spending, emphasizes cost-efficiency, and sets clear financial boundaries.

For small businesses, where every dollar counts, a stringent budget is the gateway to financial prudence, ensuring that funds are utilized judiciously, fostering growth, and minimizing wastage.

Strategies for Reducing Costs and Optimizing Expenses

Bulk purchasing.

When businesses buy supplies in large quantities, they often benefit from discounts due to economies of scale . This can significantly reduce per-unit costs.

However, while bulk purchasing leads to immediate savings, businesses must ensure they have adequate storage and that the products won't expire or become obsolete before they're used.

Renegotiating Vendor Contracts

Regularly reviewing and renegotiating contracts with suppliers or service providers can lead to better terms and lower costs. This might involve exploring volume discounts, longer payment terms, or even bartering services.

Building strong relationships with vendors often paves the way for such negotiations.

Adopting Energy-Saving Measures

Simple changes, like switching to LED lighting or investing in energy-efficient appliances, can lead to long-term savings in utility bills. Moreover, energy conservation not only reduces costs but also minimizes the environmental footprint, which can enhance the business's reputation.

Embracing Technology

Modern software and technology can streamline business processes. Automation tools can handle repetitive tasks, reducing labor costs.

Meanwhile, data analytics tools can provide insights into customer preferences and behavior, ensuring that marketing budgets are used effectively and target the right audience.

Streamlining Operations

Regularly reviewing and refining business processes can eliminate redundancies and improve efficiency. This might mean merging roles, cutting down on unnecessary meetings, or simplifying supply chains. A leaner operation often translates to reduced expenses.

Outsourcing Non-core Tasks

Instead of maintaining an in-house team for every function, businesses can outsource tasks that aren't central to their operations.

For instance, functions like accounting , IT support, or digital marketing can be outsourced to specialized agencies, often leading to cost savings and access to expert skills.

Cultivating a Culture of Frugality

Encouraging employees to adopt a cost-conscious mindset can lead to collective savings. This can be fostered through incentives, regular training, or even simple practices like recycling and reusing office supplies.

When everyone in the organization is attuned to the importance of cost savings, the cumulative effect can be substantial.

Forecasting Small Business Revenue and Cash Flow

Techniques for predicting future sales in a small business, past sales data analysis.

Historical sales data is a foundational element in any forecasting effort. By reviewing previous sales figures, businesses can identify patterns, understand seasonal fluctuations, and recognize the effects of past initiatives.

This information offers a baseline upon which to build future projections, accounting for known recurring variables in the business cycle .

Market Research

Understanding the larger market dynamics is crucial for accurate forecasting. This involves tracking industry trends, monitoring shifts in consumer behavior, and being aware of potential market disruptions.

For instance, a sudden technological advancement can change consumer preferences or regulatory changes might impact an industry.

Local Trend Analysis

For small businesses, localized insights can be especially impactful. Observing local competitors, understanding regional consumer preferences, or noting shifts in the local economy can offer precise data points.

These granular details, when integrated into a larger forecasting model, can enhance prediction accuracy.

Customer Feedback

Direct feedback from customers is an invaluable source of insights. Surveys, focus groups, or even informal chats can reveal customer sentiments, preferences, and potential future purchasing behavior.

For instance, if a majority of loyal customers express interest in a new product or service, it can be indicative of future sales potential.

Moving Averages

This technique involves analyzing a series of data points (like monthly sales) by creating averages from different subsets of the full data set.

For yearly forecasting, a 12-month moving average can be used to smooth out short-term fluctuations and highlight longer-term trends or cycles.

Regression Analysis

Regression analysis is a statistical tool used to identify relationships between variables. In sales forecasting, it can help understand how different factors (like marketing spend, seasonal variations, or competitor actions) relate to sales figures.

Once these relationships are understood, businesses can predict future sales based on planned actions or expected external events.

Understanding the Cash Cycle of Business

The cash cycle encompasses the time it takes for a business to convert resource investments, often in the form of inventory, back into cash.

This involves the processes of purchasing inventory, selling it, and subsequently collecting payment. A shorter cycle implies quicker cash turnarounds, which are vital for liquidity.

For small businesses, a firm grasp of the cash cycle can aid in managing cash flow more effectively.

By identifying bottlenecks or delays, businesses can strategize to expedite processes. This might involve renegotiating payment terms with suppliers, offering discounts for prompt customer payments, or optimizing inventory levels to prevent overstocking.

Ultimately, understanding and optimizing the cash cycle ensures that a business remains liquid and agile.

Preparing for Seasonality and Unexpected Changes

Seasonality affects many businesses, from the ice cream vendor witnessing summer surges to the retailer bracing for holiday shopping frenzies.

By analyzing historical data and market trends, businesses can prepare for these cyclical shifts, ensuring they stock up, staff appropriately, and market effectively.

Small businesses, often operating on tighter margins , need to be especially vigilant. Beyond seasonality, they must also brace for unexpected changes – a local construction project obstructing store access, a sudden competitor emergence, or unforeseen regulatory changes.

Building a financial buffer, diversifying product or service lines, and maintaining flexible operational strategies can equip small businesses to weather these unforeseen challenges with resilience.

Securing Small Business Financing and Capital

Role of debt and equity financing.

When businesses seek external funding, they often grapple with the debt vs. equity conundrum. Debt financing involves borrowing money, typically via loans. While it doesn't dilute ownership, it necessitates regular interest payments, potentially impacting cash flow.

Equity financing, on the other hand, entails selling a stake in the business to investors. It might not demand regular repayments, but it dilutes ownership and might influence business decisions.

Small businesses must weigh these options carefully. While loans offer a structured repayment plan and retained control, they might strain finances if the business hits a rough patch.

Equity financing, although relinquishing some control, might bring aboard strategic partners, offering expertise and networks in addition to funds.

The optimal choice hinges on the business's financial health, growth aspirations, and the founder's comfort with sharing control.

Choosing Between Different Types of Loans

A staple in the lending arena, term loans offer businesses a fixed amount of capital that is paid back over a specified period with interest. They're often used for significant one-time expenses, such as purchasing machinery, real estate , or even business expansion.

With predictable monthly payments, businesses can plan their budgets accordingly. However, they might require collateral and a robust credit history for approval.

Lines of Credit

Unlike term loans that provide funds in a lump sum, a line of credit grants businesses access to a pool of funds up to a certain limit.

Businesses can draw from this line as needed, only paying interest on the amount they use. This makes it a versatile tool, especially for managing cash flow fluctuations or unexpected expenses. It serves as a financial safety net, ready for use whenever required.

As the name suggests, microloans are smaller loans designed to cater to businesses that might not need substantial amounts of capital. They're particularly beneficial for startups, businesses with limited credit histories, or those in need of a quick, small financial boost.

Since they are of a smaller denomination, the approval process might be more lenient than traditional loans.

Peer-To-Peer Lending

A contemporary twist to the traditional lending model, peer-to-peer (P2P) platforms connect borrowers directly with individual lenders or investor groups.

This direct model often translates to quicker approvals and competitive interest rates as the overheads of traditional banking structures are removed. With technology at its core, P2P lending can offer a more user-friendly, streamlined process.

However, creditworthiness still plays a pivotal role in determining interest rates and loan amounts.

Crowdfunding and Alternative Financing Options

In an increasingly digital age, crowdfunding platforms like Kickstarter or Indiegogo have emerged as viable financing avenues.

These platforms enable businesses to raise small amounts from a large number of people, often in exchange for product discounts, early access, or other perks. This not only secures funds but also validates the business idea and fosters a community of supporters.

Other alternatives include invoice financing, where businesses get an advance on pending invoices, or merchant cash advances tailored for businesses with significant credit card sales.

Each financing mode offers unique advantages and constraints. Small businesses must meticulously evaluate their financial landscape, growth trajectories, and risk appetite to harness the most suitable option.

Small Business Tax Planning and Management

Basic tax obligations for small businesses.

Navigating the maze of taxation can be daunting, especially for small businesses. Yet, understanding and fulfilling tax obligations is crucial.

Depending on the business structure—whether sole proprietorship , partnership , LLC , or corporation—different tax rules apply. For instance, while corporations are taxed on their earnings, sole proprietors report business income and expenses on their personal tax returns.

In addition to income taxes, small businesses may also be responsible for employment taxes if they have employees. This covers Social Security , Medicare , federal unemployment, and sometimes state-specific taxes.

There might also be sales taxes, property taxes, or special state-specific levies to consider.

Consistently maintaining accurate financial records, being aware of filing deadlines, and setting aside funds for tax obligations are essential practices to avoid penalties and ensure compliance.

Advantages of Tax Planning and Potential Deductions

Tax planning is the strategic approach to minimizing tax liability through the best use of available allowances, deductions, exclusions, and breaks.

For small businesses, effective tax planning can lead to significant savings.

This might involve strategies like deferring income to a later tax year, choosing the optimal time to purchase equipment, or taking advantage of specific credits available to businesses in certain sectors or regions.

Several potential deductions can reduce taxable income for small businesses. These include expenses like rent, utilities, business travel, employee wages, and even certain meals.

By keeping abreast of tax law changes and actively seeking out eligible deductions, small businesses can optimize their financial landscape, ensuring they're not paying more in taxes than necessary.

Importance of Hiring a Tax Professional or Accountant

While it's feasible for small business owners to manage their taxes, the intricate nuances of tax laws make it beneficial to consult professionals.

An experienced accountant or tax consultant can not only ensure compliance but can proactively recommend strategies to reduce tax liability.

They can guide businesses on issues like whether to classify someone as an employee or a contractor, how to structure the business for optimal taxation, or when to make certain capital investments.

Beyond just annual tax filing, these professionals offer year-round counsel, helping businesses maintain clean financial records, stay updated on tax law changes, and plan for future financial moves.

The investment in professional advice often pays dividends , saving businesses from costly mistakes, penalties, or missed financial opportunities.

Regularly Reviewing and Adjusting the Small Business Financial Plan

Setting checkpoints and milestones.

Like any strategic blueprint, a financial plan isn't static. It serves as a guiding framework but should be flexible enough to adapt to evolving business realities.

Setting regular checkpoints— quarterly , half-yearly, or annually—can help businesses assess whether they're on track to meet their financial objectives.

Milestones, such as reaching a specific sales target, launching a new product, or expanding into a new market, offer tangible markers of progress. Celebrating these victories can bolster morale, while any shortfalls can serve as lessons, prompting strategy tweaks. F

or small businesses, where agility is an asset, regularly revisiting the financial plan ensures that the business remains aligned with its overarching financial goals while being responsive to the dynamic marketplace.

Using Financial Ratios to Monitor Business Health

Financial ratios offer a distilled snapshot of a business's health. Ratios like the current ratio ( current assets divided by current liabilities ) can shed light on liquidity, indicating whether a business can meet short-term obligations.

The debt-to-equity ratio , contrasting borrowed funds with owner's equity, offers insights into the business's leverage and potential financial risk.

Profit margin , depicting profitability relative to sales, can highlight operational efficiency. By consistently monitoring these and other pertinent ratios, small businesses can glean actionable insights, understanding their financial strengths and areas needing attention.

In a realm where early intervention can stave off major financial setbacks, these ratios serve as vital diagnostic tools, guiding informed decision-making.

Pivoting Strategies Based on Financial Performance

In the ever-evolving world of business, flexibility is paramount. If financial reviews indicate that certain strategies aren't yielding anticipated results, it might be time to pivot.

This could involve tweaking product offerings, revising pricing strategies, targeting a different customer segment, or even overhauling the business model.

For small businesses, the ability to pivot can be a lifeline. It allows them to respond swiftly to market changes, customer feedback, or internal challenges.

A robust financial plan, while offering direction, should also be pliable, accommodating shifts in strategy based on real-world performance. After all, in the business arena, adaptability often spells the difference between stagnation and growth.

Bottom Line

Financial foresight is integral for the stability and growth of small businesses. Effective revenue and cash flow forecasting, anchored by historical sales data and enhanced by market research, local trends, and customer feedback, ensures businesses are prepared for future demands.

With the unpredictability of the business environment, understanding the cash cycle and preparing for unforeseen challenges is essential.

As businesses contemplate external financing, the decision between debt and equity and the myriad of loan types, should be made judiciously, keeping in mind the business's health, growth aspirations, and risk appetite.

Furthermore, diligent tax planning, with professional guidance, can lead to significant financial benefits. Regular reviews using financial ratios allow businesses to gauge their performance, adapt strategies, and pivot when necessary.

Ultimately, the agility to adapt, guided by a well-structured financial plan, is pivotal for businesses to thrive in a dynamic marketplace.

Creating a Small Business Financial Plan FAQs

What is the importance of a financial plan for small businesses.

A financial plan offers a structured roadmap, guiding businesses in making informed decisions, ensuring growth, and navigating financial challenges.

How do forecasting revenue and understanding cash cycles aid in financial planning?

Forecasting provides insights into expected income, aiding in budget allocation, while understanding cash cycles ensures effective liquidity management.

What are the core components of a financial plan for small businesses?

Core components include setting objectives, estimating startup costs, preparing financial statements, budgeting, forecasting, securing financing, and tax management.

Why is tax planning vital for small businesses?

Tax planning ensures compliance, optimizes tax liabilities through available deductions, and helps businesses save money and avoid penalties.

How often should a small business review its financial plan?

Regular reviews, ideally quarterly or half-yearly, ensure alignment with business goals and allow for strategy adjustments based on real-world performance.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon , Nasdaq and Forbes .

Related Topics

• Average Cost of a Certified Financial Planner
• Benefits of Having a Financial Planner
• Cash Flow Management
• Cash Flow-Based Financial Planning
• Charitable Financial Planning
• Components of a Good Financial Plan
• Debt Reduction Strategies
• Divorce Financial Planning
• Education Planning
• Fee-Only Financial Planning
• Financial Contingency Planning
• Financial Planner for Retirement
• Financial Planning Career Pathway
• Financial Planning Pyramid
• Financial Planning Tips
• Financial Planning Trends
• Financial Planning and Analysis
• Financial Planning for Allied Health Professionals
• Financial Planning for Married Couples
• Financial Planning for Military Families
• Financial Planning for Retirement
• Financial Planning for Startups
• Financial Planning vs Budgeting
• Financial Tips for Young Adults
• How to Build a 5-Year Financial Plan
• Limitations of Financial Planning
• Military Spouse Financial Planning
• The Function of a Financial Planner
• When Do You Need a Financial Planner?

Ask a Financial Professional Any Question

Meet top certified financial advisors near you, find advisor near you, our recommended advisors.

Taylor Kovar, CFP®

WHY WE RECOMMEND:

Fee-Only Financial Advisor Show explanation

Certified financial planner™, 3x investopedia top 100 advisor, author of the 5 money personalities & keynote speaker.

IDEAL CLIENTS:

Business Owners, Executives & Medical Professionals

Strategic Planning, Alternative Investments, Stock Options & Wealth Preservation

Claudia Valladares

Bilingual in english / spanish, founder of wisedollarmom.com, quoted in gobanking rates, yahoo finance & forbes.

Retirees, Immigrants & Sudden Wealth / Inheritance

Retirement Planning, Personal finance, Goals-based Planning & Community Impact

We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it.

Fact Checked

At Finance Strategists, we partner with financial experts to ensure the accuracy of our financial content.

Our team of reviewers are established professionals with decades of experience in areas of personal finance and hold many advanced degrees and certifications.

They regularly contribute to top tier financial publications, such as The Wall Street Journal, U.S. News & World Report, Reuters, Morning Star, Yahoo Finance, Bloomberg, Marketwatch, Investopedia, TheStreet.com, Motley Fool, CNBC, and many others.

This team of experts helps Finance Strategists maintain the highest level of accuracy and professionalism possible.

Why You Can Trust Finance Strategists

Finance Strategists is a leading financial education organization that connects people with financial professionals, priding itself on providing accurate and reliable financial information to millions of readers each year.

We follow strict ethical journalism practices, which includes presenting unbiased information and citing reliable, attributed resources.

Our goal is to deliver the most understandable and comprehensive explanations of financial topics using simple writing complemented by helpful graphics and animation videos.

Our writing and editorial staff are a team of experts holding advanced financial designations and have written for most major financial media publications. Our work has been directly cited by organizations including Entrepreneur, Business Insider, Investopedia, Forbes, CNBC, and many others.

Our mission is to empower readers with the most factual and reliable financial information possible to help them make informed decisions for their individual needs.

How It Works

Step 1 of 3, ask any financial question.

Ask a question about your financial situation providing as much detail as possible. Your information is kept secure and not shared unless you specify.

Step 2 of 3

Our team will connect you with a vetted, trusted professional.

Someone on our team will connect you with a financial professional in our network holding the correct designation and expertise.

Step 3 of 3

Get your questions answered and book a free call if necessary.

A financial professional will offer guidance based on the information provided and offer a no-obligation call to better understand your situation.

Where Should We Send Your Answer?

Just a Few More Details

We need just a bit more info from you to direct your question to the right person.

Tell Us More About Yourself

Is there any other context you can provide.

Pro tip: Professionals are more likely to answer questions when background and context is given. The more details you provide, the faster and more thorough reply you'll receive.

What is your age?

Are you married, do you own your home.

• Owned outright
• Owned with a mortgage

Do you have any children under 18?

• Yes, 3 or more

What is the approximate value of your cash savings and other investments?

• $50k - $250k
• $250k - $1m

Pro tip: A portfolio often becomes more complicated when it has more investable assets. Please answer this question to help us connect you with the right professional.

Would you prefer to work with a financial professional remotely or in-person?

• I would prefer remote (video call, etc.)
• I would prefer in-person
• I don't mind, either are fine

What's your zip code?

• I'm not in the U.S.

Submit to get your question answered.

A financial professional will be in touch to help you shortly.

Part 1: Tell Us More About Yourself

Do you own a business, which activity is most important to you during retirement.

• Giving back / charity
• Spending time with family and friends
• Pursuing hobbies

Part 2: Your Current Nest Egg

Part 3: confidence going into retirement, how comfortable are you with investing.

• Very comfortable
• Somewhat comfortable
• Not comfortable at all

How confident are you in your long term financial plan?

• Very confident
• Somewhat confident
• Not confident / I don't have a plan

What is your risk tolerance?

How much are you saving for retirement each month.

• None currently
• Minimal: $50 - $200
• Steady Saver: $200 - $500
• Serious Planner: $500 - $1,000
• Aggressive Saver: $1,000+

How much will you need each month during retirement?

• Bare Necessities: $1,500 - $2,500
• Moderate Comfort: $2,500 - $3,500
• Comfortable Lifestyle: $3,500 - $5,500
• Affluent Living: $5,500 - $8,000
• Luxury Lifestyle: $8,000+

Part 4: Getting Your Retirement Ready

What is your current financial priority.

• Getting out of debt
• Growing my wealth
• Protecting my wealth

Do you already work with a financial advisor?

Which of these is most important for your financial advisor to have.

• Tax planning expertise
• Investment management expertise
• Estate planning expertise
• None of the above

Where should we send your answer?

Submit to get your retirement-readiness report., get in touch with, great the financial professional will get back to you soon., where should we send the downloadable file, great hit “submit” and an advisor will send you the guide shortly., create a free account and ask any financial question, learn at your own pace with our free courses.

Take self-paced courses to master the fundamentals of finance and connect with like-minded individuals.

Get Started

Hey, did we answer your financial question.

We want to make sure that all of our readers get their questions answered.

Great, Want to Test Your Knowledge of This Lesson?

Create an Account to Test Your Knowledge of This Topic and Thousands of Others.

Get Your Question Answered by a Financial Professional

Create a free account and submit your question. We'll make sure a financial professional gets back to you shortly.

To Ensure One Vote Per Person, Please Include the Following Info

Great thank you for voting..

How to make a business plan

Table of Contents

How to make a good business plan: step-by-step guide.

A business plan is a strategic roadmap used to navigate the challenging journey of entrepreneurship. It's the foundation upon which you build a successful business.

A well-crafted business plan can help you define your vision, clarify your goals, and identify potential problems before they arise.

But where do you start? How do you create a business plan that sets you up for success?

This article will explore the step-by-step process of creating a comprehensive business plan.

What is a business plan?

A business plan is a formal document that outlines a business's objectives, strategies, and operational procedures. It typically includes the following information about a company:

Products or services

Target market

Competitors

Marketing and sales strategies

Financial plan

Management team

A business plan serves as a roadmap for a company's success and provides a blueprint for its growth and development. It helps entrepreneurs and business owners organize their ideas, evaluate the feasibility, and identify potential challenges and opportunities.

As well as serving as a guide for business owners, a business plan can attract investors and secure funding. It demonstrates the company's understanding of the market, its ability to generate revenue and profits, and its strategy for managing risks and achieving success.

Business plan vs. business model canvas

A business plan may seem similar to a business model canvas, but each document serves a different purpose.

A business model canvas is a high-level overview that helps entrepreneurs and business owners quickly test and iterate their ideas. It is often a one-page document that briefly outlines the following:

Key partnerships

Key activities

Key propositions

Customer relationships

Customer segments

Key resources

Cost structure

Revenue streams

On the other hand, a Business Plan Template provides a more in-depth analysis of a company's strategy and operations. It is typically a lengthy document and requires significant time and effort to develop.

A business model shouldn’t replace a business plan, and vice versa. Business owners should lay the foundations and visually capture the most important information with a Business Model Canvas Template . Because this is a fast and efficient way to communicate a business idea, a business model canvas is a good starting point before developing a more comprehensive business plan.

A business plan can aim to secure funding from investors or lenders, while a business model canvas communicates a business idea to potential customers or partners.

Why is a business plan important?

A business plan is crucial for any entrepreneur or business owner wanting to increase their chances of success.

Here are some of the many benefits of having a thorough business plan.

Helps to define the business goals and objectives

A business plan encourages you to think critically about your goals and objectives. Doing so lets you clearly understand what you want to achieve and how you plan to get there.

A well-defined set of goals, objectives, and key results also provides a sense of direction and purpose, which helps keep business owners focused and motivated.

Guides decision-making

A business plan requires you to consider different scenarios and potential problems that may arise in your business. This awareness allows you to devise strategies to deal with these issues and avoid pitfalls.

With a clear plan, entrepreneurs can make informed decisions aligning with their overall business goals and objectives. This helps reduce the risk of making costly mistakes and ensures they make decisions with long-term success in mind.

Attracts investors and secures funding

Investors and lenders often require a business plan before considering investing in your business. A document that outlines the company's goals, objectives, and financial forecasts can help instill confidence in potential investors and lenders.

A well-written business plan demonstrates that you have thoroughly thought through your business idea and have a solid plan for success.

Identifies potential challenges and risks

A business plan requires entrepreneurs to consider potential challenges and risks that could impact their business. For example:

Is there enough demand for my product or service?

Will I have enough capital to start my business?

Is the market oversaturated with too many competitors?

What will happen if my marketing strategy is ineffective?

By identifying these potential challenges, entrepreneurs can develop strategies to mitigate risks and overcome challenges. This can reduce the likelihood of costly mistakes and ensure the business is well-positioned to take on any challenges.

Provides a basis for measuring success

A business plan serves as a framework for measuring success by providing clear goals and financial projections . Entrepreneurs can regularly refer to the original business plan as a benchmark to measure progress. By comparing the current business position to initial forecasts, business owners can answer questions such as:

Are we where we want to be at this point?

Did we achieve our goals?

If not, why not, and what do we need to do?

After assessing whether the business is meeting its objectives or falling short, business owners can adjust their strategies as needed.

How to make a business plan step by step

The steps below will guide you through the process of creating a business plan and what key components you need to include.

1. Create an executive summary

Start with a brief overview of your entire plan. The executive summary should cover your business plan's main points and key takeaways.

Keep your executive summary concise and clear with the Executive Summary Template . The simple design helps readers understand the crux of your business plan without reading the entire document.

2. Write your company description

Provide a detailed explanation of your company. Include information on what your company does, the mission statement, and your vision for the future.

Provide additional background information on the history of your company, the founders, and any notable achievements or milestones.

3. Conduct a market analysis

Conduct an in-depth analysis of your industry, competitors, and target market. This is best done with a SWOT analysis to identify your strengths, weaknesses, opportunities, and threats. Next, identify your target market's needs, demographics, and behaviors.

Use the Competitive Analysis Template to brainstorm answers to simple questions like:

What does the current market look like?

Who are your competitors?

What are they offering?

What will give you a competitive advantage?

Who is your target market?

What are they looking for and why?

How will your product or service satisfy a need?

These questions should give you valuable insights into the current market and where your business stands.

4. Describe your products and services

Provide detailed information about your products and services. This includes pricing information, product features, and any unique selling points.

Use the Product/Market Fit Template to explain how your products meet the needs of your target market. Describe what sets them apart from the competition.

5. Design a marketing and sales strategy

Outline how you plan to promote and sell your products. Your marketing strategy and sales strategy should include information about your:

Pricing strategy

Advertising and promotional tactics

Sales channels

The Go to Market Strategy Template is a great way to visually map how you plan to launch your product or service in a new or existing market.

6. Determine budget and financial projections

Document detailed information on your business’ finances. Describe the current financial position of the company and how you expect the finances to play out.

Some details to include in this section are:

Startup costs

Revenue projections

Profit and loss statement

Funding you have received or plan to receive

Strategy for raising funds

7. Set the organization and management structure

Define how your company is structured and who will be responsible for each aspect of the business. Use the Business Organizational Chart Template to visually map the company’s teams, roles, and hierarchy.

As well as the organization and management structure, discuss the legal structure of your business. Clarify whether your business is a corporation, partnership, sole proprietorship, or LLC.

8. Make an action plan

At this point in your business plan, you’ve described what you’re aiming for. But how are you going to get there? The Action Plan Template describes the following steps to move your business plan forward. Outline the next steps you plan to take to bring your business plan to fruition.

Types of business plans

Several types of business plans cater to different purposes and stages of a company's lifecycle. Here are some of the most common types of business plans.

Startup business plan

A startup business plan is typically an entrepreneur's first business plan. This document helps entrepreneurs articulate their business idea when starting a new business.

Not sure how to make a business plan for a startup? It’s pretty similar to a regular business plan, except the primary purpose of a startup business plan is to convince investors to provide funding for the business. A startup business plan also outlines the potential target market, product/service offering, marketing plan, and financial projections.

Strategic business plan

A strategic business plan is a long-term plan that outlines a company's overall strategy, objectives, and tactics. This type of strategic plan focuses on the big picture and helps business owners set goals and priorities and measure progress.

The primary purpose of a strategic business plan is to provide direction and guidance to the company's management team and stakeholders. The plan typically covers a period of three to five years.

Operational business plan

An operational business plan is a detailed document that outlines the day-to-day operations of a business. It focuses on the specific activities and processes required to run the business, such as:

Organizational structure

Staffing plan

Production plan

Quality control

Inventory management

Supply chain

The primary purpose of an operational business plan is to ensure that the business runs efficiently and effectively. It helps business owners manage their resources, track their performance, and identify areas for improvement.

Growth-business plan

A growth-business plan is a strategic plan that outlines how a company plans to expand its business. It helps business owners identify new market opportunities and increase revenue and profitability. The primary purpose of a growth-business plan is to provide a roadmap for the company's expansion and growth.

The 3 Horizons of Growth Template is a great tool to identify new areas of growth. This framework categorizes growth opportunities into three categories: Horizon 1 (core business), Horizon 2 (emerging business), and Horizon 3 (potential business).

One-page business plan

A one-page business plan is a condensed version of a full business plan that focuses on the most critical aspects of a business. It’s a great tool for entrepreneurs who want to quickly communicate their business idea to potential investors, partners, or employees.

A one-page business plan typically includes sections such as business concept, value proposition, revenue streams, and cost structure.

Best practices for how to make a good business plan

Here are some additional tips for creating a business plan:

Use a template

A template can help you organize your thoughts and effectively communicate your business ideas and strategies. Starting with a template can also save you time and effort when formatting your plan.

Miro’s extensive library of customizable templates includes all the necessary sections for a comprehensive business plan. With our templates, you can confidently present your business plans to stakeholders and investors.

Be practical

Avoid overestimating revenue projections or underestimating expenses. Your business plan should be grounded in practical realities like your budget, resources, and capabilities.

Be specific

Provide as much detail as possible in your business plan. A specific plan is easier to execute because it provides clear guidance on what needs to be done and how. Without specific details, your plan may be too broad or vague, making it difficult to know where to start or how to measure success.

Be thorough with your research

Conduct thorough research to fully understand the market, your competitors, and your target audience . By conducting thorough research, you can identify potential risks and challenges your business may face and develop strategies to mitigate them.

Get input from others

It can be easy to become overly focused on your vision and ideas, leading to tunnel vision and a lack of objectivity. By seeking input from others, you can identify potential opportunities you may have overlooked.

Review and revise regularly

A business plan is a living document. You should update it regularly to reflect market, industry, and business changes. Set aside time for regular reviews and revisions to ensure your plan remains relevant and effective.

Create a winning business plan to chart your path to success

Starting or growing a business can be challenging, but it doesn't have to be. Whether you're a seasoned entrepreneur or just starting, a well-written business plan can make or break your business’ success.

The purpose of a business plan is more than just to secure funding and attract investors. It also serves as a roadmap for achieving your business goals and realizing your vision. With the right mindset, tools, and strategies, you can develop a visually appealing, persuasive business plan.

Ready to make an effective business plan that works for you? Check out our library of ready-made strategy and planning templates and chart your path to success.

Get on board in seconds

Join thousands of teams using Miro to do their best work yet.

AI ASSISTANTS

Upmetrics AI Your go-to AI-powered business assistant

AI Writing Assist Write, translate, and refine your text with AI

AI Financial Assist Automated forecasts and AI recommendations

TOP FEATURES

AI Business Plan Generator Create business plans faster with AI

Financial Forecasting Make accurate financial forecasts faster

INTEGRATIONS

Quickbooks Sync and compare with your quickbooks data

Strategic Planning Develop actionable strategic plans on-the-go

AI Pitch Deck Generator Use AI to generate your investor deck

Xero Sync and compare with your Xero data

See how it works  →

AI-powered business planning software

Very useful business plan software connected to AI. Saved a lot of time, money and energy. Their team is highly skilled and always here to help.

- Julien López

BY USE CASE

Secure Funding, Loans, Grants Create plans that get you funded

Starting & Launching a Business Plan your business for launch and success

Validate Your Business Idea Discover the potential of your business idea

Business Consultant & Advisors Plan with your team members and clients

Business Schools & Educators Simplify business plan education for students

Students & Learners Your e-tutor for business planning

• Sample Plans

WHY UPMETRICS?

Reviews See why customers love Upmetrics

Customer Success Stories Read our customer success stories

Blogs Latest business planning tips and strategies

Strategic Planning Templates Ready-to-use strategic plan templates

Business Plan Course A step-by-step business planning course

Ebooks & Guides A free resource hub on business planning

Business Tools Free business tools to help you grow

• 400+ Sample Business Plans

How to Prepare a Financial Plan for Startup Business (w/ example)

Free Financial Statements Template

Ajay Jagtap

• December 7, 2023

13 Min Read

If someone were to ask you about your business financials, could you give them a detailed answer?

Let’s say they ask—how do you allocate your operating expenses? What is your cash flow situation like? What is your exit strategy? And a series of similar other questions.

Instead of mumbling what to answer or shooting in the dark, as a founder, you must prepare yourself to answer this line of questioning—and creating a financial plan for your startup is the best way to do it.

A business plan’s financial plan section is no easy task—we get that.

But, you know what—this in-depth guide and financial plan example can make forecasting as simple as counting on your fingertips.

Ready to get started? Let’s begin by discussing startup financial planning.

What is Startup Financial Planning?

Startup financial planning, in simple terms, is a process of planning the financial aspects of a new business. It’s an integral part of a business plan and comprises its three major components: balance sheet, income statement, and cash-flow statement.

Apart from these statements, your financial section may also include revenue and sales forecasts, assets & liabilities, break-even analysis , and more. Your first financial plan may not be very detailed, but you can tweak and update it as your company grows.

Key Takeaways

• Realistic assumptions, thorough research, and a clear understanding of the market are the key to reliable financial projections.
• Cash flow projection, balance sheet, and income statement are three major components of a financial plan.
• Preparing a financial plan is easier and faster when you use a financial planning tool.
• Exploring “what-if” scenarios is an ideal method to understand the potential risks and opportunities involved in the business operations.

Why is Financial Planning Important to Your Startup?

Poor financial planning is one of the biggest reasons why most startups fail. In fact, a recent CNBC study reported that running out of cash was the reason behind 44% of startup failures in 2022.

A well-prepared financial plan provides a clear financial direction for your business, helps you set realistic financial objectives, create accurate forecasts, and shows your business is committed to its financial objectives.

It’s a key element of your business plan for winning potential investors. In fact, YC considered recent financial statements and projections to be critical elements of their Series A due diligence checklist .

Your financial plan demonstrates how your business manages expenses and generates revenue and helps them understand where your business stands today and in 5 years.

Makes sense why financial planning is important to your startup, doesn’t it? Let’s cut to the chase and discuss the key components of a startup’s financial plan.

Say goodbye to old-school excel sheets & templates

Make accurate financial plan faster with AI

Plans starting from $7/month

Key Components of a Startup Financial Plan

Whether creating a financial plan from scratch for a business venture or just modifying it for an existing one, here are the key components to consider including in your startup’s financial planning process.

Income Statement

An Income statement , also known as a profit-and-loss statement(P&L), shows your company’s income and expenditures. It also demonstrates how your business experienced any profit or loss over a given time.

Consider it as a snapshot of your business that shows the feasibility of your business idea. An income statement can be generated considering three scenarios: worst, expected, and best.

Your income or P&L statement must list the following:

• Cost of goods or cost of sale
• Gross margin
• Operating expenses
• Revenue streams
• EBITDA (Earnings before interest, tax, depreciation , & amortization )

Established businesses can prepare annual income statements, whereas new businesses and startups should consider preparing monthly statements.

Cash flow Statement

A cash flow statement is one of the most critical financial statements for startups that summarize your business’s cash in-and-out flows over a given time.

This section provides details on the cash position of your business and its ability to meet monetary commitments on a timely basis.

Your cash flow projection consists of the following three components:

✅ Cash revenue projection: Here, you must enter each month’s estimated or expected sales figures.

✅ Cash disbursements: List expenditures that you expect to pay in cash for each month over one year.

✅ Cash flow reconciliation: Cash flow reconciliation is a process used to ensure the accuracy of cash flow projections. The adjusted amount is the cash flow balance carried over to the next month.

Furthermore, a company’s cash flow projections can be crucial while assessing liquidity, its ability to generate positive cash flows and pay off debts, and invest in growth initiatives.

Balance Sheet

Your balance sheet is a financial statement that reports your company’s assets, liabilities, and shareholder equity at a given time.

Consider it as a snapshot of what your business owns and owes, as well as the amount invested by the shareholders.

This statement consists of three parts: assets , liabilities, and the balance calculated by the difference between the first two. The final numbers on this sheet reflect the business owner’s equity or value.

Balance sheets follow the following accounting equation with assets on one side and liabilities plus Owner’s equity on the other:

Here is what’s the core purpose of having a balance-sheet:

• Indicates the capital need of the business
• It helps to identify the allocation of resources
• It calculates the requirement of seed money you put up, and
• How much finance is required?

Since it helps investors understand the condition of your business on a given date, it’s a financial statement you can’t miss out on.

Break-even Analysis

Break-even analysis is a startup or small business accounting practice used to determine when a company, product, or service will become profitable.

For instance, a break-even analysis could help you understand how many candles you need to sell to cover your warehousing and manufacturing costs and start making profits.

Remember, anything you sell beyond the break-even point will result in profit.

You must be aware of your fixed and variable costs to accurately determine your startup’s break-even point.

• Fixed costs: fixed expenses that stay the same no matter what.
• Variable costs: expenses that fluctuate over time depending on production or sales.

A break-even point helps you smartly price your goods or services, cover fixed costs, catch missing expenses, and set sales targets while helping investors gain confidence in your business. No brainer—why it’s a key component of your startup’s financial plan.

Having covered all the key elements of a financial plan, let’s discuss how you can create a financial plan for your startup.

How to Create a Financial Section of a Startup Business Plan?

1. determine your financial needs.

You can’t start financial planning without understanding your financial requirements, can you? Get your notepad or simply open a notion doc; it’s time for some critical thinking.

Start by assessing your current situation by—calculating your income, expenses , assets, and liabilities, what the startup costs are, how much you have against them, and how much financing you need.

Assessing your current financial situation and health will help determine how much capital you need for your startup and help plan fundraising activities and outreach.

Furthermore, determining financial needs helps prioritize operational activities and expenses, effectively allocate resources, and increase the viability and sustainability of a business in the long run.

Having learned to determine financial needs, let’s head straight to setting financial goals.

2. Define Your Financial Goals

Setting realistic financial goals is fundamental in preparing an effective financial plan. So, it would help to outline your long-term strategies and goals at the beginning of your financial planning process.

Let’s understand it this way—if you are a SaaS startup pursuing VC financing rounds, you may ask investors about what matters to them the most and prepare your financial plan accordingly.

However, a coffee shop owner seeking a business loan may need to create a plan that appeals to banks, not investors. At the same time, an internal financial plan designed to offer financial direction and resource allocation may not be the same as previous examples, seeing its different use case.

Feeling overwhelmed? Just define your financial goals—you’ll be fine.

You can start by identifying your business KPIs (key performance indicators); it would be an ideal starting point.

3. Choose the Right Financial Planning Tool

Let’s face it—preparing a financial plan using Excel is no joke. One would only use this method if they had all the time in the world.

Having the right financial planning software will simplify and speed up the process and guide you through creating accurate financial forecasts.

Many financial planning software and tools claim to be the ideal solution, but it’s you who will identify and choose a tool that is best for your financial planning needs.

Create a Financial Plan with Upmetrics in no time

Enter your Financial Assumptions, and we’ll calculate your monthly/quarterly and yearly financial projections.

Start Forecasting

4. Make Assumptions Before Projecting Financials

Once you have a financial planning tool, you can move forward to the next step— making financial assumptions for your plan based on your company’s current performance and past financial records.

You’re just making predictions about your company’s financial future, so there’s no need to overthink or complicate the process.

You can gather your business’ historical financial data, market trends, and other relevant documents to help create a base for accurate financial projections.

After you have developed rough assumptions and a good understanding of your business finances, you can move forward to the next step—projecting financials.

5. Prepare Realistic Financial Projections

It’s a no-brainer—financial forecasting is the most critical yet challenging aspect of financial planning. However, it’s effortless if you’re using a financial planning software.

Upmetrics’ forecasting feature can help you project financials for up to 7 years. However, new startups usually consider planning for the next five years. Although it can be contradictory considering your financial goals and investor specifications.

Following are the two key aspects of your financial projections:

Revenue Projections

In simple terms, revenue projections help investors determine how much revenue your business plans to generate in years to come.

It generally involves conducting market research, determining pricing strategy , and cash flow analysis—which we’ve already discussed in the previous steps.

The following are the key components of an accurate revenue projection report:

• Market analysis
• Sales forecast
• Pricing strategy
• Growth assumptions
• Seasonal variations

This is a critical section for pre-revenue startups, so ensure your projections accurately align with your startup’s financial model and revenue goals.

Expense Projections

Both revenue and expense projections are correlated to each other. As revenue forecasts projected revenue assumptions, expense projections will estimate expenses associated with operating your business.

Accurately estimating your expenses will help in effective cash flow analysis and proper resource allocation.

These are the most common costs to consider while projecting expenses:

• Fixed costs
• Variable costs
• Employee costs or payroll expenses
• Operational expenses
• Marketing and advertising expenses
• Emergency fund

Remember, realistic assumptions, thorough research, and a clear understanding of your market are the key to reliable financial projections.

6. Consider “What if” Scenarios

After you project your financials, it’s time to test your assumptions with what-if analysis, also known as sensitivity analysis.

Using what-if analysis with different scenarios while projecting your financials will increase transparency and help investors better understand your startup’s future with its best, expected, and worst-case scenarios.

Exploring “what-if” scenarios is the best way to better understand the potential risks and opportunities involved in business operations. This proactive exercise will help you make strategic decisions and necessary adjustments to your financial plan.

7. Build a Visual Report

If you’ve closely followed the steps leading to this, you know how to research for financial projections, create a financial plan, and test assumptions using “what-if” scenarios.

Now, we’ll prepare visual reports to present your numbers in a visually appealing and easily digestible format.

Don’t worry—it’s no extra effort. You’ve already made a visual report while creating your financial plan and forecasting financials.

Check the dashboard to see the visual presentation of your projections and reports, and use the necessary financial data, diagrams, and graphs in the final draft of your financial plan.

Here’s what Upmetrics’ dashboard looks like:

8. Monitor and Adjust Your Financial Plan

Even though it’s not a primary step in creating a good financial plan, it’s quite essential to regularly monitor and adjust your financial plan to ensure the assumptions you made are still relevant, and you are heading in the right direction.

There are multiple ways to monitor your financial plan.

For instance, you can compare your assumptions with actual results to ensure accurate projections based on metrics like new customers acquired and acquisition costs, net profit, and gross margin.

Consider making necessary adjustments if your assumptions are not resonating with actual numbers.

Also, keep an eye on whether the changes you’ve identified are having the desired effect by monitoring their implementation.

And that was the last step in our financial planning guide. However, it’s not the end. Have a look at this financial plan example.

Startup Financial Plan Example

Having learned about financial planning, let’s quickly discuss a coffee shop startup financial plan example prepared using Upmetrics.

Important Assumptions

• The sales forecast is conservative and assumes a 5% increase in Year 2 and a 10% in Year 3.
• The analysis accounts for economic seasonality – wherein some months revenues peak (such as holidays ) and wanes in slower months.
• The analysis assumes the owner will not withdraw any salary till the 3rd year; at any time it is assumed that the owner’s withdrawal is available at his discretion.
• Sales are cash basis – nonaccrual accounting
• Moderate ramp- up in staff over the 5 years forecast
• Barista salary in the forecast is $36,000 in 2023.
• In general, most cafes have an 85% gross profit margin
• In general, most cafes have a 3% net profit margin

Projected Balance Sheet

Projected Cash-Flow Statement

Projected Profit & Loss Statement

Break Even Analysis

Start Preparing Your Financial Plan

We covered everything about financial planning in this guide, didn’t we? Although it doesn’t fulfill our objective to the fullest—we want you to finish your financial plan.

Sounds like a tough job? We have an easy way out for you—Upmetrics’ financial forecasting feature. Simply enter your financial assumptions, and let it do the rest.

So what are you waiting for? Try Upmetrics and create your financial plan in a snap.

Build your Business Plan Faster

with step-by-step Guidance & AI Assistance.

Frequently Asked Questions

How often should i update my financial projections.

Well, there is no particular rule about it. However, reviewing and updating your financial plan once a year is considered an ideal practice as it ensures that the financial aspirations you started and the projections you made are still relevant.

How do I estimate startup costs accurately?

You can estimate your startup costs by identifying and factoring various one-time, recurring, and hidden expenses. However, using a financial forecasting tool like Upmetrics will ensure accurate costs while speeding up the process.

What financial ratios should startups pay attention to?

Here’s a list of financial ratios every startup owner should keep an eye on:

• Net profit margin
• Current ratio
• Quick ratio
• Working capital
• Return on equity
• Debt-to-equity ratio
• Return on assets
• Debt-to-asset ratio

What are the 3 different scenarios in scenario analysis?

As discussed earlier, Scenario analysis is the process of ascertaining and analyzing possible events that can occur in the future. Startups or businesses often consider analyzing these three scenarios:

• base-case (expected) scenario
• Worst-case scenario
• best case scenario.

About the Author

Ajay is a SaaS writer and personal finance blogger who has been active in the space for over three years, writing about startups, business planning, budgeting, credit cards, and other topics related to personal finance. If not writing, he’s probably having a power nap. Read more

Reach Your Goals with Accurate Planning

No Risk – Cancel at Any Time – 15 Day Money Back Guarantee

Small Business Financial Strategy: Tips For Success

How you manage your finances, as well as how you plan for future growth, are the cornerstones of a successful business.

But if you’re like a lot of entrepreneurs, you haven’t put much thought into a financial strategy. You may be so mired in the daily tasks of running your business that you haven’t considered what you need to do for future success.

That’s where having a financial plan comes in handy. It can help you make the most of the working capital you have and find financing when you need more to grow.

Why a Financial Strategy is Crucial to the Success of Your Small Business

What you do in your business will impact it in a year, in five, even in 10. That’s why having a successful business and financial strategic plan is so important. Without one, you may spend your time putting out fires and managing day-to-day operations without really seeing the bigger picture, and your business may stagnate rather than grow.

Let’s say you want to increase revenues by 30% in the next two years. How will you do that? You may need to hire additional salespeople or increase pricing. These all fall under your financial strategy.

And if growth is your objective, you may need to plan to purchase commercial real estate. Though you may not be able to afford to spend $1 million on an office building today, with the right cash flow management and credit-building strategies, you can set your company up to be in a position to take out financing at a low rate in a few years.

Bottom line: having a financial strategy helps you carve your path to success.

Access better funding options with a solution you can’t get anywhere else

Reduce the pain in financing with streamlined applications, instant offers and approval rates that are 3.5X higher than industry averages.

Small Business Financial Strategies To Strengthen Your Business

Now let’s dive into some of the strategies that small business owners can use to grow their companies.

Establish Good Financial Habits from the Start

If you just launched a new business, it’s important to set your business up for financial success from the start. Invest in accounting software and open a business account so you separate personal and business finances.

Being a new business, you may not qualify for some types of financing from banks and SBA lenders, so work on building your credit by opening and using business credit cards responsibly.

Get a Payment Policy in Place

Late-paying clients can really jeopardize your business cash flow. That’s why it’s important to establish a policy outlining when invoices are due. Consider charging a late fee to encourage clients to pay on time, or offering a discount if they pay early so you keep your liquidity flowing.

Make it easy for clients to pay by automating as much as possible with your accounts receivable processes. Accepting debit and credit cards, as well as bank transfers, lets you get paid digitally so you don’t have to wait for a check to arrive in the mail.

Even a small business can benefit from bookkeeping help, especially if you don’t have the time to update your accounts regularly.

You can hire a part-time accountant, CPA, or bookkeeper to make sure your business expenses are appropriately categorized, send invoices, check on late payments, and even file your taxes.

The time you save not having to manage your company’s finances is time you can reinvest in running your business.

You might also consider hiring a financial advisor who can help you establish your business’ financial goals and determine how to best reach them.

Understand Your Financial Statements

Things like cash flow statements, balance sheets, and profit and loss statements might sound complicated and like something your accountant should deal with, but it’s important that you as the business owner understand your own financial statements.

These statements tell the story of your business’s financial wellbeing. Looking at assets and liabilities, cash flow, or projected sales paints a picture of where your business is, and where it’s headed so that you can make decisions to course-correct when needed.

Constantly Monitor Your Credit

Even if your business isn’t a new one, it’s important to keep an eye on both your personal and business credit. If you haven’t yet established credit for your business, spend time learning how to establish business credit , since some lenders look at your scores when determining whether to give you financing or not.

Make sure there are no discrepancies in your credit reports. If they are, report them immediately, since they can negatively affect your credit. Work to raise your credit scores by paying down debt and making on-time payments each month.

The higher your credit scores, the lower the interest rate you will qualify for, should you decide to take out a loan one day.

Consider Your Financing Options

Whether you need an injection of cash right now or not, there may come a day when you do. Maybe you will want to purchase another business in a few years, hire more help, or amp up your marketing spend. Don’t wait until then to research your options and find the type of small business loans or lines of credit that are the best fit.

If you run a startup, also look into venture capital, though know that any investor will have a piece of your company’s equity and may want a hand in the decision-making process.

How to Create a Financial Strategy for Your Small Business

We’ve covered some tactics you can use to take your business to success. Now let’s build that into a financial strategy.

If you haven’t yet created a business plan, now is the time to do so. There are many free templates available online, so use one of them as a starting point. In your small business plan, outline your business goals and how you will achieve them. Leverage those financial statements that you’re now an expert at deciphering.

Once you finalize your business plan, don’t stick it in a drawer and forget about it. It needs to be a living, breathing document, and one that you update as your business pivots.

Successful entrepreneurs know they must see beyond the short-term to develop a business strategy that plans for the long-term financial health of their companies.

Get Personalized Loan Options For Your Business

Let our experts connect you to lenders based on your unique business data.

This article was originally written on January 14, 2022 and updated on February 24, 2022.

Rate This Article

This article currently has 21 ratings with an average of 4.5 stars.

Susan Guillory

Susan Guillory is an intuitive business coach and content magic maker. She’s written several business books and has been published on sites including Forbes, AllBusiness, and SoFi. She writes about business and personal credit, financial strategies, loans, and credit cards.

Have at it! We'd love to hear from you and encourage a lively discussion among our users. Please help us keep our site clean and protect yourself. Refrain from posting overtly promotional content, and avoid disclosing personal information such as bank account or phone numbers. Reviews Disclosure: The responses below are not provided or commissioned by the credit card, financing and service companies that appear on this site. Responses have not been reviewed, approved or otherwise endorsed by the credit card, financing and service companies and it is not their responsibility to ensure all posts and/or questions are answered.

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Save my name and email in this browser for the next time I comment.

One response to “ Small Business Financial Strategy: Tips For Success ”

This nav is giving me the tools I need to grow 2tonetrucking into a reputable company.

• Starting a Business

Our Top Picks

• Best Small Business Loans
• Best Business Internet Service
• Best Online Payroll Service
• Best Business Phone Systems

Our In-Depth Reviews

• OnPay Payroll Review
• ADP Payroll Review
• Ooma Office Review
• RingCentral Review

Explore More

• Business Solutions
• Entrepreneurship
• Franchising
• Best Accounting Software
• Best Merchant Services Providers
• Best Credit Card Processors
• Best Mobile Credit Card Processors
• Clover Review
• Merchant One Review
• QuickBooks Online Review
• Xero Accounting Review
• Financial Solutions

Human Resources

• Best Human Resources Outsourcing Services
• Best Time and Attendance Software
• Best PEO Services
• Best Business Employee Retirement Plans
• Bambee Review
• Rippling HR Software Review
• TriNet Review
• Gusto Payroll Review
• HR Solutions

Marketing and Sales

• Best Text Message Marketing Services
• Best CRM Software
• Best Email Marketing Services
• Best Website Builders
• Textedly Review
• Salesforce Review
• EZ Texting Review
• Textline Review
• Business Intelligence
• Marketing Solutions
• Marketing Strategy
• Public Relations
• Social Media
• Best GPS Fleet Management Software
• Best POS Systems
• Best Employee Monitoring Software
• Best Document Management Software
• Verizon Connect Fleet GPS Review
• Zoom Review
• Samsara Review
• Zoho CRM Review
• Technology Solutions

Business Basics

• 4 Simple Steps to Valuing Your Small Business
• How to Write a Business Growth Plan
• 12 Business Skills You Need to Master
• How to Start a One-Person Business
• FreshBooks vs. QuickBooks Comparison
• Salesforce CRM vs. Zoho CRM
• RingCentral vs. Zoom Comparison
• 10 Ways to Generate More Sales Leads

6 Elements of a Successful Financial Plan for a Small Business

Improve your chances of growth by covering these bases in your plan.

Table of Contents

Many small businesses lack a full financial plan, even though evidence shows that it is essential to the long-term success and growth of any business. 

For example, a study in the New England Journal of Entrepreneurship found that entrepreneurs with a business plan are more successful than those without one. If you’re not sure how to get started, read on to learn the six key elements of a successful small business financial plan.

What is a business financial plan, and why is it important? 

A business financial plan is an overview of a business’s financial situation and a forward-looking projection for growth. A business financial plan typically has six parts: sales forecasting, expense outlay, a statement of financial position, a cash flow projection, a break-even analysis and an operations plan.

A good financial plan helps you manage cash flow and accounts for months when revenue might be lower than expected. It also helps you budget for daily and monthly expenses and plan for taxes each year.

Importantly, a financial plan helps you focus on the long-term growth of your business. That way, you don’t get so caught up in the day-to-day activities that you lose sight of your goals. Focusing on the long-term vision helps you prioritize your financial resources. 

The 6 components of a successful financial plan for business

1. sales forecasting.

You should have an estimate of your sales revenue for every month, quarter and year. Identifying any patterns in your sales cycles helps you better understand your business, and this knowledge is invaluable as you plan marketing initiatives and growth strategies . 

For instance, a seasonal business can aim to improve sales in the off-season to eventually become a year-round venture. Another business might become better prepared by understanding how upticks and downturns in business relate to factors such as the weather or the economy.

Sales forecasting is also the foundation for setting company growth goals. For instance, you could aim to improve your sales by 10 percent over each previous period.

2. Expense outlay

A full expense plan includes regular expenses, expected future expenses and associated expenses. Regular expenses are the current ongoing costs of your business, including operational costs such as rent, utilities and payroll. 

Regular expenses relate to standard business activities that occur each year, such as conference attendance, advertising and marketing, and the office holiday party. It’s a good idea to distinguish essential expenses from expenses that can be reduced or eliminated if needed.

Expected future expenses are known future costs, such as tax rate increases, minimum wage increases or maintenance needs. Generally, a part of the budget should also be allocated to unexpected future expenses, such as damage to your business caused by fire, flood or other unexpected disasters. Planning for future expenses ensures your business is financially prepared via budget reduction, increases in sales or financial assistance.

Associated expenses are the estimated costs of various initiatives, such as acquiring and training new hires, opening a new store or expanding delivery to a new territory. An accurate estimate of associated expenses helps you properly manage growth and prevents your business from exceeding your cost capabilities. 

As with expected future expenses, understanding how much capital is required to accomplish various growth goals helps you make the right decision about financing options.

3. Statement of financial position (assets and liabilities)

Assets and liabilities are the foundation of your business’s balance sheet and the primary determinants of your business’s net worth. Tracking both allows you to maximize your business’s potential value. 

Small businesses frequently undervalue their assets (such as machinery, property or inventory) and fail to properly account for outstanding bills. Your balance sheet offers a more complete view of your business’s health than a profit-and-loss statement or a cash flow report. 

A profit-and-loss statement shows how the business performed over a specific time period, while a balance sheet shows the financial position of the business on any given day.

4. Cash flow projection

You should be able to predict your cash flow on a monthly, quarterly and annual basis. Projecting cash flow for the full year allows you to get ahead of any financial struggles or challenges. 

It can also help you identify a cash flow problem before it hurts your business. You can set the most appropriate payment terms, such as how much you charge upfront or how many days after invoicing you expect payment .

A cash flow projection gives you a clear look at how much money is expected to be left at the end of each month so you can plan a possible expansion or other investments. It also helps you budget, such as by spending less one month for the anticipated cash needs of another month.

5. Break-even analysis

A break-even analysis evaluates fixed costs relative to the profit earned by each additional unit you produce and sell. This analysis is essential to understanding your business’s revenue and potential costs versus profits of expansion or growth of your output. 

Having your expenses fully fleshed out, as described above, makes your break-even analysis more accurate and useful. A break-even analysis is also the best way to determine your pricing.

In addition, a break-even analysis can tell you how many units you need to sell at various prices to cover your costs. You should aim to set a price that gives you a comfortable margin over your expenses while allowing your business to remain competitive.

6. Operations plan

To run your business as efficiently as possible, craft a detailed overview of your operational needs. Understanding what roles are required for you to operate your business at various volumes of output, how much output or work each employee can handle, and the costs of each stage of your supply chain will aid you in making informed decisions for your business’s growth and efficiency.

It’s important to tightly control expenses, such as payroll or supply chain costs, relative to growth. An operations plan can also make it easier to determine if there is room to optimize your operations or supply chain via automation, new technology or superior supply chain vendors.

For this reason, it is imperative for a business owner to conduct due diligence and become knowledgeable about merchant services before acquiring an account. Once the owner signs a contract, it cannot be changed, unless the business owner breaks the contract and acquires a new account with a new merchant services provider. 

Tips on writing a business financial plan

Business owners should create a financial plan annually to ensure they have a clear and accurate picture of their business’s finances and a realistic view for future growth or expansion. A financial plan helps the business’s leaders make informed decisions about purchases, debt, hiring, expense control and overall operations for the year ahead. 

A business financial plan is essential if a business owner is looking to sell their business, attract investors or enter a partnership with another business. Here are some tips for writing a business financial plan.

Review the previous year’s plan.

It’s a good idea to compare the previous year’s plan against actual performance and finances to see how accurate the previous plan and forecast were. That way, you can address any discrepancies or overlooked elements in next year’s plan.

Collaborate with other departments.

A business owner or other individual charged with creating the business financial plan should collaborate with the finance department, human resources department, sales team , operations leader, and those in charge of machinery, vehicles or other significant business tools. 

Each division should provide the necessary data about projections, value and expenses. All of these elements come together to create a comprehensive financial picture of the business.

Use available resources.

The Small Business Administration (SBA) and SCORE, the SBA’s nonprofit partner, are two excellent resources for learning about financial plans. Both can teach you the elements of a comprehensive plan and how best to work with the different departments in your business to collect the necessary information. Many websites, including business.com , and service providers, such as Intuit, offer advice on this matter. 

If you have questions or encounter challenges while creating your business financial plan, seek advice from your accountant or other small business owners in your network. Your city or state has a small business office that you can contact for help.

Business financial plan templates

Many business organizations offer free information that small business owners can use to create their financial plan. For example, the SBA’s Learning Platform offers a course on how to create a business plan. It also offers worksheets and templates to help you get started. You can seek additional help and more personalized service from your local office.

SCORE is the largest volunteer network of business mentors. It began as a group of retired executives (SCORE stands for “Service Corps of Retired Executives”) but has expanded to include business owners and executives from many industries. Advice is free and available online, and there are SBA district offices in every U.S. state. In addition to participating in group or at-home learning, you can be paired with a mentor for individualized help. 

SCORE offers templates and tips for creating a small business financial plan. SCORE is an excellent resource because it addresses different levels of experience and offers individualized help.

Other templates can be found in Microsoft Office’s template library, QuickBooks’ online resources, Shopify’s blog and other places. You can also ask your accountant for guidance, since many accountants provide financial planning services in addition to their usual tax services.

Diana Wertz contributed to the writing and research in this article.

Get Weekly 5-Minute Business Advice

B. newsletter is your digest of bite-sized news, thought & brand leadership, and entertainment. All in one email.

Our mission is to help you take your team, your business and your career to the next level. Whether you're here for product recommendations, research or career advice, we're happy you're here!

Business Financial Plan Example: Strategies and Best Practices

Any successful endeavor begins with a robust plan – and running a prosperous business is no exception. Careful strategic planning acts as the bedrock on which companies build their future. One of the most critical aspects of this strategic planning is the creation of a detailed business financial plan. This plan serves as a guide, helping businesses navigate their way through the complex world of finance, including revenue projection, cost estimation, and capital expenditure, to name just a few elements. However, understanding what a business financial plan entails and how to implement it effectively can often be challenging. With multiple components to consider and various economic factors at play, the financial planning process may appear daunting to both new and established business owners.

This is where we come in. In this comprehensive article, we delve into the specifics of a business financial plan. We discuss its importance, the essential elements that make it up, and the steps to craft one successfully. Furthermore, we provide a practical example of a business financial plan in action, drawing upon real-world-like scenarios and strategies. By presenting the best practices and demonstrating how to employ them, we aim to equip business owners and entrepreneurs with the tools they need to create a robust, realistic, and efficient business financial plan. This in-depth guide will help you understand not only how to plan your business finances but also how to use this plan as a roadmap, leading your business towards growth, profitability, and overall financial success. Whether you're a seasoned business owner aiming to refine your financial strategies or an aspiring entrepreneur at the beginning of your journey, this article is designed to guide you through the intricacies of business financial planning and shed light on the strategies that can help your business thrive.

Understanding a Business Financial Plan

At its core, a business financial plan is a strategic blueprint that sets forth how a company will manage and navigate its financial operations, guiding the organization towards its defined fiscal objectives. It encompasses several critical aspects of a business's financial management, such as revenue projection, cost estimation, capital expenditure, cash flow management, and investment strategies.

Revenue projection is an estimate of the revenue a business expects to generate within a specific period. It's often based on market research, historical data, and educated assumptions about future market trends. Cost estimation, on the other hand, involves outlining the expenses a business anticipates incurring in its operations. Together, revenue projection and cost estimation can give a clear picture of a company's expected profitability. Capital expenditure refers to the funds a company allocates towards the purchase or maintenance of long-term assets like machinery, buildings, and equipment. Understanding capital expenditure is vital as it can significantly impact a business's operational capacity and future profitability. The cash flow management aspect of a business financial plan involves monitoring, analyzing, and optimizing the company's cash inflows and outflows. A healthy cash flow ensures that a business can meet its short-term obligations, invest in its growth, and provide a buffer for future uncertainties. Lastly, a company's investment strategies are crucial for its growth and sustainability. They might include strategies for raising capital, such as issuing shares or securing loans, or strategies for investing surplus cash, like purchasing assets or investing in market securities.

A well-developed business financial plan, therefore, doesn't just portray the company's current financial status; it also serves as a roadmap for the business's fiscal operations, enabling it to navigate towards its financial goals. The plan acts as a guide, providing insights that help business owners make informed decisions, whether they're about day-to-day operations or long-term strategic choices. In a nutshell, a business financial plan is a key tool in managing a company's financial resources effectively and strategically. It allows businesses to plan for growth, prepare for uncertainties, and strive for financial sustainability and success.

Essential Elements of a Business Financial Plan

A comprehensive financial plan contains several crucial elements, including:

• Sales Forecast : The sales forecast represents the business's projected sales revenues. It is often broken down into segments such as products, services, or regions.
• Expenses Budget : This portion of the plan outlines the anticipated costs of running the business. It includes fixed costs (rent, salaries) and variable costs (marketing, production).
• Cash Flow Statement : This statement records the cash that comes in and goes out of a business, effectively portraying its liquidity.
• Income Statements : Also known as profit and loss statements, income statements provide an overview of the business's profitability over a given period.
• Balance Sheet : This snapshot of a company's financial health shows its assets, liabilities, and equity.

Crafting a Business Financial Plan: The Steps

Developing a business financial plan requires careful analysis and planning. Here are the steps involved:

Step 1: Set Clear Financial Goals

The initial stage in crafting a robust business financial plan involves the establishment of clear, measurable financial goals. These objectives serve as your business's financial targets and compass, guiding your company's financial strategy. These goals can be short-term, such as improving quarterly sales or reducing monthly overhead costs, or they can be long-term, such as expanding the business to a new location within five years or doubling the annual revenue within three years. The goals might include specific targets such as increasing revenue by a particular percentage, reducing costs by a specific amount, or achieving a certain profit margin. Setting clear goals provides a target to aim for and allows you to measure your progress over time.

Step 2: Create a Sales Forecast

The cornerstone of any business financial plan is a robust sales forecast. This element of the plan involves predicting the sales your business will make over a given period. This estimate should be based on comprehensive market research, historical sales data, an understanding of industry trends, and the impact of any marketing or promotional activities. Consider the business's growth rate, the overall market size, and seasonal fluctuations in demand. Remember, your sales forecast directly influences the rest of your financial plan, particularly your budgets for expenses and cash flow, so it's critical to make it as accurate and realistic as possible.

Step 3: Prepare an Expense Budget

The next step involves preparing a comprehensive expense budget that covers all the costs your business is likely to incur. This includes fixed costs, such as rent or mortgage payments, salaries, insurance, and other overheads that remain relatively constant regardless of your business's level of output. It also includes variable costs, such as raw materials, inventory, marketing and advertising expenses, and other costs that fluctuate in direct proportion to the level of goods or services you produce. By understanding your expense budget, you can determine how much revenue your business needs to generate to cover costs and become profitable.

Step 4: Develop a Cash Flow Statement

One of the most crucial elements of your financial plan is the cash flow statement. This document records all the cash that enters and leaves your business, presenting a clear picture of your company's liquidity. Regularly updating your cash flow statement allows you to monitor the cash in hand and foresee any potential shortfalls. It helps you understand when cash comes into your business from sales and when cash goes out of your business due to expenses, giving you insights into your financial peaks and troughs and enabling you to manage your cash resources more effectively.

Step 5: Prepare Income Statements and Balance Sheets

Another vital part of your business financial plan includes the preparation of income statements and balance sheets. An income statement, also known as a Profit & Loss (P&L) statement, provides an overview of your business's profitability over a certain period. It subtracts the total expenses from total revenue to calculate net income, providing valuable insights into the profitability of your operations.

On the other hand, the balance sheet provides a snapshot of your company's financial health at a specific point in time. It lists your company's assets (what the company owns), liabilities (what the company owes), and equity (the owner's or shareholders' investment in the business). These documents help you understand where your business stands financially, whether it's making a profit, and how your assets, liabilities, and equity balance out.

Step 6: Revise Your Plan Regularly

It's important to remember that a financial plan is not a static document, but rather a living, evolving roadmap that should adapt to your business's changing circumstances and market conditions. As such, regular reviews and updates are crucial. By continually revisiting and revising your plan, you can ensure it remains accurate, relevant, and effective. You can adjust your forecasts as needed, respond to changes in the business environment, and stay on track towards achieving your financial goals. By doing so, you're not only keeping your business financially healthy but also setting the stage for sustained growth and success.

Business Financial Plan Example: Joe’s Coffee Shop

Now, let's look at a practical example of a financial plan for a hypothetical business, Joe’s Coffee Shop.

Sales Forecast

When constructing his sales forecast, Joe takes into account several significant factors. He reviews his historical sales data, identifies and understands current market trends, and evaluates the impact of any upcoming promotional events. With his coffee shop located in a bustling area, Joe expects to sell approximately 200 cups of coffee daily. Each cup is priced at $5, which gives him a daily sales prediction of $1000. Multiplying this figure by 365 (days in a year), his forecast for Year 1 is an annual revenue of $365,000. This projection provides Joe with a financial target to aim for and serves as a foundation for his further financial planning. It is worth noting that Joe's sales forecast may need adjustments throughout the year based on actual performance and changes in the market or business environment.

Expenses Budget

To run his coffee shop smoothly, Joe has identified several fixed and variable costs he'll need to budget for. His fixed costs, which are costs that will not change regardless of his coffee shop's sales volume, include rent, which is $2000 per month, salaries for his employees, which total $8000 per month, and utilities like electricity and water, which add up to about $500 per month.

In addition to these fixed costs, Joe also has variable costs to consider. These are costs that fluctuate depending on his sales volume and include the price of coffee beans, milk, sugar, and pastries, which he sells alongside his coffee. After a careful review of all these expenses, Joe estimates that his total annual expenses will be around $145,000. This comprehensive expense budget provides a clearer picture of how much Joe needs to earn in sales to cover his costs and achieve profitability.

Cash Flow Statement

With a clear understanding of his expected sales revenue and expenses, Joe can now proceed to develop a cash flow statement. This statement provides a comprehensive overview of all the cash inflows and outflows within his business. When Joe opened his coffee shop, he invested an initial capital of $50,000. He expects that the monthly cash inflows from sales will be about $30,417 (which is his annual revenue of $365,000 divided by 12), and his monthly cash outflows for expenses will amount to approximately $12,083 (his total annual expenses of $145,000 divided by 12). The cash flow statement gives Joe insights into his business's liquidity. It helps him track when and where his cash is coming from and where it is going. This understanding can assist him in managing his cash resources effectively and ensure he has sufficient cash to meet his business's operational needs and financial obligations.

Income Statement and Balance Sheet

With the figures from his sales forecast, expense budget, and cash flow statement, Joe can prepare his income statement and balance sheet. The income statement, or Profit & Loss (P&L) statement, reveals the profitability of Joe's coffee shop. It calculates the net profit by subtracting the total expenses from total sales revenue. In Joe's case, this means his net profit for Year 1 is expected to be $220,000 ($365,000 in revenue minus $145,000 in expenses).

The balance sheet, on the other hand, provides a snapshot of the coffee shop's financial position at a specific point in time. It includes Joe's initial capital investment of $50,000, his assets like coffee machines, furniture, and inventory, and his liabilities, which might include any loans he took to start the business and accounts payable.

The income statement and balance sheet not only reflect the financial health of Joe's coffee shop but also serve as essential tools for making informed business decisions and strategies. By continually monitoring and updating these statements, Joe can keep his finger on the pulse of his business's financial performance and make necessary adjustments to ensure sustained profitability and growth.

Best Practices in Business Financial Planning

While crafting a business financial plan, consider the following best practices:

• Realistic Projections : Ensure your forecasts are realistic, based on solid data and reasonable assumptions.
• Scenario Planning : Plan for best-case, worst-case, and most likely scenarios. This will help you prepare for different eventualities.
• Regular Reviews : Regularly review and update your plan to reflect changes in business conditions.
• Seek Professional Help : If you are unfamiliar with financial planning, consider seeking assistance from a financial consultant.

The importance of a meticulously prepared business financial plan cannot be overstated. It forms the backbone of any successful business, steering it towards a secure financial future. Creating a solid financial plan requires a blend of careful analysis, precise forecasting, clear and measurable goal setting, prudent budgeting, and efficient cash flow management. The process may seem overwhelming at first, especially for budding entrepreneurs. However, it's crucial to understand that financial planning is not an event, but rather an ongoing process. This process involves constant monitoring, evaluation, and continuous updating of the financial plan as the business grows and market conditions change.

The strategies and best practices outlined in this article offer an invaluable framework for any entrepreneur or business owner embarking on the journey of creating a financial plan. It provides insights into essential elements such as setting clear financial goals, creating a sales forecast, preparing an expense budget, developing a cash flow statement, and preparing income statements and balance sheets. Moreover, the example of Joe and his coffee shop gives a practical, real-world illustration of how these elements come together to form a coherent and effective financial plan. This example demonstrates how a robust financial plan can help manage resources more efficiently, make better-informed decisions, and ultimately lead to financial success.

Remember, every grand journey begins with a single step. In the realm of business, this step is creating a well-crafted, comprehensive, and realistic business financial plan. By following the guidelines and practices suggested in this article, you are laying the foundation for financial stability, profitability, and long-term success for your business. Start your journey today, and let the road to financial success unfold.

Related blogs

Stay up to date on the latest investment opportunities

• Skip to content.
• Jump to Page Footer.

Financing workbook 1: Developing a financing strategy for your company

New unproven ventures are risky and spend more cash than they generate. A new venture will likely not be able to raise the total investment amount required to become cash-flow positive right from the start. Potential investors in your business will want to see the progression of your business broken down into logical achievable steps that take your company to the end goal, and the cash requirement for each step. These steps, the cash required at each step along with your financial plan, form the backbone of your financing strategy. If you’re thinking of raising capital from outside investors, this workbook provides a framework for developing a financing strategy for your business. Download and use this workbook to:

• Identify your key milestones to successfully build your venture.
• Develop a comprehensive list of tasks associated with each milestone.
• Establish the amount of capital that you will need to raise.
• Match your financing requirements to each of these milestones.

Workbooks are comprised of two elements ― the  workbook guide , which contains instructions, examples and activities, and the  workbook template , in which you can write your responses. You can personalize the workbook template by adding your company name and logo. This workbook guide is part one of a four-part series covering business planning and financing. It is designed specifically for technology and life sciences companies. The business planning and financing management process consists of four major parts, or buildings blocks, each adding, to the foundation of the previous one:

• Building block 1: Developing a financing strategy for your company
• Building block 2: The business plan and executive summary
• Building block 3: Identifying, targeting and engaging potential investors
• Building block 4: Developing and delivering a winning investor presentation

Download:Developing a financing strategy for your company

Download: Developing a financing strategy for your company workbook template

Revenue models: Request for proposal (RFP) and competitive bidding

Developing a business financing roadmap and financial plan, revenue models: low-value transactions in ict, medical devices and biopharmaceuticals, sign up for our monthly startup resources newsletter about building high-growth companies..

• Enter your email *

You may unsubscribe at any time. To find out more, please visit our Privacy Policy .

Financial Strategies in a Business Plan

• Small Business
• Business Planning & Strategy
• Financial Business Plans
• ')" data-event="social share" data-info="Pinterest" aria-label="Share on Pinterest">
• ')" data-event="social share" data-info="Reddit" aria-label="Share on Reddit">
• ')" data-event="social share" data-info="Flipboard" aria-label="Share on Flipboard">

A Business Investment Policy

Key tools for planning finances, cash budgeting, forecasting cash flow and account analysis.

• Policies & Procedures for Accounts Receivable
• The Advantages of Short-Term Debt

A large part of the business plan for any small business is the financial section of the plan. The financial section includes the income statement, cash flow statement and balance sheet. For new businesses, these financial statements will be projections, whereas for an existing the business the section will contain several years of history as well as projections. In addition to statements, the plan should include the financial strategies of the business in how finances will be handled.

Financial strategies are a core element for any business and they ultimately form the backbone of the business structure. Managing finances and pursuing and securing revenue are critical to the success of any business.

Cash Flow Management

The income statement and balance sheet of a business may look great on paper, but if the cash is not properly managed, the small business can quickly go under. Part of the financial strategy of the business plan will detail how cash will be used in the business . This includes identifying an amount that will always be in reserves as well as how major expenses will be paid. By laying out the financial cash strategy ahead of time, it will make financial decisions easier about when to write a check and when to access a line of credit during normal business practice.

Having a line of credit or business loan strategy is also necessary for many business models. A contractor for example might secure a large bid and need to access the cash quickly for overhead. Knowing when to access credit that has a large return is an important aspect of managing cash flow. This becomes especially important when securing projects depends on accessing outside capital to fund the project without a long waiting period.

Planning for Purchases

Any purchases made through the business, particularly large purchases, should have detailed guidelines in the business plan. This will determine which purchases will be made with cash, a line of credit and with a credit card. This strategy will also outline taking advantage of the terms of suppliers. For instance, if a supplier offers 45-day terms, the business will wait until the end of the term to make a payment. In addition, the purchasing strategy should specify if approval is needed by a manager or board for purchases over a certain amount.

Pursuing Outstanding Bills

If the business is not properly managing its own receivable, it can be devastating to the financial health of the business. The financial strategy should detail the collections plan . This may include dedicating in-house staff to following up with overdue customers or turning them over to an outside agency. It will also specify late fees and if deposits are due before products and services are delivered for new customers.

Investments for Growth

Although a specific investment strategy may not be able to be detailed in a written plan, general guidance should be given to management. This includes a percentage of money invested in high-risk portfolios vs. lower-risk portfolios. The investment section of the plan will also include guidelines of when approval is needed to make changes to current investments or to liquidate investments to cover business necessities.

Big Picture Considerations

The financial strategy of a business plan should be a general guide. While some specifics, such as approval authorities can be outlined, it will be difficult to account for every possible financial scenario that may arise in the business. However, the financial strategy should be enough of a guideline to direct the basic staff of the business in conducting the financial aspects of the business from paying for purchases to making payroll.

• Business Capital: Corporate Financial Strategies
• Inc: How to write the financial section of a business plan

Leigh Anthony has provided ghostwritten content for a variety of small-business sites since 2004. Her work appears on eHow and Chron.com. Her areas of expertise include marketing, human resources, finance and leadership. She holds a Master of Business Administration from the University of Georgia.

Related Articles

What is the relationship between an operating & a cash budget, a financial plan vs. a pro-forma cash flow budget, how much upfront capital for a small business, examples of risk working capital strategies, do banks look at a company's balance sheet or income statement when extending credit, who manages a company's cash budget, approval process for audit of capital transactions, do banks lend to partnerships or sole proprietorships, how to go about opening a do it yourself car wash, most popular.

• 1 What Is the Relationship Between an Operating & a Cash Budget?
• 2 A Financial Plan Vs. a Pro-Forma Cash Flow Budget
• 3 How Much Upfront Capital for a Small Business?
• 4 Examples of Risk Working Capital Strategies

Free Financial Templates for a Business Plan

By Andy Marker | July 29, 2020

• Share on Facebook
• Share on LinkedIn

Link copied

In this article, we’ve rounded up expert-tested financial templates for your business plan, all of which are free to download in Excel, Google Sheets, and PDF formats.

Included on this page, you’ll find the essential financial statement templates, including income statement templates , cash flow statement templates , and balance sheet templates . Plus, we cover the key elements of the financial section of a business plan .

Financial Plan Templates

Download and prepare these financial plan templates to include in your business plan. Use historical data and future projections to produce an overview of the financial health of your organization to support your business plan and gain buy-in from stakeholders

Business Financial Plan Template

Use this financial plan template to organize and prepare the financial section of your business plan. This customizable template has room to provide a financial overview, any important assumptions, key financial indicators and ratios, a break-even analysis, and pro forma financial statements to share key financial data with potential investors.

Download Financial Plan Template

Word | PDF | Smartsheet

Financial Plan Projections Template for Startups

This financial plan projections template comes as a set of pro forma templates designed to help startups. The template set includes a 12-month profit and loss statement, a balance sheet, and a cash flow statement for you to detail the current and projected financial position of a business.

‌ Download Startup Financial Projections Template

Excel | Smartsheet

Income Statement Templates for Business Plan

Also called profit and loss statements , these income statement templates will empower you to make critical business decisions by providing insight into your company, as well as illustrating the projected profitability associated with business activities. The numbers prepared in your income statement directly influence the cash flow and balance sheet forecasts.

Pro Forma Income Statement/Profit and Loss Sample

Use this pro forma income statement template to project income and expenses over a three-year time period. Pro forma income statements consider historical or market analysis data to calculate the estimated sales, cost of sales, profits, and more.

‌ Download Pro Forma Income Statement Sample - Excel

Small Business Profit and Loss Statement

Small businesses can use this simple profit and loss statement template to project income and expenses for a specific time period. Enter expected income, cost of goods sold, and business expenses, and the built-in formulas will automatically calculate the net income.

‌ Download Small Business Profit and Loss Template - Excel

3-Year Income Statement Template

Use this income statement template to calculate and assess the profit and loss generated by your business over three years. This template provides room to enter revenue and expenses associated with operating your business and allows you to track performance over time.

Download 3-Year Income Statement Template

For additional resources, including how to use profit and loss statements, visit “ Download Free Profit and Loss Templates .”

Cash Flow Statement Templates for Business Plan

Use these free cash flow statement templates to convey how efficiently your company manages the inflow and outflow of money. Use a cash flow statement to analyze the availability of liquid assets and your company’s ability to grow and sustain itself long term.

Simple Cash Flow Template

Use this basic cash flow template to compare your business cash flows against different time periods. Enter the beginning balance of cash on hand, and then detail itemized cash receipts, payments, costs of goods sold, and expenses. Once you enter those values, the built-in formulas will calculate total cash payments, net cash change, and the month ending cash position.

Download Simple Cash Flow Template

12-Month Cash Flow Forecast Template

Use this cash flow forecast template, also called a pro forma cash flow template, to track and compare expected and actual cash flow outcomes on a monthly and yearly basis. Enter the cash on hand at the beginning of each month, and then add the cash receipts (from customers, issuance of stock, and other operations). Finally, add the cash paid out (purchases made, wage expenses, and other cash outflow). Once you enter those values, the built-in formulas will calculate your cash position for each month with.

‌ Download 12-Month Cash Flow Forecast

3-Year Cash Flow Statement Template Set

Use this cash flow statement template set to analyze the amount of cash your company has compared to its expenses and liabilities. This template set contains a tab to create a monthly cash flow statement, a yearly cash flow statement, and a three-year cash flow statement to track cash flow for the operating, investing, and financing activities of your business.

Download 3-Year Cash Flow Statement Template

For additional information on managing your cash flow, including how to create a cash flow forecast, visit “ Free Cash Flow Statement Templates .”

Balance Sheet Templates for a Business Plan

Use these free balance sheet templates to convey the financial position of your business during a specific time period to potential investors and stakeholders.

Small Business Pro Forma Balance Sheet

Small businesses can use this pro forma balance sheet template to project account balances for assets, liabilities, and equity for a designated period. Established businesses can use this template (and its built-in formulas) to calculate key financial ratios, including working capital.

Download Pro Forma Balance Sheet Template

Monthly and Quarterly Balance Sheet Template

Use this balance sheet template to evaluate your company’s financial health on a monthly, quarterly, and annual basis. You can also use this template to project your financial position for a specified time in the future. Once you complete the balance sheet, you can compare and analyze your assets, liabilities, and equity on a quarter-over-quarter or year-over-year basis.

Download Monthly/Quarterly Balance Sheet Template - Excel

Yearly Balance Sheet Template

Use this balance sheet template to compare your company’s short and long-term assets, liabilities, and equity year-over-year. This template also provides calculations for common financial ratios with built-in formulas, so you can use it to evaluate account balances annually.

Download Yearly Balance Sheet Template - Excel

For more downloadable resources for a wide range of organizations, visit “ Free Balance Sheet Templates .”

Sales Forecast Templates for Business Plan

Sales projections are a fundamental part of a business plan, and should support all other components of your plan, including your market analysis, product offerings, and marketing plan . Use these sales forecast templates to estimate future sales, and ensure the numbers align with the sales numbers provided in your income statement.

Basic Sales Forecast Sample Template

Use this basic forecast template to project the sales of a specific product. Gather historical and industry sales data to generate monthly and yearly estimates of the number of units sold and the price per unit. Then, the pre-built formulas will calculate percentages automatically. You’ll also find details about which months provide the highest sales percentage, and the percentage change in sales month-over-month. 

Download Basic Sales Forecast Sample Template

12-Month Sales Forecast Template for Multiple Products

Use this sales forecast template to project the future sales of a business across multiple products or services over the course of a year. Enter your estimated monthly sales, and the built-in formulas will calculate annual totals. There is also space to record and track year-over-year sales, so you can pinpoint sales trends.

Download 12-Month Sales Forecasting Template for Multiple Products

3-Year Sales Forecast Template for Multiple Products

Use this sales forecast template to estimate the monthly and yearly sales for multiple products over a three-year period. Enter the monthly units sold, unit costs, and unit price. Once you enter those values, built-in formulas will automatically calculate revenue, margin per unit, and gross profit. This template also provides bar charts and line graphs to visually display sales and gross profit year over year.

Download 3-Year Sales Forecast Template - Excel

For a wider selection of resources to project your sales, visit “ Free Sales Forecasting Templates .”

Break-Even Analysis Template for Business Plan

A break-even analysis will help you ascertain the point at which a business, product, or service will become profitable. This analysis uses a calculation to pinpoint the number of service or unit sales you need to make to cover costs and make a profit.

Break-Even Analysis Template

Use this break-even analysis template to calculate the number of sales needed to become profitable. Enter the product's selling price at the top of the template, and then add the fixed and variable costs. Once you enter those values, the built-in formulas will calculate the total variable cost, the contribution margin, and break-even units and sales values.

Download Break-Even Analysis Template

For additional resources, visit, “ Free Financial Planning Templates .”

Business Budget Templates for Business Plan

These business budget templates will help you track costs (e.g., fixed and variable) and expenses (e.g., one-time and recurring) associated with starting and running a business. Having a detailed budget enables you to make sound strategic decisions, and should align with the expense values listed on your income statement.

Startup Budget Template

Use this startup budget template to track estimated and actual costs and expenses for various business categories, including administrative, marketing, labor, and other office costs. There is also room to provide funding estimates from investors, banks, and other sources to get a detailed view of the resources you need to start and operate your business.

Download Startup Budget Template

Small Business Budget Template

This business budget template is ideal for small businesses that want to record estimated revenue and expenditures on a monthly and yearly basis. This customizable template comes with a tab to list income, expenses, and a cash flow recording to track cash transactions and balances.

Download Small Business Budget Template

Professional Business Budget Template

Established organizations will appreciate this customizable business budget template, which  contains a separate tab to track projected business expenses, actual business expenses, variances, and an expense analysis. Once you enter projected and actual expenses, the built-in formulas will automatically calculate expense variances and populate the included visual charts. 

‌ Download Professional Business Budget Template

For additional resources to plan and track your business costs and expenses, visit “ Free Business Budget Templates for Any Company .”

Other Financial Templates for Business Plan

In this section, you’ll find additional financial templates that you may want to include as part of your larger business plan.

Startup Funding Requirements Template

This simple startup funding requirements template is useful for startups and small businesses that require funding to get business off the ground. The numbers generated in this template should align with those in your financial projections, and should detail the allocation of acquired capital to various startup expenses.

Download Startup Funding Requirements Template - Excel

Personnel Plan Template

Use this customizable personnel plan template to map out the current and future staff needed to get — and keep — the business running. This information belongs in the personnel section of a business plan, and details the job title, amount of pay, and hiring timeline for each position. This template calculates the monthly and yearly expenses associated with each role using built-in formulas. Additionally, you can add an organizational chart to provide a visual overview of the company’s structure. 

Download Personnel Plan Template - Excel

Elements of the Financial Section of a Business Plan

Whether your organization is a startup, a small business, or an enterprise, the financial plan is the cornerstone of any business plan. The financial section should demonstrate the feasibility and profitability of your idea and should support all other aspects of the business plan. 

Below, you’ll find a quick overview of the components of a solid financial plan.

• Financial Overview: This section provides a brief summary of the financial section, and includes key takeaways of the financial statements. If you prefer, you can also add a brief description of each statement in the respective statement’s section.
• Key Assumptions: This component details the basis for your financial projections, including tax and interest rates, economic climate, and other critical, underlying factors.
• Break-Even Analysis: This calculation helps establish the selling price of a product or service, and determines when a product or service should become profitable.
• Pro Forma Income Statement: Also known as a profit and loss statement, this section details the sales, cost of sales, profitability, and other vital financial information to stakeholders.
• Pro Forma Cash Flow Statement: This area outlines the projected cash inflows and outflows the business expects to generate from operating, financing, and investing activities during a specific timeframe.
• Pro Forma Balance Sheet: This document conveys how your business plans to manage assets, including receivables and inventory.
• Key Financial Indicators and Ratios: In this section, highlight key financial indicators and ratios extracted from financial statements that bankers, analysts, and investors can use to evaluate the financial health and position of your business.

Need help putting together the rest of your business plan? Check out our free simple business plan templates to get started. You can learn how to write a successful simple business plan  here . 

Visit this  free non-profit business plan template roundup  or download a  fill-in-the-blank business plan template  to make things easy. If you are looking for a business plan template by file type, visit our pages dedicated specifically to  Microsoft Excel ,  Microsoft Word , and  Adobe PDF  business plan templates. Read our articles offering  startup business plan templates  or  free 30-60-90-day business plan templates  to find more tailored options.

Discover a Better Way to Manage Business Plan Financials and Finance Operations

Empower your people to go above and beyond with a flexible platform designed to match the needs of your team — and adapt as those needs change. 

The Smartsheet platform makes it easy to plan, capture, manage, and report on work from anywhere, helping your team be more effective and get more done. Report on key metrics and get real-time visibility into work as it happens with roll-up reports, dashboards, and automated workflows built to keep your team connected and informed. 

When teams have clarity into the work getting done, there’s no telling how much more they can accomplish in the same amount of time.  Try Smartsheet for free, today.

Discover why over 90% of Fortune 100 companies trust Smartsheet to get work done.

More From Forbes

How To Finance A Startup: Exploring Your Options

• Share to Facebook
• Share to Twitter
• Share to Linkedin

One of the biggest challenges entrepreneurs face when starting a new business is securing the necessary funding. Financing a startup requires careful planning and a thorough understanding of the different options available. Without adequate capital, even the most promising business ideas can struggle to get off the ground.

Entrepreneurs must explore various financing avenues, from personal savings and loans to attracting angel investors or venture capital. Each option comes with its own set of advantages and challenges, making it crucial for entrepreneurs to evaluate their specific needs and circumstances to choose the best funding strategy.

Let’s explore various ways to finance your startup, helping you make an informed decision that aligns with your business goals:

1. personal savings.

Using personal savings is often the first step many entrepreneurs take due to a lack of access to other types of funding. Using your personal savings eliminates the need to repay loans or give up equity in your business and leaves you with complete control over your business. However, it’s crucial that you don’t deplete your personal finances entirely, as this could lead to personal financial difficulties.

• Full control over your business without external interference.
• No debt or interest payments.

Combined Wealth Of Taiwan’s 50 Richest On Forbes List Rises $19 Billion To $174 Billion

A 3 point cheat sheet for creating romantic chemistry by a psychologist, apple brings back iphone 14 pro for first time at lower price refurbished.

• High personal financial risk.
• Limited capital based on personal savings.

2. Family and Friends

Raising funds from family and friends can be a viable option, especially if they believe in your business idea. You must treat this arrangement professionally, outlining clear terms to avoid misunderstandings and preserve relationships. Clearly documenting the investment terms, repayment plans, and expected returns can help ensure that everyone involved is on the same page.

Be sure to maintain open and honest communication throughout the process to prevent potential conflicts and to keep personal relationships intact. This approach not only provides the necessary funds but also creates a supportive network of backers who are personally invested in your success.

• Flexible terms and conditions.
• Supportive investors who believe in your vision.
• Potential strain on personal relationships.
• Lack of formal investment agreements.

3. Angel Investors

Angel investors are wealthy people who want to use their own capital to help entrepreneurs launch their businesses. They can provide capital for startups in exchange for equity or can offer business loans. Angel investors often bring valuable industry experience and connections, which can be a great help for young businesses. These investors not only offer financial support but also mentorship and strategic guidance, helping startups navigate early challenges and grow sustainably.

• Access to substantial funds.
• Mentorship and networking opportunities.
• Giving up a portion of ownership.
• Potential for differing visions and goals.

4. Venture Capitalists

Venture capitalists (VCs) are firms that invest in high-potential startups, offering significant funding and strategic assistance. In return, they usually require substantial ownership stakes and have high expectations for rapid growth. This option is particularly suitable for startups with the potential for exponential growth and scalability.

Accepting VC funding means giving up a significant amount of control over your business. VCs often demand board seats and a say in major business decisions, which can influence the direction and management of the company. It's essential for entrepreneurs to weigh the benefits of substantial financial support and expertise against the potential loss of autonomy in their business operations.

• Large funding amounts.
• Strategic guidance and business development support.
• Significant equity dilution.
• Pressure to achieve rapid growth and high returns.

5. Small Business Loans

Traditional bank loans or loans from financial institutions can provide the necessary capital while allowing you to maintain full control of your business. Unlike equity financing, where investors gain ownership stakes, loans enable you to retain complete autonomy over your company's decisions and direction.

Securing a loan often requires a solid business plan, good credit history, and collateral to back the loan. The application process can be rigorous, involving detailed financial projections and proof of your business's viability. Despite these challenges, obtaining a bank loan can be a viable option for entrepreneurs seeking to grow their businesses without diluting ownership.

• Retain full ownership of your business.
• Fixed repayment schedules.
• Debt obligations with interest payments.
• Stringent qualification criteria.

6. Crowdfunding

Crowdfunding platforms allow you to raise funds from a large number of people, typically in exchange for early access to products or other rewards. This method not only raises funds but also helps gauge market interest and build a customer base. By presenting your business idea or product on platforms, you can attract backers who are enthusiastic about your project and willing to support it financially. This approach can validate your concept and provide valuable feedback from potential customers.

Successful crowdfunding campaigns can create buzz and generate early adopters, contributing to your startup's initial growth and visibility.

• Validates your business idea with a broad audience.
• No need to give up equity in the business or bring on debt.
• Intensive marketing efforts required.
• Uncertain funding outcomes.

7. Grants and Competitions

Various government and private organizations offer grants and startup competitions. These provide funding without requiring equity or repayment, but they often come with rigorous application processes and intense competition.

• Non-repayable funds.
• Recognition and validation from reputable sources.
• Highly competitive.
• Time-consuming application processes.

8. Bootstrapping

Bootstrapping involves financing your startup through internal cash flow and revenue generation. It requires a lean approach and a strong focus on profitability, which can lead to a more sustainable business in the long run.

• Full control and ownership.
• Builds a sustainable business model from the start.
• Slow growth due to limited resources.
• Potentially overwhelming workload.

The bottom line is that financing a startup is a critical step in bringing your business idea to life. Each funding option has its own set of advantages and drawbacks, and it’s up to you to do the research and decide which option best suits your needs. Assess your business needs, risk tolerance, and long-term goals to choose the most suitable financing method. Remember, a well-thought-out financing strategy can set the foundation for your startup’s success.

Melissa Houston, CPA is the author of Cash Confident: An Entrepreneur’s Guide to Creating a Profitable Business and the founder of She Means Profit , a bookkeeping and financial consultancy firm. As a Business Strategist for small business owners, Melissa helps women making mid-career shifts, to launch their dream businesses, and I also guide established business owners to grow their businesses to more profitably.

The opinions expressed in this article are not intended to replace any professional or expert accounting and/or tax advice whatsoever.

• Editorial Standards
• Reprints & Permissions

Join The Conversation

One Community. Many Voices. Create a free account to share your thoughts. 

Forbes Community Guidelines

Our community is about connecting people through open and thoughtful conversations. We want our readers to share their views and exchange ideas and facts in a safe space.

In order to do so, please follow the posting rules in our site's  Terms of Service.   We've summarized some of those key rules below. Simply put, keep it civil.

Your post will be rejected if we notice that it seems to contain:

• False or intentionally out-of-context or misleading information
• Insults, profanity, incoherent, obscene or inflammatory language or threats of any kind
• Attacks on the identity of other commenters or the article's author
• Content that otherwise violates our site's  terms.

User accounts will be blocked if we notice or believe that users are engaged in:

• Continuous attempts to re-post comments that have been previously moderated/rejected
• Racist, sexist, homophobic or other discriminatory comments
• Attempts or tactics that put the site security at risk
• Actions that otherwise violate our site's  terms.

So, how can you be a power user?

• Stay on topic and share your insights
• Feel free to be clear and thoughtful to get your point across
• ‘Like’ or ‘Dislike’ to show your point of view.
• Protect your community.
• Use the report tool to alert us when someone breaks the rules.

Thanks for reading our community guidelines. Please read the full list of posting rules found in our site's  Terms of Service.

Six strategies for growth outperformance

Growth is the lifeblood of any successful business, but achieving growth that is both profitable and sustainable has proved especially difficult in recent years. Business leaders need a strategic approach that combines courage, innovation, and a willingness to make bold moves. In this episode of the Inside the Strategy Room podcast, McKinsey partners Rebecca Doherty and Kate Siegel and senior partner Jill Zucker share their insights on how companies can grow faster and more consistently than their peers. This transcript has been edited for clarity and length. For more discussions on the strategy issues that matter, follow the series on your preferred podcast platform .

Sean Brown: This may seem like a naive question, but why does growth matter?

Jill Zucker: Growth drives performance. It drives culture. It drives employee satisfaction. It helps you retain the best talent. And it fosters innovation in the marketplace. But it’s important to grow profitably. Top-line-only growth tends to catch up with you over time. And while most organizations aspire to grow, we find that growth is quite hard to achieve. Only 25 percent of companies grow sustainably over time. But if you can achieve it, that growth is rewarded, with sustainable growth outperformers generating seven percentage points more annual total shareholder returns than their peers.

Sean Brown: What does it take to be a growth outperformer?

Jill Zucker: We studied what drives growth at more than 4,000 companies around the globe, and we found a set of ingredients that are true across industries. We recognize the challenges that companies are facing today because of the global economy, so our research spans a period of ebbs and flows in the economy.

The first thing that we found is that it’s important to wake up in the morning and actively choose growth. We meet many executives who say they want their companies to grow, but they don’t allocate resources to support that growth over time.

You also need the courage to make bold moves, even in a time of economic uncertainty. In previous decades, you could choose not to pursue growth in a temporarily challenging environment. These challenging events, however, have become so pervasive that we need to have a through-cycle growth mindset. During the financial crisis, the gap between those companies that chose growth and those that stuck to maintaining the core business was reasonably narrow, but as the economy settled, that gap significantly widened. You saw a much steeper growth curve among those that had made bold bets during the downturn.

Sean Brown: How do you ensure that the pathways you choose lead you to the intended destination?

Subscribe to the Inside the Strategy Room podcast

Jill Zucker: You need to lay the foundation for more dynamic resource allocation, by which we mean both capital and talent. It means being careful in your culture to shut off projects without shutting off the talent. Just because a talented executive pursued a good experiment that didn’t work out doesn’t mean the executive should leave. Talent remains scarce in many business areas, so it’s important to allocate it to growth projects. It also means allocating resources to areas you are convinced will grow and eliminating the hobbies.

Secondly, you need to think about inorganic opportunities—both acquisitions and divestitures. The third part of the foundation is building functional capabilities, whether it’s marketing or digital or innovation.

Sean Brown: What strategies do you find growth outperformers pursue?

Rebecca Doherty: We looked at what companies have done both during the uncertainty over the past five years as well as over the longer term and found six differentiating strategies. One of the timeless approaches is to continue innovating in the core. Eighty percent of growth comes from maximizing the value of your core [exhibit]. But that’s not enough to put you in the echelon of companies that achieve growth on a sustained basis. To achieve that remaining 20 percent, you need to move into adjacencies in your value stream, such as new geographies, and build breakout businesses.

The third timeless element is putting people at the heart of what you do, whether it’s day-to-day growth or a broader transformation. Having your core people involved in growth initiatives with an ownership mindset is critical.

The three strategies that have emerged in more recent years include building an innovation culture , using sustainability as an accelerant to growth, and portfolio reallocation, including what we call shrinking to grow. The bold moves you make could include divesting assets where you may not be the best owner and then reallocating those resources toward growth opportunities.

Sean Brown: You talked about the timeless growth strategies. What makes them timeless?

Rebecca Doherty: The ratio of growth that comes from the core versus adjacencies or breakout business is pretty consistent over time. We’ve also found that companies that grow in all directions over a ten-year period have double the chance of outperforming their peers.

Sean Brown: How do the strongest growers embed an innovation culture?

Rebecca Doherty: We ran an executive survey of more than 1,000 companies, and I was surprised, frankly, to see how important innovation is across all the growth paths. Historically, people think of innovation as a way to turbocharge the core business. But leading growers look just as much at innovating new offerings and permeating that mindset through the company.

Sean Brown: Many companies still see sustainability more as a cost than a growth generator. How do you envision it accelerating growth?

About QuantumBlack, AI by McKinsey

QuantumBlack, McKinsey’s AI arm, helps companies transform using the power of technology, technical expertise, and industry experts. With thousands of practitioners at QuantumBlack (data engineers, data scientists, product managers, designers, and software engineers) and McKinsey (industry and domain experts), we are working to solve the world’s most important AI challenges. QuantumBlack Labs is our center of technology development and client innovation, which has been driving cutting-edge advancements and developments in AI through locations across the globe.

Rebecca Doherty: We’ve found that if you already have growth and profitability in place, sustainability can be that extra punch  that gives you a lift over your competitors. Sustainable growth is not a substitute for profitability, but companies that have been able to embed sustainability in their businesses have been rewarded. Perhaps intuitively, those that deliver growth and profits show a five-percentage-point outperformance in TSR. If you add ESG [environmental, social, and governance] into the mix—and this isn’t dabbling but integrating ESG priorities into your strategy and sharing the messages with investors—you see seven points of outperformance. In some sectors such as retail, you have brands that have brought sustainability into the core and have done strings of acquisitions over the years to drive impact.

Sean Brown: How do you balance the bets on breakout or adjacent growth against building up the core? If 80 percent of the growth comes from the core, should that much of your investment go there as well?

Rebecca Doherty: It depends in part on the maturity of the business and where you are on the growth curve. If it’s early, you should focus on propelling that core growth strategy. If it’s a mature business and you’re only making incremental gains, maybe you look to invest beyond the core. How much you invest does matter, though. Companies sometimes simply take last year’s budget and tweak it by a few percent. For a breakout business, sometimes you need to invest more—and not just more money. I worked with one company that put its chief technology officer into the new business to help grow it. The initial investment in dollars wasn’t large but the investment in talent was.

You should also think about the investment in stage gates. Some bets may require a large up-front investment, and you will not see much revenue for a while. Others, you could start with smaller investments, and the funding could grow proportionately with revenue. Different profiles can work, but it’s important to have a sound business plan, understand the operational and financial milestones, and be willing to pull the plug if it’s not panning out—which is a bold move in itself.

Sean Brown: Reallocation of resources includes both people and capital, but people tend to have incentives. How do you maintain incentives when you’re moving somebody from a stable business into a riskier growth project?

Rebecca Doherty: It ties to what Jill said earlier: a failed business doesn’t mean a failed executive. The culture needs to reward risk taking, and management has to accept that you won’t have 100 percent success. In terms of incentives, you can align an individual’s incentives to delivering the project, but also implement incentives that reward thinking about what is best for the broader company.

Jill Zucker: We see some management teams reward managers uniformly on EPS [earnings-per-share] growth of the business or total shareholder return, and therefore whether you’re innovating or you’re maximizing the core, you are rewarded equally. It’s not about giving more money to one person or another but about what will grow the total shareholder return. This encourages managers to give up some capital for innovation if they believe that doing so will improve the company’s growth.

Sean Brown: Can you elaborate on how companies should pursue growth through adjacencies?

Kate Siegel: Finding growth outside your core business is challenging, so we looked at how growth outperformers approach adjacencies. Our sample was about 250 companies that had announced significant adjacency moves over the past 20 years. We found four types of rationales, or approaches, that underpinned these moves. The first was based on customer relationships and the knowledge of customers’ pain points. The second was capabilities, where companies could use their existing assets, people, or processes in new markets. Expansion into the value chain—going upstream or downstream to capture various synergies—was another rationale. The last one was finding opportunities for disruption and business model innovation. What’s interesting is that the more approaches they used, the higher the reward, and that included both outperformers and other companies.

Sean Brown: How do companies identify those adjacencies? Is it based on experience and team discussions, or do they use tools?

Kate Siegel: There is a variety of data you can scan on trends, technologies, changes in preferences. You can also consider similarities of your offerings to certain businesses and capabilities. For example, we recently helped a software company that was struggling with high competition find diversification opportunities. We used AI to scan unstructured online data to identify more than 500 growth ideas based on the value creation approaches . Another set of AI analyses helped prioritize the opportunities based on trends, news mentions, momentum, and patent intensity to give the management team a short list of ideas. The company then considered which were the best fit, what talent they would need, or whether the market was big enough. One of these ideas was one they hadn’t talked about before. AI is a powerful tool for challenging orthodoxies.

Sean Brown: One strategy we haven’t yet touched on is shrinking to grow. What does that mean?

Kate Siegel: We know only about 10 percent of companies are able to maintain positive growth rates across a decade. But suppose you don’t have this consistent growth engine. The next-best strategy is to periodically prune back your portfolio and then grow healthily from a new base. You divest parts of the business one or two years out of the decade, but in every other year, you grow from that new base. We’ve seen that work in some conglomerates, where they regularly look at their portfolio to see if there are less attractive assets they could divest and then reinvest the proceeds into ones that could be better platforms.

Sean Brown: What if the businesses you want to prune have some star performers? How are companies thinking about that talent dimension?

Kate Siegel: Divestitures typically have key-member clauses to ensure business continuity, but you can take steps to understand which talent you would like to retain. The worst thing you can do is not think about talent when you sell a business, because it could have the best technology officer for a new growth entity you plan to reinvest in.

Rebecca Doherty: When we consider an acquisition, we often think about it as one plus one equals more than two. Likewise, when we think about divestitures or spinouts, it’s usually not two minus one equals one, because you’re not the best owner of the business, and someone else might be, or it might flourish on its own. Separations might not only give you proceeds to reinvest but also help the other entity perform better.

Sean Brown: Once you have laid out the various growth paths and developed strategies, you need to execute them well. What does excellence look like for execution?

Kate Siegel: People are at the heart of a successful transformation. Transformations that activate the full organization are eight times more likely to succeed. In addition, those in which more than 20 percent of employees owned transformation initiatives saw nearly twice the excess shareholder return than their peers did. Once you have the right aspiration mindsets and culture, with clarity on the growth pathways, the most important thing is to involve as many people as possible in the growth effort. That includes getting everyone aligned on the growth aspiration, building the skills they need, having leaders consistently talk about the growth targets, and implementing processes to verify whether the bets are working.

Sean Brown: Are you optimistic that companies can revive growth?

Jill Zucker: There is not a single company I can point to that’s not focused on growth today, despite the economic backdrop. When I think back to other periods of economic uncertainty, the hunkering down, the fixation on the core, the focus on efficiency were much more at the forefront. Now, growth remains a priority.

Jill Zucker   is a senior partner in  McKinsey’s New York office,  Kate Siegel  is a partner in the Detroit office, and  Rebecca Doherty is a partner in the Bay Area office.  Sean Brown is global director of communications for the Strategy & Corporate Finance Practice and is based in the Boston office.

Explore a career with us

Related articles.

Are you an innovative grower?

The triple play: Growth, profit, and sustainability

• Search Search Please fill out this field.

Why Do I Need a Business Plan?

Sections of a business plan, the bottom line.

• Small Business

How to Write a Business Plan for a Loan

How to secure business financing

Matt Webber is an experienced personal finance writer, researcher, and editor. He has published widely on personal finance, marketing, and the impact of technology on contemporary arts and culture.

• How to Start a Business: A Comprehensive Guide and Essential Steps
• How to Do Market Research, Types, and Example
• Marketing Strategy: What It Is, How It Works, How To Create One
• Marketing in Business: Strategies and Types Explained
• What Is a Marketing Plan? Types and How to Write One
• Business Development: Definition, Strategies, Steps & Skills
• Business Plan: What It Is, What's Included, and How to Write One
• Small Business Development Center (SBDC): Meaning, Types, Impact
• How to Write a Business Plan for a Loan CURRENT ARTICLE
• Business Startup Costs: It’s in the Details
• Startup Capital Definition, Types, and Risks
• Bootstrapping Definition, Strategies, and Pros/Cons
• Crowdfunding: What It Is, How It Works, and Popular Websites
• Starting a Business with No Money: How to Begin
• A Comprehensive Guide to Establishing Business Credit
• Equity Financing: What It Is, How It Works, Pros and Cons
• Best Startup Business Loans
• Sole Proprietorship: What It Is, Pros & Cons, and Differences From an LLC
• Partnership: Definition, How It Works, Taxation, and Types
• What is an LLC? Limited Liability Company Structure and Benefits Defined
• Corporation: What It Is and How to Form One
• Starting a Small Business: Your Complete How-to Guide
• Starting an Online Business: A Step-by-Step Guide
• How to Start Your Own Bookkeeping Business: Essential Tips
• How to Start a Successful Dropshipping Business: A Comprehensive Guide

A business plan is a document that explains what a company’s objectives are and how it will achieve them. It contains a road map for the company from a marketing, financial, and operational standpoint. Some business plans are more detailed than others, but they are used by all types of businesses, from large, established companies to small startups.

If you are applying for a business loan , your lender may want to see your business plan. Your plan can prove that you understand your market and your business model and that you are realistic about your goals. Even if you don’t need a business plan to apply for a loan, writing one can improve your chances of securing finance.

Key Takeaways

• Many lenders will require you to write a business plan to support your loan application.
• Though every business plan is different, there are a number of sections that appear in every business plan.
• A good business plan will define your company’s strategic priorities for the coming years and explain how you will try to achieve growth.
• Lenders will assess your plan against the “five Cs”: character, capacity, capital, conditions, and collateral.

There are many reasons why all businesses should have a business plan . A business plan can improve the way that your company operates, but a well-written plan is also invaluable for attracting investment.

On an operational level, a well-written business plan has several advantages. A good plan will explain how a company is going to develop over time and will lay out the risks and contingencies that it may encounter along the way.

A business plan can act as a valuable strategic guide, reminding executives of their long-term goals amid the chaos of day-to-day business. It also allows businesses to measure their own success—without a plan, it can be difficult to determine whether a business is moving in the right direction.

A business plan is also valuable when it comes to dealing with external organizations. Indeed, banks and venture capital firms often require a viable business plan before considering whether they’ll provide capital to new businesses.

Even if a business is well-established, lenders may want to see a solid business plan before providing financing. Lenders want to reduce their risk, so they want to see that a business has a serious and realistic plan in place to generate income and repay the loan.

Every business is different, and so is every business plan. Nevertheless, most business plans contain a number of generic sections. Common sections are: executive summary, company overview, products and services, market analysis, marketing and sales plan, operational plan, and management team. If you are applying for a loan, you should also include a funding request and financial statements.

Let’s look at each section in more detail.

Executive Summary

The executive summary is a summary of the information in the rest of your business plan, but it’s also where you can create interest in your business.

You should include basic information about your business, including what you do, where you are based, your products, and how long you’ve been in business. You can also mention what inspired you to start your business, your key successes so far, and your growth plans.

Company Overview

In this section, focus on the core strengths of your business, the problem you want to solve, and how you plan to address it.

Here, you should also mention any key advantages that your business has over your competitors, whether this is operating in a new market or a unique approach to an existing one. You should also include key statistics in this section, such as your annual turnover and number of employees.

Products and Services

In this section, provide some details of what you sell. A lender doesn’t need to know all the technical details of your products but will want to see that they are desirable.

You can also include information on how you make your products, or how you provide your services. This information will be useful to a lender if you are looking for financing to grow your business.

Market Analysis

A market analysis is a core section of your business plan. Here, you need to demonstrate that you understand the market you are operating in, and how you are different from your competitors. If you can find statistics on your market, and particularly on how it is projected to grow over the next few years, put them in this section.

Marketing and Sales Plan

Your marketing and sales plan gives details on what kind of new customers you are looking to attract, and how you are going to connect with them. This section should contain your sales goals and link these to marketing or advertising that you are planning.

If you are looking to expand into a new market, or to reach customers that you haven’t before, you should explain the risks and opportunities of doing so.

Operational Plan

This section explains the basic requirements of running your business on a day-to-day basis. Your exact requirements will vary depending on the type of business you run, but be as specific as possible.

If you need to rent office space, for example, you should include the cost in your operational plan. You should also include the cost of staff, equipment, and any raw materials required to run your business.

Management Team

The management team section is one of the most important sections in your business plan if you are applying for a loan. Your lender will want reassurance that you have a skilled, experienced, competent, and reliable senior management team in place.

Even if you have a small team, you should explain what makes each person qualified for their position. If you have a large team, you should include an organizational chart to explain how your team is structured.

Funding Request

If you are applying for a loan, you should add a funding request. This is where you explain how much money you are looking to borrow, and explain in detail how you are going to use it.

The most important part of the funding-request section is to explain how the loan you are asking for would improve the profitability of your business, and therefore allow you to repay your loan.

Financial Statements

Most lenders will also ask you to provide evidence of your business finances as part of your application. Graphs and charts are often a useful addition to this section, because they allow your lender to understand your finances at a glance.

The overall goal of providing financial statements is to show that your business is profitable and stable. Include three to five years of income statements, cash flow statements, and balance sheets. It can also be useful to provide further analysis, as well as projections of how your business will grow in the coming years.

What Do Lenders Look for in a Business Plan?

Lenders want to see that your business is stable, that you understand the market you are operating in, and that you have realistic plans for growth.

Your lender will base their decision on what are known as the “five Cs.” These are:

• Character : You can stress your good character in your executive summary, company overview, and your management team section.
• Capacity : This is, essentially, your ability to repay the loan. Your lender will look at your growth plans, your funding request, and your financial statements in order to assess this.
• Capital : This is the amount of money you already have in your business. The larger and more established your business is, the more likely you are to be approved for finance, so highlight your capital throughout your business plan.
• Conditions : Conditions refer to market conditions. In your market analysis, you should be able to prove that your business is well-positioned in relation to your target market and competitors.
• Collateral : Depending on your loan, you may be asked to provide collateral , so you should provide information on the assets you own in your operational plan.

How Long Does It Take to Write a Business Plan?

The length of time it takes to write a business plan depends on your business, but you should take your time to ensure it is thorough and correct. A business plan has advantages beyond applying for a loan, providing a strategic focus for your business.

What Should You Avoid When Writing a Business Plan?

The most common mistake that business owners make when writing a business plan is to be unrealistic about their growth potential. Your lender is likely to spot overly optimistic growth projections, so try to keep it reasonable.

Should I Hire Someone to Write a Business Plan for My Business?

You can hire someone to write a business plan for your business, but it can often be better to write it yourself. You are likely to understand your business better than an external consultant.

Writing a business plan can benefit your business, whether you are applying for a loan or not. A good business plan can help you develop strategic priorities and stick to them. It describes how you are going to grow your business, which can be valuable to lenders, who will want to see that you are able to repay a loan that you are applying for.

U.S. Small Business Administration. “ Write Your Business Plan .”

U.S. Small Business Administration. “ Market Research and Competitive Analysis .”

U.S. Small Business Administration. “ Fund Your Business .”

Navy Federal Credit Union. “ The 5 Cs of Credit .”

• Terms of Service
• Editorial Policy
• Privacy Policy
• Your Privacy Choices

Personal Finance

How to start an online business in 8 steps.

Our evaluations and opinions are not influenced by our advertising relationships, but we may earn a commission from our partners’ links. This content is created independently from TIME’s editorial staff. Learn more about it.

The internet has reshaped where, when, and how people shop for goods and services. The popularity of digital shopping has opened a world of opportunities for online business owners. With a computer and a stable internet connection, you can work from anywhere, set your own schedule, and sell to customers worldwide while avoiding the hassle and costs of owning a brick-and-mortar business.

Whether you're just starting to brainstorm about the best online business ideas or already have a concept in mind, here are some tips for getting your business up and running.

8 Ways to start your online business

1. establish a business niche.

If you haven't done so already, you'll need to decide what you want to offer and who your target customers will be. Here are a few factors to consider:

Your interests

Mark Twain once said, "Find a job you enjoy doing, and you will never have to work a day in your life." While only some would agree with this work/life approach, it's a good starting point for choosing a business niche. Think about your passions, skills, and expertise, then focus on ideas where they intersect.

Target audience

Consider your target audience and whether they have a problem no one else is solving or a product no one else is providing. If so, do they have the discretionary income to afford your product or service and are they willing to pay for it? Will there be adequate demand?

Profit potential

Consider if your niche has profit potential in an online environment. For example, an overly large or heavy product may be too expensive to ship at a reasonable cost. Is the idea scalable so you can accommodate more customers and transactions in the future?

2. Choose a business model

A business model is how your company will provide products or services to customers and make money. Some options to consider include:

• Affiliate marketing. Promote other businesses and receive a commission for each sale you make.
• Coaching and consulting. Share your expertise and offer guidance.
• E-commerce. Launch a website and sell products online using one of the best payment gateways .
• Franchising. Pay a franchise fee and operate under an established brand.
• Freelancing. Offer a service such as writing, programming, web design, or social media marketing.
• Information products. Create and sell eBooks or online courses.
• Subscriptions. Package software or subscription boxes and charge a recurring fee.

3. Write a business plan

A good business plan outlines the steps to start and manage your business. The important thing is to think through the key elements of your venture while focusing on your goals. According to the Small Business Administration (SBA), a traditional business plan format includes some combination of the following:

Executive summary

Explain what your company is and why it will be successful. This section should include your mission statement, product or service, basic company information, and financial details if you need financing.

Company description

Provide detailed information about your company: the problem it solves, your target audience, and your competitive advantages.

Market analysis

Explain your industry outlook, what other businesses are doing, and how you can do it better.

Organization and management

Outline who will run your company and how it will be structured. Will it be a general or limited partnership, a C or S corporation, limited liability company (LLC), or are you a sole proprietor?

Service or product line

Describe the product or service you offer, explaining how it benefits your target customers.

Marketing and sales

Explain how you will attract and retain customers and the steps for making a sale.

Funding request

Explain the level of funding you'll need over the next five years and how you'll use it. Include financial projections detailing your forecasted income, cash flow, and budgets. Research how to get a business loan , and familiarize yourself with the SBA website to learn more about its loan programs.

4. Develop your brand

Once you know what you'll sell and how you'll run the business, developing your brand is next. You'll have to choose a business name and create a logo. This process can be relatively simple if you already have ideas in mind—or challenging if you're starting from scratch. You might want to hire a graphic designer to implement your vision.

5. Create a website

Once you have developed your brand, it’s time to build a website. You’ll need to lock in a domain name and choose a hosting service. There are website builders, such as Squarespace , available to help you get started—or you can hire someone to do the work for you.

6. Cover legal bases

The next step is to make your business official. While the requirements vary by business, here are the essential action items:

Register your business

Registering with your state gives you legal grounds to use your brand's name. You can utilize a service like LegalZoom to register as a sole proprietor, LLC, corporation (C corp or S corp), nonprofit, or DBA (doing business as). Consult a tax specialist for help choosing the best business structure for your situation.

Apply for an EIN

You'll need an Employer Identification Number (EIN)—a federal tax ID—to pay federal taxes, apply for business licenses and permits, open a business bank account , and hire employees. You can apply for an EIN for free on the IRS website . The IRS says to beware of websites that charge for this free service.

Licenses and permits

Depending on your business activities and location, you may need licenses and permits from your state, county, or city. Check with your state's website (e.g., ca.gov, nc.gov) to determine your necessary licenses and permits.

Most businesses must file an annual income tax return, and the form you use depends on how your business is structured. Online services like Found, a banking and tax app designed for small business owners, have tools to make keeping track of taxes easier. It's also helpful to establish a relationship with a trusted tax specialist.

7. Market your business

Once your online business is ready for the world, it's time to market it. While marketing strategies vary depending on your business model and target audience, here are a few options to consider:

• Include your brand in online directories.
• Create social media profiles and share high-quality content often.
• Launch compelling email marketing campaigns.
• Use SEO best practices to optimize your site for search engines.
• Collaborate with influencers to promote your brand.
• Leverage your network—including professional contacts, friends, and family.

8. Reward customer loyalty

Keeping existing customers happy is often easier than generating new leads, so it can be worth the extra effort to reward them for their loyalty. Consider offering discounts to repeat customers or perks to patrons who refer friends and family. You might also provide spending-based rewards or incentives for sharing positive reviews on social media.

Of course, one of the best ways to reward loyalty is to connect with your customers personally, making sure they always feel welcome and appreciated. That way, they'll be more likely to become repeat customers, recommend you to friends and family, and help you grow a thriving online business.

Why should you consider starting an online business?

Consumers increasingly prefer shopping online, providing virtually unlimited opportunities for digital entrepreneurs to reach a global audience. Further, many of the traditionally time-consuming aspects of starting a business have been simplified—and made more affordable—by websites such as LegalZoom .

One outcome of the pandemic was the emergence of new and enhanced tools that make remote work not only possible, but more efficient. As a result, it's easier than ever to work anywhere in the world with a laptop and a reliable internet connection.

How to save when starting an online business

Businesses have a slew of start-up costs that can be difficult to manage before you're up and running. Here are a few ways to make balancing the budget a little easier.

Rewards credit cards

A business credit card is an excellent way to keep your business and personal expenses separate for accounting purposes, but that's not the only perk. With the best small business credit cards , you can also earn rewards on your spending, enjoy perks like free travel insurance, and score a hefty welcome bonus.

Tax prep software

A good way to save money in the early days of your business is to use upgradable tax prep and other business-related software. Start with the free version, then upgrade to the premium package once your business takes off.

Payment processing

You'll need a payment service provider to accept online payments. Not surprisingly, some payment solutions are more expensive than others. For example, Square charges 2.9% + $0.30 for online transactions, while Venmo costs 1.9% + $0.10 between Venmo accounts. Of course, fees shouldn't be the only consideration when choosing a payment service provider. Still, they're worth paying attention to; even small differences can add up over time.

TIME Stamp: Research and strategy are key to success

Starting an online business involves many of the same steps as opening a brick-and-mortar business. You’ll need to determine your niche, conduct market research, craft a well-thought-out business plan, and develop a brand and website. Implementing a successful marketing plan is also key to building and retaining a solid customer base.

Frequently asked questions (FAQs)

What is the best type of online business to start.

The best online business for you depends on your professional background, skills, interests, and goals. Think about what you're good at and enjoy doing, then brainstorm ideas for monetizing it.

Which kind of online business is most profitable?

There are a wide variety of online businesses ranging from e-commerce to private tutoring. How profitable one is over the other depends on a number of factors. The start-up and ongoing costs of some are nominal compared to others. For example, an online tutoring business would typically have much lower costs than selling collectibles online. Demand, competition, and how well an online business is managed also impact profitability.

Can I start an online business with $100?

You can start an online business on a shoestring budget. With $100, you’ll be able to buy a domain name, build a basic website (using a free template), and publish the site through a web hosting provider long enough to get you started. Of course, some ventures have higher start-up costs, so you may well need considerably more than $100, depending on your business.

The information presented here is created independently from the TIME editorial staff. To learn more, see our About page.

Kid’s Clothing Store Business Plan PDF Example

• May 29, 2024
• Business Plan

Creating a comprehensive business plan is crucial for launching and running a successful kid’s clothing store. This plan serves as your roadmap, detailing your vision, operational strategies, and financial plan. It helps establish your kid’s clothing store’s identity, navigate the competitive market, and secure funding for growth.

This article not only breaks down the critical components of a kid’s clothing store business plan, but also provides an example of a business plan to help you craft your own.

Whether you’re an experienced entrepreneur or new to the retail industry, this guide, complete with a business plan example, lays the groundwork for turning your kid’s clothing store business concept into reality. Let’s dive in!

Our kid’s clothing store business plan is structured to cover all essential aspects needed for a comprehensive strategy. It outlines the store’s operations, marketing strategy , market environment, competitors, management team, and financial forecasts.

• Executive Summary : Offers an overview of your kid’s clothing store’s business concept, market analysis , management, and financial strategy.
• Store & Location : Describes the store’s design, amenities, and why its location is appealing to potential clients.
• Supply & Products : Lists the types of clothing and related products provided by your store, including pricing structure .
• Key Stats : Shares industry size , growth trends, and relevant statistics for the kid’s clothing market.
• Key Trends : Highlights recent trends affecting the kid’s clothing sector.
• Key Competitors : Analyzes main competitors nearby and how your kid’s clothing store differs from them.
• SWOT Analysis : Strengths, weaknesses, opportunities, and threats analysis.
• Marketing Plan : Strategies for attracting and retaining customers.
• Timeline : Key milestones and objectives from start-up through the first year of operation.
• Management: Information on who manages the kid’s clothing store and their roles.
• Financial Plan: Projects the store’s 5-year financial performance, including revenue, profits, and expected expenses.

Kids’ Clothing Store Business Plan

Fully editable 30+ slides Powerpoint presentation business plan template.

Download an expert-built 30+ slides Powerpoint business plan template

Executive Summary

The Executive Summary introduces your kid’s clothing store’s business plan, offering a concise overview of your store and its product offerings. It should detail your market positioning, the range of children’s clothing and accessories you offer, its location, size, and an outline of day-to-day operations.

This section should also explore how your kid’s clothing store will integrate into the local market, including the number of direct competitors within the area, identifying who they are, along with your store’s unique selling points that differentiate it from these competitors.

Furthermore, you should include information about the management and co-founding team, detailing their roles and contributions to the store’s success. Additionally, a summary of your financial projections, including revenue and profits over the next five years, should be presented here to provide a clear picture of your store’s financial plan.

Make sure to cover here _ Business Overview _ Market Overview _ Management Team _ Financial Plan

Dive deeper into Executive Summary

Business Overview

For a  kid’s clothing store, the Business Overview section can be concisely divided into 2 main slides:

Store & Location

Briefly describe the store’s physical environment, emphasizing its design, comfort, and the overall atmosphere that welcomes customers. Mention the store’s location, highlighting its accessibility and the convenience it offers to customers, such as proximity to shopping centers or ease of parking. Explain why this location is advantageous in attracting your target clientele, which includes parents and guardians shopping for children’s clothing.

Supply & Products

Detail the range of children’s clothing and accessories offered, from everyday wear to special occasion outfits. Outline your product sourcing strategy, ensuring it reflects the quality and variety of items provided and matches the market you’re targeting. Highlight any exclusive brands, unique product lines, or special deals that provide added value to your customers, encouraging repeat business and customer loyalty.

Make sure to cover here _ Store & Location _ Supply & Products

Market Overview

Industry size & growth.

Examine the size of the children’s apparel industry and its growth potential. Discuss current market value, projected growth rates, and key factors driving expansion, such as rising birth rates and increasing disposable incomes.

Key Market Trends

Highlight recent trends, including the demand for sustainable and organic clothing, gender-neutral fashion, and ethically produced apparel. Note the shift towards online shopping and the influence of social media on parents’ purchasing decisions.

Key Competitors

Analyze the competitive landscape, covering high-end boutiques, budget-friendly chain stores, and online marketplaces. Emphasize your store’s unique selling points, such as exceptional customer service or a distinctive product range, to show how it stands out in the market.

Make sure to cover here _ Industry size & growth _ Key competitors _ Key market trends

Dive deeper into Key competitors

First, conduct a SWOT analysis for the kid’s clothing store , highlighting Strengths (such as a wide range of products and high-quality, stylish offerings), Weaknesses (including high operational costs or limited brand recognition), Opportunities (for example, growing market demand for unique and fashionable children’s clothing), and Threats (such as economic downturns that may decrease consumer spending on non-essential items).

Marketing Plan

Next, develop a marketing strategy that outlines how to attract and retain customers through targeted advertising, promotional discounts, an engaging social media presence, and community involvement.

Finally, create a detailed timeline that outlines critical milestones for the store’s opening, marketing efforts, customer base growth, and expansion objectives, ensuring the business moves forward with clear direction and purpose.

Make sure to cover here _ SWOT _ Marketing Plan _ Timeline

Dive deeper into SWOT

Dive deeper into Marketing Plan

The management section focuses on the kid’s clothing store’s management and their direct roles in daily operations and strategic direction. This part is crucial for understanding who is responsible for making key decisions and driving the kid’s clothing store toward its financial and operational goals.

For yourkid’s clothing store business plan, list the core team members, their specific responsibilities, and how their expertise supports the business.

Financial Plan

The Financial Plan section is a comprehensive analysis of your financial projections for revenue, expenses, and profitability. It lays out your kid’s clothing store business’s approach to securing funding, managing cash flow, and achieving breakeven.

This section typically includes detailed forecasts for the first 5 years of operation, highlighting expected revenue, operating costs and capital expenditures.

For your kid’s clothing store business plan, provide a snapshot of your financial statement (profit and loss, balance sheet, cash flow statement), as well as your key assumptions (e.g. number of customers and prices, expenses, etc.).

Make sure to cover here _ Profit and Loss _ Cash Flow Statement _ Balance Sheet _ Use of Funds

Privacy Overview

American Airlines CEO admits the airline messed up its plan to disrupt how tickets are sold

• American Airlines slashed its revenue and margin outlook for Q2 2024 on Tuesday.
• The airline also announced the departure of chief commercial officer Vasu Raja.
• American's CEO said part of its struggles is due to recent changes in ticket sales strategy.

American Airlines lowered its earnings outlook for the second quarter of 2024 and announced the departure of its Chief Commercial Officer on Tuesday.

Speaking at an event on Wednesday, CEO Robert Isom said the lower earnings guidance can be attributed to a weaker-than-expected marketplace and the airline's weaker-than-expected performance.

A key factor behind lower bookings is the airline's recent changes to ticket sales strategy, Isom said.

That's a not-so-tacit admission that the airline's recent shake-up of its corporate ticket sales and third-party ticket sales strategy quarterbacked by the outgoing CCO, Vasu Raja, has not worked.

"We are adapting our distribution strategy," Isom said at the event, which was hosted by Bernstein. "We moved faster than we should have and we didn't execute well."

Related stories

In February, American Airlines announced changes to its ticket distribution strategy, including new rules that limit the accrual of loyalty points needed to achieve elite status to tickets purchased from the airline and through select approved travel agencies.

The strategy encouraged customers to buy directly from the carrier instead of third-party websites and travel agencies.

Last year, American gutted its corporate sales team, responsible for managing business travel needs for its major corporate clients.

Isom said that American is reevaluating its distribution strategy to make it easier for travel agencies, corporate clients, and customers in general to interact with the airline. This includes pausing some of the policy changes announced in February.

"Our approach has driven customers away from American and we are unequivocally committed to getting those customers back," Isom added.

In a regulatory filing, the airline said it now expects profit margins for the current quarter to be 1% lower than it had predicted in April. In addition, American expects second-quarter revenue to be as much as 6% lower than the same period in 2023.

Raja, who joined the company in 2004 and took over as CCO in 2022, will officially leave the company in June.

Shares of American Airlines fell more than 13% in trading on Wednesday.

• Main content

• Share full article

Advertisement

Supported by

Renting Forever and Trying to Create a Strong Financial Future

Either by choice or because they are priced out of the market, many people plan to never stop renting. Building wealth without home equity requires a different mind-set.

By Paulette Perhach

Moving back and forth between Tennessee and Alaska, Michael Rogers and his wife, Christy, have twice been stuck simultaneously paying a mortgage and rent. Once, in 2006, the situation dragged on for eight months, finally ending when they sold their house in Tennessee for $20,000 below what they’d paid for it.

Other adventures in homeownership ended well — the couple doubled their money after selling a fixer-upper. Then later, with another property, they had to pay out $30,000 to fix a mudslide around their home, a mistake caused by the builder.

Two years ago, the Rogerses moved to Kingsport, in northeastern Tennessee, where they signed a lease on an apartment they thought would be a yearlong stopgap before buying again.

The couple just renewed their lease for a third year, and have decided to remain renters for good. Mr. Rogers, a construction manager, likes the convenience of being able to move when a job calls.

Either by choice or by being priced out of the market , many people have decided that renting forever is their best — or only — option. Housing costs and interest rates have risen in the last few years, and it can make financial sense to rent. (The New York Times has recently updated its popular rent-versus-buy calculator to help people understand the trade-offs.) In the 1960s, the median house price was a little over twice as much as the average income . It’s now nearly six times as much.

Homeownership is a traditional strategy for long-term wealth building. For people who aren’t planning to buy, creating a strong financial plan without building home equity requires a different mind-set.

Owning a home isn’t a magic bullet to secure retirement. Mr. Rogers has seen how being “house poor” has affected older family members, one of whom has three-quarters of her net worth tied up in her house. That situation leaves people with the option of borrowing against the equity in their home or selling the home to get at the value within it.

He’s focused on investing instead, preferring the liquidity and stability of the stock market.

“If you’re buying something like a broad-based U.S. stock index, you’re just kind of buying a slice of the entire U.S. economy,” Mr. Rogers said. “When you buy a house, your risk is concentrated literally down to one house, in one neighborhood, in one state.”

Mr. Rogers has found that people tend to focus on home equity over other factors. He thinks that can be a mistake.

“In the current market, particularly in my area, rent looks like an absolute bargain compared to what houses are selling for now,” he said. “That allows me to really bump up my savings rate. People are like, ‘Well, you’re not building equity.’ Yeah, but I’ve got a 35 percent savings rate. I’m building investment accounts much faster than I would ever build equity in the house.”

Choosing to Rent

As in any other market, predicting the future of rent charges is impossible. Rents could deflate as they did during the pandemic in New York City or balloon as they have in Amazon-inflated Seattle. Housing prices could crumble as they did during the Great Recession or explode as they have in San Francisco. The key is to have a plan that covers you in a variety of scenarios.

“Renting can be a better financial decision; owning can be a better financial decision,” said Ramit Sethi, author of “ I Will Teach You to Be Rich .” “Too often, we simply buy because our parents told us to, and their parents told them to.”

Though he’s a millionaire, Mr. Sethi has rented for the last 20 years in cities like San Francisco, New York and Los Angeles. When he lived in Manhattan, he calculated that it would have cost him 2.2 times more per month to own than to rent. He emphasizes that your calculations have to include the phantom costs of mortgage interest, taxes and maintenance, which is often estimated at 1 to 3 percent of a home’s value.

So he rented and focused on investing. He’s a fan of index funds, target date funds any long-term, low-cost investment.

“If you choose to rent, there’s one key thing that is the most important thing of all, which is you absolutely must run your numbers,” Mr. Sethi said, “and if it’s cheaper to rent than to buy, you must invest the difference.”

He also negotiates his rent, which he said many people weren’t aware was an option. He recommends that renters pay attention to comparable housing costs in their area. If they can find better deals, they should go in at renewal time with documentation.

“It doesn’t always work,” he said. “When it does, it’s a huge benefit.”

Over the last century, the S&P 500 has returned an average of about 7 percent a year, when adjusted for inflation. Mr. Sethi said most people had no idea what the stock market was returning. “But you need to know that number,” he said, “because it tells you what your opportunity cost is — in other words, how much you could be making if you just put money into the market.”

Planning your finances while renting also has an emotional element. Mr. Sethi said people shouldn’t feel guilty if they were renting.

“Remember that there are literally millions of people in America who rent and invest the difference,” he said. “You’re not some weirdo just because you’re choosing to rent. I do it, and plenty of other people do it.”

Running the Numbers

“I am constantly being asked why I’m not buying a house,” said Miranda Marquit , who is in her mid-40s and living in Idaho Falls, Idaho. “People think it’s weird.”

Ms. Marquit earns between $10,000 and $12,000 each month and has been creating an investment portfolio for the last 25 years and multiple income streams for the last 15 years. If you want to start planning a successful financial life without homeownership, she suggests starting with retirement calculators at investor.gov .

“When deciding how much I’m going to invest each month, I take a very conservative approach and assume a 6 percent rate of return,” she said. “I know a lot of people will say you should assume a much higher rate of return, especially if you’re investing in stocks, but I like to err on the side of caution.”

You’ll need to factor in how much rent is likely to increase over time (Ms. Marquit uses a 3 percent inflation-based estimate) to come up with the number of how much you’re going to need in retirement.

“Figuring out whether you’re set for retirement is about running the numbers, whether you rent, have a mortgage or are building a rental empire,” she said. “Look at what you want to do in retirement and estimate your monthly needs. Then figure out how you’ll meet those monthly needs.”

The Renting-Only Strategy

“This is very much my life,” said Berna Anat, who lives in the San Francisco Bay Area. “I don’t see home owning in my future.”

When someone says she’s throwing away money on renting, she thinks of friends who have homes. “They’re like, ‘Oh, we can’t go on vacation for two years because termites have eaten the foundation of our bathroom,’ or like, ‘Yeah, we actually can’t hang out this weekend because we are on our hands and knees tiling the grout of our decrepit sunroom,’” she said. “Forever renting is very much a movement. It’s a lifestyle.”

It comes with a cost: the theoretical equity many plan as a stronghold of their retirement.

Ms. Anat, author of “ Money Out Loud ,” said replacing that home equity and living a renting lifestyle was about diversification and maximizing investments. If you’re employed full time, she said, you’ll want to be fully invested in your 401(k) and getting as much of an employer match as possible. Ms. Anat recommends opening up another fund as well, such as a Roth individual retirement account.

“The idea is, if you are not spending on housing costs, closing costs, escrow, property taxes” and charges like homeowners’ association fees, she said, “then you are investing all of that money so that your retirement is as cushy as possible, since you won’t have that equity.”

“For me, as a forever renter, I have all those things, and I’m investing as aggressively as possible,” she said.

In the short term, Ms. Anat said, you also need to plan for real-world volatility. Your rent could spike, or your building could get sold. She recommends an emergency fund of at least six months and a spreadsheet detailing your plan if you lose housing.

“If you were to have to move out of your apartment tomorrow, what is the actual plan for your funds and your life?” she said. “It’s almost like those earthquake escape plan situations.”

Another consideration is your credit score: Keep it clean. Make your payments on time and try to keep the amount you owe low compared with your limit. The usual advice is to restrict your borrowing to 30 percent of your credit limit; Ms. Anat tries to stick to 10 to 15 percent.

Maintaining a strong credit score is critical, she said, because “landlords are looking at that, and you’re more likely to have to shop the market again next month or next year and impress a landlord.”

You also need to protect yourself by understanding landlord’s rights vs. renter’s rights where you live, as they varies by city and state. Buy renter’s insurance, which is usually affordable.

Overall, Ms. Anat said, you have to stabilize your life with as much financial backup as possible.

“It reminds me so much of being self-employed,” she said. “Being self-employed means that you have to make your own plan for health insurance. You have to D.I.Y. your plan for retirement. It’s a little bit more of getting into that mental mode.”

A Guide to Making Better Financial Moves

Making sense of your finances can be complicated. the tips below can help..

Inheriting money after the death of a loved one while also grieving can be an emotional minefield, particularly for younger adults. Experts share ways to handle it wisely .

Either by choice or because they are priced out of the market, many people plan to never stop renting. Building wealth without home equity  requires a different mind-set.

You may feel richer as you pay your mortgage down and home values go up. As a result, some homeowners end up with a lot of home equity but low retirement savings. Here’s the problem  with that situation.

Can your investment portfolio reflect your values? If you want it to, it is becoming easier with each passing year .

The way advisers handle your retirement money is about to change: More investment professionals will be required to act in their customers’ best interest  when providing advice about their retirement money.

The I.R.S. estimates that 940,000 people who didn’t file their tax returns  in 2020 are due back money. The deadline for filing to get it is May 17.