financial summary business plan

WHAT IS A FINANCIAL SUMMARY IN A BUSINESS PLAN: Best Practices

• by Folakemi Adegbaju
• August 10, 2023
• No comments
• 9 minute read

Table of Contents Hide

What is a financial summary in a business plan.

• #1. Introduction to the Financial Summary 

#2. Financial Statements and Analyses

#3. forecast profit and loss, #4. work out your cash-flow projections, #5. forecast balance sheet, why is financial summary important to a business, #1. profit and loss statement, #2. balance sheet, #3. cash flow statement, make financial planning a recurring part of your business, get professional help, final thoughts, what is financial overview in business plan, what are the six basic financial statements, what is meant by "financial summary".

Preparedness is key in order to succeed in your business in the long run. Also, having a sound financial summary is the key to that preparation for your new business. You can foresee growth, make investor pitches, and deal with cash flow problems thanks to it. It is important that you become familiar with a few foundational concepts of financial summary before you can begin. You can also help yourself write one by checking out the financial summary example in a business plan; it will get you prepared for yours. This article serves as a guideline to how you can write a financial summary in your business plan and makes you see the importance of preparing one in your business plan.

Let’s dig in deep..

The business’s profitability, aspects of debt and equity, projected operational costs, financial statement estimates, future growth projections, and business financing are all covered in the financial summary. This part contains extremely detailed and organised financial information. There may be graphs, tables, charts, calculations, and spreadsheets. To write it accurately, it could need the assistance of a financial specialist, like an accountant.

A financial summary is the lifeline of a business plan. It is what gives the company a sense of vitality and pragmatism. The financial part frequently appears near the end of the plan, but this does not lessen the significance of what it contains. In actuality, it is the part of the business plan that gets the greatest scrutiny. Due to the fact that a company’s value is in its financial statements, investors may actually give it more attention than other sections of the plan. Having a financial summary example in a business plan or getting someone to write one for you makes writing one easier.

How Do You Write a Financial Summary for a Business Plan?

A business plan’s financial section has advantages for both the owner of the company and investors and financiers. It helps them gain a better understanding of their company. It is also a crucial tool for managing the company. When writing the financial part and, by extension, the entire business plan, the majority of authors favour the Turabian paper format.

Your level of realism in writing the financial section will be the only factor determining its trustworthiness. You can accomplish this by decomposing the figures into different parts that you can examine separately. Having a financial summary example in a business plan or getting someone to write for you makes writing one easier.

The following are steps to take when you want to write the financial summary for your business plan:

#1. Introduction to the Financial Summary  

Firstly, the introduction to the financial plan typically comes first in a business plan’s financial overview. The business plan drawer is the only source for the introduction’s structure and format. You’re giving the reader an overview of the section’s contents in the introduction.

The predicted financial statements and analyses will be the focus of the second part of the financial summary.  Here, the financial statements and analyses listed below are provided.

• Forecasted income statement
• Cash flow statement (Forecasted)
• Forecasted balance sheet
• Sensitivity analysis
• Breakeven analysis
• Ratio analysis

To determine if you can anticipate making a profit or loss for any of these time periods, estimate your sales and expenses on a monthly, quarterly, or annual basis. You can use this to set sales goals, pricing, and probable profit margins. You can use industry benchmarks, market research, and industry analysis to base your estimates on the success of similar companies in your industry.

Even a profitable company may run out of money. For instance, you can earn a lot of sales in the first month without any payment for them until the following month. You can determine if you’ll have enough money to run your firm or if you’ll need additional funding by doing cash-flow estimates.

Among the helpful pointers to bear in mind are:

• To account for any seasonality, project your cash flow at least 12 months in advance.
• Be realistic; some clients might take longer to pay
• If you discover a financial shortage, take steps to regulate your cash flow.

To develop a financial picture of your business after the first 12 months, list all of your anticipated assets and liabilities . It’s a good idea to use your balance sheet statistics to determine whether you’ll have enough money after a year to carry out your daily operations. This will help you assess the financial viability of your business plan.

These three sections should be on your balance sheet:

• Assets : This is what your company owns, including assets like money, merchandise, and buildings as examples.
• Liabilities : What your company owes, with loans and accounts payable as examples
• Ownership stake : This is the part of the assets that the business owner is entitled to. Add up all of your assets, then deduct all of your debts to arrive at this calculation.

#6. Find Your Break-even Point

The amount of sales required to cover costs is revealed by performing a break-even analysis; anything above this point is considered a profit. In order to determine whether your business plan is practical, you can utilise the break-even point to analyse the sales, cost, and pricing figures from your prior estimates. You might wish to check your calculations to determine if there are any ways to increase your company’s profitability, for instance, if your break-even point is years away.

Things to think about are:

• realistically estimating sales. If you run a service business, for instance, you might choose to base your calculations on a 60–70% utilisation rate rather than assuming that all of your time can be charged.
• Changing your rates and costs will make it simple for you to test various situations.

You can also check our Jewelry business plan to see what a financial summary in a business plan looks like.

A well-organized financial summary can boost your company’s confidence while providing you with a clearer picture of how to distribute resources. It demonstrates your company’s dedication to prudent expenditure and its capacity to fulfil financial commitments. A financial summary enables you to identify which decisions will have an influence on your income and which situations necessitate using reserve cash.

It’s also a crucial tool when requesting funding for your company. You must outline your company’s spending control and income generation processes in your financial summary of your business plan. It reveals the state of your company and the number of sales and investors it requires to reach significant financial milestones.

What Financials Should Be Included In A Business Plan?

There are three major financials you must include in a business plan, they are :

• Profit and loss statement
• Balance sheet 
• Cash flow statement

Your profit and loss statement is a summary of the activities of your business over a predetermined time period, typically one year. It is an indicator of the health or performance of the company’s finances. Although you can use it to make projections as well, it is typically used as a look back.

Your profit and loss statement provides a summary of your revenue, total expenses, and profit (or loss), which is the amount left over after deducting expenses from revenue.

The profit and loss statement is also a helpful tool for evaluating growth and comparing performance. To determine if your organisation is expanding or contracting, you can compare the profit and loss statement data from prior years to your present and next years.

The balance sheet will also show the effects of any profits made on increasing assets, reinvesting in the company, reducing obligations, or paying dividends or bonuses to shareholders. The two documents are related in that way.

Your balance sheet is a description of what your company owns and what it owes at a specific point in time, as opposed to your profit and loss statement, which shows how much money was brought in and spent over the course of a year, a quarter, or a month. List all of your company’s assets, the stuff you own, at the top of the statement. This comprises your long-term assets, such as your property, plant, and machinery. This list would also contain any machinery, raw materials, merchandise, real estate, or computer equipment. Accounts receivable, or what your clients owe you, is another example of a short-term asset. Assets should include anything you use to make money.

The shareholders’ equity and liabilities are listed on the balance sheet’s bottom half. What you owe is considered a liability. This covers costs such as loans, unpaid taxes, unpaid invoices, leases on property or equipment, and so forth. The value your business has created is shared by all of your shareholders, who are also known as your partners or owners in the company. This value is known as your shareholders’ (or owners’) equity.

You should also take note that assets are always equal to shareholders’ equity plus liabilities. The more equity that the shareholders own, the more value the company is producing.

The cash flow statement shows all of the money that the company has taken in and spent over a certain period of time. When making projections, cash flow statements are typically utilised to try and foresee when the company could require a financial infusion or be able to afford a significant investment. As a result, monthly breakdowns of cash inflow and outflow are common in cash flow statements.

Operations (what you sell to clients) can produce cash for the business, as can assets (such as stocks or real estate) and/or finance (such as when you receive a loan or take on an investor).

Cash paid to purchase additional assets or to repay a loan or extended credit falls under the category of cash outflow.

You, the company’s lenders, or investors can get a sense of how cash healthy the business is by examining variations in cash flow over multiple time frames, like months or quarters.

Also, know that each statement offers information about the company’s performance that can aid owners and managers in figuring out how to enhance operations. However, because each statement has a distinct function, it’s crucial to understand how to use each one.

These three financial statements are crucial business tools that can show you where you need to focus your attention in order to expand your company. You also need to update and review them frequently to keep money coming in steadily, fill out your profit and loss statement and balance sheet, and help ensure that your company survives and prospers.

When you first begin, your financial plan may seem intimidating, but this part of your business plan is actually crucial to comprehend.

You, as the business owner, should be able to read and comprehend these records and make decisions based on what you learn from them, even if you decide to outsource your bookkeeping and routine financial analysis to an accounting firm. Though it might seem so confusing and hard, having a financial summary example in a business plan or getting someone to write for you makes writing one easier.

Did you have any issues with it? We’re here to help you.

Having a financial summary example in a business plan might not be enough to write a strong financial summary that will attract the attention of your investors. However, our professional business plan writers are always at your service to help you out with one without any delay or disappointment. BUSINESS YIELD CONSULT is always at your service.

Your chances of getting money from investors or lenders are significantly increased if you produce and present a financial summary that all works together to tell the tale of your firm and if you can respond to inquiries regarding the sources of your figures. However, we recommend you reach out to a professional like BUSINESS YELD CONSULT their expertise is always available to guide you on how to write a strong and convincing financial summary for your business plan.

A financial plan is nothing more than a summary of your company’s present financial situation and growth expectations. Consider any records that show your current financial status as a snapshot of the state of your business and the projections as your hopes for the future.

The following components of the financial statements of business enterprises have been specified by the Financial Accounting Standards Board (FASB): assets, liabilities, equity, revenues, expenses, gains, losses, investment by owners, distribution to owners, and comprehensive income.

Financial statements are a group of summaries of information regarding the cash flows, financial position, and financial outcomes of a company. They consist of the cash flow statement, balance sheet, and income statement.

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Free Financial Templates for a Business Plan

By Andy Marker | July 29, 2020

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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.

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Business Plan Financial Summary - The Devil Is In The Detail

A business plan financial summary can be a key factor in the overall success of your business plan. Make your projections too grand and without justifiable data and you can lose the trust of your reader. The goal of a business plan financial summary is to provide a snapshot of the financial health, performance, and future projections of your enterprise. In this blog post, we will guide you through the process of creating a compelling financial summary. Whether you're a startup looking to secure funding or an established company planning to scale, this comprehensive guide will serve as an invaluable tool on your business journey.

Table of Contents

Understanding the Financial Summary

• Key Components
• Step By Step

Revenue/Sales Forecast

Expenses projection, cash flow statement, income statement, balance sheet, break-even analysis.

• Ratios & KPIs
• Putting It Altogether
• Tips & Best Practices

Wrapping It All Up

The financial summary, at its core, is a succinct and high-level overview of the financial data that shows your business's viability and potential profitability. Unlike the financial projections section, which delves into detailed predictions about future income, expenses, and cash flows, the financial summary provides a more digestible summary of these figures.  Its purpose is to communicate the key aspects of your financial strategy and give stakeholders - investors, banks, and even team members - an accessible snapshot of your business's financial health and plans. A well-crafted financial summary gives potential investors the assurance they need about your business's ability to generate profit, manage expenses, and, ultimately, provide a return on their investment. It guides decision-making processes and plays a significant role in securing funding.

Business Plan Financial Summary - Key Components

A financial summary is a composite of several key components, each contributing to a comprehensive picture of your business's financial trajectory.

• Revenue/Sales Forecast: This projects the amount of money your business anticipates to make from the sale of products or services over a certain period. It forms the basis of your profit expectations and is critical in strategising your business's growth.
• Expenses Projection: This includes your forecast of both fixed costs (rent, salaries, utilities) and variable costs (production materials, commissions, advertising). Getting a handle on projected expenses is essential in planning for profitability and cash flow management.
• Cash Flow Statement: This reflects how changes in balance sheet accounts and income affect your cash and cash equivalents, and breaks the analysis down to operating, investing, and financing activities. It’s vital for understanding the liquidity and financial flexibility of your business.
• Income Statement: Also known as a profit and loss statement, it shows your revenues, costs, and expenses over a period. This statement is your business's report card, showing its profitability during a specific time frame.
• Balance Sheet: This gives a snapshot of your company's net worth at a specific point in time. It lists all your business's assets, liabilities, and shareholders' equity - the difference between assets and liabilities.
• Breakeven Analysis: This is the point when your total revenue equals total costs. Knowing your breakeven point is crucial for determining pricing, setting sales budgets, and planning for future growth.
• Financial Ratios and Key Performance Indicators (KPIs): These metrics help assess the financial health, performance, and growth potential of your business. They can highlight strengths, pinpoint weaknesses, and guide strategic decision-making.

In the coming sections, we will delve into each of these components in greater detail, illuminating how to create, analyze, and utilize them effectively in your financial summary.

Building a Financial Summary Step-by-Step

Creating a revenue forecast may seem daunting at first, especially for new businesses without historical sales data. But don't be discouraged; it is achievable through a blend of market research, a clear understanding of your target audience, and strategic sales goals. Begin by defining your potential market and then estimating the portion of this market that your business can reasonably capture (your market share). This market share, when multiplied by the price of your product or service, forms the basis of your revenue forecast. Here, it is crucial to base your estimates on practical figures rather than optimistic ones. Overestimating sales can lead to disappointments and financial missteps. It's also worth noting that your revenue forecast will likely change as your business grows and gathers more data. Remember, your sales forecast isn't set in stone. It's an evolving aspect of your business plan that should be reviewed and adjusted regularly based on the realities of your business operations. An effective revenue forecast is a balance between ambition and realism.

After outlining your revenue forecast, the next step is to estimate your business's expenses. A comprehensive and accurate expense projection is paramount in ensuring your business stays financially sustainable and on the path to profitability. Expenses typically fall into two categories: fixed and variable. Fixed costs are those that don't change with the level of goods or services you produce. They include rent, utilities, insurance, salaries, and any other costs that remain constant regardless of business activity. These costs are often easier to predict as they don't vary much over time. Variable costs, on the other hand, fluctuate based on your business volume. They include the costs of raw materials, shipping, sales commissions, and other expenses that rise and fall with your business activity. When projecting expenses, start by listing all potential costs—both fixed and variable—that your business is likely to incur. Then, estimate the amount of each cost based on historical data if available, or industry averages for new businesses. Consider the likely changes to your costs over time. For example, rent may increase due to inflation, or your raw material costs may fluctuate based on supplier prices or changes in demand. Accuracy in expense projection is vital; underestimating your expenses can lead to financial strain and cash flow issues down the line. Regularly revisiting and updating your expense projection will keep it in line with the realities of your business, helping you make informed decisions about pricing, budgeting, and growth. With a clear understanding of your expenses, you can create a more informed and accurate cash flow statement, which we will delve into in the next section.

A cash flow statement, one of the most critical components of a financial summary, provides a comprehensive picture of how money moves in and out of your business. This document gives stakeholders a clear view of your business's liquidity—its ability to cover short-term obligations. The cash flow statement breaks down into three main sections: Cash from Operating Activities : This section reveals how much cash your business generates from its core operations, such as sales of goods or services. It also includes cash spent, like operating expenses. A positive number here indicates that the company's operations are generating more cash than it is using, which is a good sign of financial health. Cash from Investing Activities : This part shows cash gained or spent through investing activities. These could include the purchase or sale of assets, like property or equipment, or investments in other businesses. A negative number here is typical for growing businesses making substantial investments. Cash from Financing Activities : This reveals the cash inflows from investors or banks and outflows to shareholders, such as dividends or share buybacks. Positive cash flow from financing activities means more money is flowing into the business than flowing out, indicating growth or expansion. The bottom line of the cash flow statement reveals the net increase or decrease in cash for the period. If this number is negative, it could be a warning sign that the company is not generating enough cash from its operations and may need to reevaluate its business model. In essence, the cash flow statement offers an in-depth look at your company's ability to generate cash to sustain its operations and finance its growth. It complements the income statement and balance sheet to give a holistic view of a business's financial health.

Another pivotal component of your financial summary is the Income Statement , also known as a Profit and Loss Statement (P&L). The income statement shows your business's profitability over a specific period, typically a quarter or a year. The income statement provides a structured summary of your revenues, costs, and expenses. Here's a general format for how to create it: Revenues : This includes all the income your business generates, primarily from selling goods or services. It is generally listed at the top of the income statement. Cost of Goods Sold (COGS) : This section includes the direct costs associated with producing the goods or services sold by the business. It typically includes material costs and direct labour costs. Gross Profit : This is calculated by subtracting the Cost of Goods Sold from the Revenues. It shows the profit made after deducting the costs directly related to the goods or services provided. Operating Expenses : These are costs not directly tied to a specific product or service. It includes items such as salaries, utilities, rent, marketing, and depreciation. Operating Income : This is calculated by subtracting Operating Expenses from the Gross Profit. It gives the profit made from a company's core business operations. Net Income : Finally, subtracting any other expenses (like taxes and interest) from the Operating Income gives the Net Income. This is the bottom line that shows the total earnings (or losses) of the business after all costs and expenses are accounted for. A well-structured income statement not only showcases your business's profitability but also offers valuable insights into operational efficiency, cost management, and the potential for future growth. After understanding your business's profitability, the next step is to get a holistic view of your financial health with the Balance Sheet, which we will discuss in the next section.

A Balance Sheet provides a snapshot of your business's financial health at a specific point in time. It lists all your business's assets, liabilities, and shareholders' equity, giving you a holistic picture of your financial standing. The balance sheet is based on the following fundamental accounting equation: Assets = Liabilities + Shareholders' Equity Here's what each term means: Assets: These are resources owned by the business that have economic value. Assets can be tangible (like cash, inventory, property, and equipment) or intangible (like patents, trademarks, and copyrights). Liabilities: These are obligations the business owes to others. Liabilities can be current (due within a year, like accounts payable, wages, and taxes) or long-term (due over a more extended period, like bank loans or mortgage payments). Shareholders' Equity: Also known as owner's equity, it represents the net value of the business. It's what's left over when you subtract liabilities from assets. It reflects the money that would be left if the company sold all its assets and paid off all its liabilities. A balance sheet offers a wealth of information for potential investors. It allows them to assess the company's liquidity (current assets vs. current liabilities), efficiency (inventory and receivable turnover), and financial structure (debt vs. equity). It's important to regularly review and update your balance sheet to reflect the dynamic nature of business transactions and to maintain a clear and accurate picture of your business's financial health.

A Break-even Analysis is an essential tool in your financial summary arsenal. It helps you determine the minimum amount of sales needed to cover all your costs—both fixed and variable. In other words, it’s the point at which total revenue equals total costs, and your business neither makes a profit nor suffers a loss. The formula for calculating the break-even point is straightforward: Break-Even Point (in units) = Total Fixed Costs / (Selling Price per Unit - Variable Cost per Unit) Here's what each term represents: Total Fixed Costs: These are the costs that do not change with the level of output, such as rent, salaries, and insurance. Selling Price per Unit: This is the price at which you sell your product or service to customers. Variable Cost per Unit: These are costs that vary with the level of production, like raw materials or direct labour costs. Understanding your break-even point is vital for several reasons: Pricing Strategy: It helps you determine how to price your products or services. If your selling price is too low, you might sell a lot, but you might also struggle to cover your costs. Sales Targets: It can guide you in setting realistic sales targets that ensure profitability. Growth Planning: It allows you to gauge the impact of increased production and whether scaling up would be financially beneficial. Investor Attraction: Investors may use your break-even analysis to understand the risk involved in your business. Remember that your break-even point is not static—it will shift as costs, prices, and other variables change. Make sure to recalculate it regularly to stay on top of your financial situation.

Financial Ratios and Key Performance Indicators (KPIs)

Financial Ratios and Key Performance Indicators (KPIs) are like the vital signs of your business, providing a quick snapshot of its health and performance. They allow you to analyze your business's financial situation, highlight areas of strength and weakness, and compare performance over time or against industry standards. Here are some of the most critical ratios and KPIs that you should consider including in your financial summary:

• Profit Margin : This measures profitability for each dollar of sales. It's calculated by dividing net profit by total revenue. A higher profit margin indicates a more profitable business.
• Current Ratio : This measures your ability to pay back short-term liabilities (debts and payables) with short-term assets (cash, inventory, receivables). The higher the ratio, the better your company's liquidity position.
• Quick Ratio : Similar to the current ratio but excludes inventory from assets. It provides a more stringent view of your company's ability to meet short-term obligations.
• Debt to Equity Ratio: This shows the proportion of equity and debt the company is using to finance its assets. A lower ratio generally implies a company has been less aggressive in financing its growth with debt, which in turn reduces the risk of default.
• Return on Equity: This shows how much profit a company generates with the money shareholders have invested. A higher ROE indicates more effective management.
• Inventory Turnover: This measures how quickly inventory is sold. A higher turnover rate can indicate strong sales or ineffective buying.

Your business may also have unique KPIs based on its industry or specific operational metrics. For example, a software-as-a-service (SaaS) company might focus on churn rate (the rate at which customers cancel their subscriptions), while a retail store might track same-store sales (comparing sales in the same store locations for two different periods). If you are looking for a guide on business plans for your specific industry, check out our business plan guides homepage.

Business Plan Financial Summary - Putting it All Together

The financial summary is where you bring together all the various elements discussed so far into a coherent and compelling narrative. This section provides an overview of the financial aspects of your business, giving readers an at-a-glance understanding of your company's financial position and future expectations. The bulk of the work will be done in preparing the various components of the business financial summary that have been outlined above. The key is taking the main parts of each section of giving the reader a full overview of the financial status and projections. Be sure to Include graphs and charts where possible to aid readability. As with any financial projections don't overstate or create numbers that you can't justify. If pitching to investors they will quickly lose confidence in your business plan if you use unrealistic projections or targets.

Tips and Best Practices for Creating a Financial Summary

Creating a comprehensive and compelling financial summary can seem daunting, but with the right approach, it can be a powerful tool to drive your business success. Here are some tips and best practices to help you on your way:

• 1. Keep it Simple: Your financial summary should be clear and easy to understand. Avoid excessive jargon or overly complex calculations. Use tables, charts, and graphs to visually represent data and highlight key points.
• Be Conservative in Your Estimates: It's better to underestimate your revenues and overestimate your expenses. This approach ensures that any surprises are more likely to be positive than negative.
•  Base Projections on Realistic Assumptions: Make sure your financial forecasts are grounded in reality. Use historical data, industry benchmarks, and realistic market assumptions. Always explain the basis of your assumptions.
• Regularly Update Your Projections: Your financial summary isn't a one-time document. It should be reviewed and updated regularly to reflect changes in your business or market conditions.
• Be Transparent: Don't hide or minimise potential financial issues. Transparency about risks and challenges shows that you understand them and have plans to address them.
• Seek Expert Advice: If you're not financially savvy, consider enlisting the help of an accountant or financial advisor. They can ensure your financial summary is accurate and complete.
• Use a Bottom-Up Approach for Sales Forecasting: Instead of starting with total market size and estimating your share, start by considering your capacity—how much you can realistically expect to sell based on your resources and capabilities.
• Factor in Seasonality if Relevant: If your business experiences regular sales fluctuations throughout the year, ensure this is reflected in your revenue forecast and cash flow statement.
• Tell a Story: While numbers are crucial, remember to weave them into a compelling narrative. Use your financial summary to tell the story of your business's path to profitability and financial stability

In the final section, we will provide a conclusion to wrap up the blog.

Crafting a detailed and convincing financial summary is an integral part of your business plan. It not only gives you a clear perspective of your business's financial health and viability but also demonstrates to potential investors that you have a firm grasp on the financial aspects of running a business. Remember, the aim is not to dazzle with complex financial jargon or overly optimistic forecasts. Instead, the goal is to provide a realistic, well-reasoned, and transparent account of your business's financial situation and outlook. Here at Action Planr we have a full suite of guides on all sections of the business plan, to help you on your way to business sucess.

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Learning ZoNe

How to Write a Small Business Financial Plan

Noah Parsons

3 min. read

Updated January 3, 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 in place are more prepared to pitch to investors, receive funding, and achieve long-term success.

Thankfully, you don’t need an accounting degree to successfully put your budget and forecasts together. Here is everything you need to include in your financial plan along with optional performance metrics, specifics for funding, 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 all of your financial statements and forecasts in place, you have all the numbers needed to calculate insightful financial ratios. While these metrics are entirely optional to include in your plan, having them easily accessible can be valuable for tracking your performance and overall financial situation.

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).

• 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.

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See why 1.2 million entrepreneurs have written their business plans with LivePlan

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.

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• What to include for funding

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September 29, 2017

Business plan: How to write the financial summary

The financial summary of a business plan could be regarded as the lifeline of the business. It is what breathes an air of life and practicality into the business. The financial section many times appears at the back of the plan, but this does not downplay its importance. In fact, it is the most scrutinized section of the plan. Investors may actually pay more attention to it than other parts of the plan because the value of a business is in its figures.

The financial summary gives insight into the profitability of the business , aspects of debt and equity estimated operating expenses, financial statement forecasts , future growth projections and business financing. The financial data that’s contained in this section is quite structured and in-depth. You may find charts, formulas, tables, graphs, and spreadsheets. It may require the input of a financial expert such as an accountant in order to write it accurately.

This article will consider how you can go about writing the financial summary of your business plan.

Introduction to the financial summary 

The financial summary of a business plan normally starts with the introduction to the financial plan. The format and structure of the introduction is purely left to the drawer of the business plan. The introduction basically gives the reader a basic outline to what is contained in the section.

An example of an introduction is as follows:

“This financial plan gives the forecasted financial statements of Company ABC for a three year projected period. The income statement, cash flow statement and balance sheet have been drawn and the assumptions made have been outlined. The end of each fiscal year has been set for September 2nd. The business capital requirements at startup are valued at $100,000. The business owner will inject $50,000 while the remaining $50,000 will be financed through a bank loan.”

Financial Statements and Analyses

The second part of the financial section will revolve around the forecasted financial statements and analyses. Here, the following financial statement and analyses are laid down:

1. Forecasted income statement

2. Cash flow statement (Forecasted)

3. Forecasted balance sheet

4. Sensitivity analysis

5. Breakeven analysis

6. Ratio analysis

It is best to put each statement and analysis on its own page. It is also time saving to use spreadsheets when drawing these statements and analyses. There are three financial statements that are normally written in business plans. They include:

1) Balance Sheet (Statement of Assets and Liabilities)

This statement shows what the business is worth. It states all the assets that a business has and their respective values; as well as all the liabilities and debt that the business may have. Simply, it adds all that the business owns (assets) and what it owes (liabilities) and the difference between these two forms the business’ net worth.

The net worth of the business is referred to as equity in some circles. The balance sheet normally states the net worth of the business as at a certain date. Most businesses draw it at the end of their fiscal year.

2) Income Statement (Profit and Loss Statement)

This statement shows the earnings of a business over a given period. It adds all the revenues and subtracts all the expenditures to get the net profit or loss in that trading period. When writing the plan, one can use the statistics of other businesses in the industry to get the figures that are useful in drawing the income statement.

3) Cash flow statement

As the name suggests, this statement tracks the flow of cash in a business over a period. It also shows the users of the statement the cash at hand at any given moment in time. The cash flow statement typically analyzes the changes that occur on the balance sheet. The inflow and outflow of cash in the company is captured, and the description of how the cash was spent is given.

The importance of break-even analysis for business plan 

This financial tool is used to determine the point of sales that a business should reach for it to get neither profit nor loss from trading. Simply, it is the point at which the difference between the total revenues and total expenses of the business is zero. Important elements that are considered in the break even analysis include:

• The fixed costs
• Variable costs
• Selling price

Also, the items present in the income statements are quite vital when doing the break-even analysis. When calculating the break even points, it is recommended to do them over a three year period for consistency. It also remains your own prerogative to decide whether you will provide readers of the business plan with explanations on the finer details of the analysis.

The sensitivity analysis

This analysis is used to identify the effect that increased and decreased forecasted sales have on the net income of the business. This increase and decrease are usually in percentage form. The reader of the business plan will see how your net income changes when your sales go up or down by say, 15%, 20%, and 30%. The percentage chosen remains in the prerogative of the business plan writer. However, when using the sensitivity analysis , one should know that a forecasted sale is never 100% accurate. Also, values below 14% should be avoided.

Ratio analysis

A ratio analysis is a general tool used by investors to ascertain the performance of a business (existing or potential). Values from the balance sheet are divided with other values from the income statement. This is done mostly under the time frame of three fiscal years. A percentage or decimal is then deduced.

The ratios are then compared to other businesses’ in the industry to gauge performance. Financiers may also use ratio analyses to inform their financing decisions particularly regarding the feasibility and return on equity.

A business plan writer can describe how the ratio has changed over the three years of the forecast.

• Ratios have specific labels, for example:
• Current ratio
• Quick ratio
• Debt to equity ratio
• Return on Equity

In each ratio, the formula used to calculate is given, and the corresponding dollar value is assigned to each item.

Notes to the financial summary

This is the last part of the financial section of the business plan. It summarizes every idea, assumption, and thought-processes that were used to create the forecasted financial statements. It is usually written in the period of three years of the forecast.

These notes are vital to the readers of the business plan as they give the detailed information that aids them to understand the forecasts and projections. The notes should always come after the financial statements and analyses. It beats logic to have them before the statements and analysis. It also serves to avoid confusion and incomprehension by readers.

The notes should also have labels with specific reference to the item being described. For example:

• Net income note to the financial statements
• Accounts payable note to the financial statements
• Accounts receivable note to the financial statements
• Retained earnings note to the financial statements

The positive value that notes to the financial statements in the financial section have is that they make readers of the business plan understand your projections. Hence, the investors and financiers are more certain of your business. Certainty is a motivating factor for financiers and investors to invest in a business.

The financial section of a business plan benefits not only the investors and financiers but also the business owner. It aids them to understand their business better. It is also a vital aid in running the business. Most writers prefer the turabian paper format when writing the financial section and in extension the whole business plan.

The credibility of the financial section will purely rely on how realistic you are when writing it. A good way of doing this is by breaking the figures into components such that they can be analyzed on an individual basis.

The highlighted tips on how to write the financial section of your business plan are sure to help you run your business better. They can also draw more investors to your business. Hence, a win-win situation for your business.

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How to Craft the Financial Section of Business Plan (Hint: It’s All About the Numbers)

Writing a small business plan takes time and effort … especially when you have to dive into the numbers for the financial section. But, working on the financial section of business plan could lead to a big payoff for your business.

Read on to learn what is the financial section of a business plan, why it matters, and how to write one for your company.  

What is the financial section of business plan?

Generally, the financial section is one of the last sections in a business plan. It describes a business’s historical financial state (if applicable) and future financial projections. Businesses include supporting documents such as budgets and financial statements, as well as funding requests in this section of the plan.  

The financial part of the business plan introduces numbers. It comes after the executive summary, company description , market analysis, organization structure, product information, and marketing and sales strategies.

Businesses that are trying to get financing from lenders or investors use the financial section to make their case. This section also acts as a financial roadmap so you can budget for your business’s future income and expenses. 

Why it matters 

The financial section of the business plan is critical for moving beyond wordy aspirations and into hard data and the wonderful world of numbers. 

Through the financial section, you can:

• Forecast your business’s future finances
• Budget for expenses (e.g., startup costs)
• Get financing from lenders or investors
• Grow your business

• Growth : 64% of businesses with a business plan were able to grow their business, compared to 43% of businesses without a business plan.
• Financing : 36% of businesses with a business plan secured a loan, compared to 18% of businesses without a plan.

So, if you want to possibly double your chances of securing a business loan, consider putting in a little time and effort into your business plan’s financial section. 

Writing your financial section

To write the financial section, you first need to gather some information. Keep in mind that the information you gather depends on whether you have historical financial information or if you’re a brand-new startup. 

Your financial section should detail:

• Business expenses 

Financial projections

Financial statements, break-even point, funding requests, exit strategy, business expenses.

Whether you’ve been in business for one day or 10 years, you have expenses. These expenses might simply be startup costs for new businesses or fixed and variable costs for veteran businesses. 

Take a look at some common business expenses you may need to include in the financial section of business plan:

• Licenses and permits
• Cost of goods sold 
• Rent or mortgage payments
• Payroll costs (e.g., salaries and taxes)
• Utilities 
• Equipment 
• Supplies 
• Advertising 

Write down each type of expense and amount you currently have as well as expenses you predict you’ll have. Use a consistent time period (e.g., monthly costs). 

Indicate which expenses are fixed (unchanging month-to-month) and which are variable (subject to changes). 

How much do you anticipate earning from sales each month? 

If you operate an existing business, you can look at previous monthly revenue to make an educated estimate. Take factors into consideration, like seasonality and economic ups and downs, when basing projections on previous cash flow.

Coming up with your financial projections may be a bit trickier if you are a startup. After all, you have nothing to go off of. Come up with a reasonable monthly goal based on things like your industry, competitors, and the market. Hint : Look at your market analysis section of the business plan for guidance. 

A financial statement details your business’s finances. The three main types of financial statements are income statements, cash flow statements, and balance sheets.

Income statements summarize your business’s income and expenses during a period of time (e.g., a month). This document shows whether your business had a net profit or loss during that time period. 

Cash flow statements break down your business’s incoming and outgoing money. This document details whether your company has enough cash on hand to cover expenses.

The balance sheet summarizes your business’s assets, liabilities, and equity. Balance sheets help with debt management and business growth decisions. 

If you run a startup, you can create “pro forma financial statements,” which are statements based on projections.

If you’ve been in business for a bit, you should have financial statements in your records. You can include these in your business plan. And, include forecasted financial statements. 

You’re just in luck. Check out our FREE guide, Use Financial Statements to Assess the Health of Your Business , to learn more about the different types of financial statements for your business.

Potential investors want to know when your business will reach its break-even point. The break-even point is when your business’s sales equal its expenses. 

Estimate when your company will reach its break-even point and detail it in the financial section of business plan.

If you’re looking for financing, detail your funding request here. Include how much you are looking for, list ideal terms (e.g., 10-year loan or 15% equity), and how long your request will cover. 

Remember to discuss why you are requesting money and what you plan on using the money for (e.g., equipment). 

Back up your funding request by emphasizing your financial projections. 

Last but not least, your financial section should also discuss your business’s exit strategy. An exit strategy is a plan that outlines what you’ll do if you need to sell or close your business, retire, etc. 

Investors and lenders want to know how their investment or loan is protected if your business doesn’t make it. The exit strategy does just that. It explains how your business will make ends meet even if it doesn’t make it. 

When you’re working on the financial section of business plan, take advantage of your accounting records to make things easier on yourself. For organized books, try Patriot’s online accounting software . Get your free trial now!

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Simple Business Plan Template for Startups, Small Businesses & Entrepreneurs

Financial plan, what is a financial plan.

A business’ financial plan is the part of your business plan that details how your company will achieve its financial goals. It includes information on your company’s projected income, expenses, and cash flow in the form of a 5-Year Income Statement, Balance Sheet and Cash Flow Statement. The plan should also detail how much funding your company needs and the key uses of these funds.

The financial plan is an important part of the business plan, as it provides a framework for making financial decisions. It can be used to track progress and make adjustments as needed.

Why Your Financial Plan is Important

The financial section of your business plan details the financial implications of running your company. It is important for the following two reasons:

Making Informed Decisions

A financial plan provides a framework for making decisions about how to use your money. It can help you determine whether or not you can afford to make a major purchase, such as a new piece of equipment.

It can also help you decide how much money to reinvest in your business, and how much to save for paying taxes.

A financial plan is like a roadmap for your business. It can help you track your progress and make adjustments as needed. The plan can also help you identify potential problems before they arise.

For example, if your sales are below your projections, you may need to adjust your budget accordingly.

Your financial plan helps you understand how much outside funding is required, when your levels of cash might fall low, and what sales and other goals you need to hit to become financially viable.

Securing Funding

This section of your plan is absolutely critical if you are trying to secure funding. Your financial plan should include information on your revenue, expenses, and cash flow.

This information will help potential investors or lenders understand your business’s financial situation and decide whether or not to provide funding.

Include a detailed description of how you plan to use the funds you are requesting. For example, what are the key uses of the funds (e.g., purchasing equipment, paying staff, etc.) and what are the future timings of these financial outlays.

The financial information in your business plan should be realistic and accurate. Do not overstate your projected revenues or underestimate your expenses. This can lead to problems down the road.

Potential investors and lenders will be very interested in your future projections since it indicates whether you will be able to repay your loans and/or provide a nice return on investment (ROI) upon exit.

Financial Plan Template: 4 Components to Include in Your Financial Plan

The financial section of a business plan should have the following four sub-sections:

Revenue Model

Here you will detail how your company generates revenues. Oftentimes this is very straightforward, for instance, if you sell products. Other times, your answer might be more complex, such as if you’re selling subscriptions (particularly at different price/service levels) or if you are selling multiple products and services.

Financial Overview & Highlights

In developing your financial plan, you need to create full financial forecasts including the following financial statements.

5-Year Income Statement / Profit and Loss Statement

An income statement, also known as a profit and loss statement (P&L), shows how much revenue your business has generated over a specific period of time, and how much of that revenue has turned into profits. The statement includes your company’s revenues and expenses for a given time period, such as a month, quarter, or year. It can also show your company’s net income, which is the amount of money your company has made after all expenses have been paid.

5-Year Balance Sheet

A balance sheet shows a company’s financial position at a specific point in time. The balance sheet lists a company’s assets (what it owns), its liabilities (what it owes), and its equity (the difference between its assets and its liabilities).

The balance sheet is important because it shows a company’s financial health at a specific point in time. A strong balance sheet indicates that a company has the resources it needs to grow and expand. A weak balance sheet, on the other hand, may indicate that a company is struggling to pay its bills and may be at risk of bankruptcy.

5-Year Cash Flow Statement

A cash flow statement shows how much cash a company has on hand, as well as how much cash it is generating (or losing) over a specific period of time. The statement includes both operating and non-operating activities, such as revenue from sales, expenses, investing activities, and financing activities.

While your full financial projections will go in your Appendix, highlights of your financial projections will go in the Financial Plan section.

These highlights include your Total Revenue, Direct Expenses, Gross Profit, Other Expenses, EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), and Net Income projections. Also include key assumptions used in creating these future projections such as revenue and cost growth rates.

Funding Requirements/Use of Funds

In this section, you will detail how much outside funding you require, if any, and the core uses of these funds.

For example, detail how much of the funding you need for:

• Product Development
• Product Manufacturing
• Rent or Office/Building Build-Out

Exit Strategy

If you are seeking equity capital, you need to explain your “exit strategy” here or how investors will “cash out” from their investment.

To add credibility to your exit strategy, conduct market research. Specifically, find other companies in your market who have exited in the past few years. Mention how they exited and the amounts of the exit (e.g., XYZ Corp. bought ABC Corp. for $Y).  

Business Plan Financial Plan FAQs

What is a financial plan template.

A financial plan template is a pre-formatted spreadsheet that you can use to create your own financial plan. The financial plan template includes formulas that will automatically calculate your revenue, expenses, and cash flow projections.

How Can I Download a Financial Plan Template?

Download Growthink’s Ultimate Business Plan Template which includes a complete financial plan template and more to help you write a solid business plan in hours.

How Do You Make Realistic Assumptions in Your Business Plan?

When forecasting your company’s future, you need to make realistic assumptions. Conduct market research and speak with industry experts to get a better idea of the key trends affecting your business and realistic growth rates.

You should also use historical data to help inform your projections. For example, if you are launching a new product, use past sales data to estimate how many units you might sell in Year 1, Year 2, etc.

Learn more about how to make the appropriate financial assumptions for your business plan.

How Do You Make the Proper Financial Projections for Your Business Plan?

Your business plan’s financial projections should be based on your business model and your market research. The goal is to make as realistic and achievable projections as possible.

To create a good financial projection, you need to understand your revenue model and your target market. Once you have this information, you can develop assumptions around revenue growth, cost of goods sold, margins, expenses, and other key metrics.

Once you have your assumptions set, you can plug them into a financial model to generate your projections.

Learn more about how to make the proper financial projections for your business plan.

What Financials Should Be Included in a Business Plan?

There are a few key financials that should be included in a traditional business plan format. These include the Income Statement, Balance Sheet, and Cash Flow Statement.

Income Statements, also called Profit and Loss Statements, will show your company’s expected income and expense projections over a specific period of time (usually 1 year, 3 years, or 5 years). Balance Sheets will show your company’s assets, liabilities, and equity at a specific point in time. Cash Flow Statements will show how much cash your company has generated and used over a specific period of time.

Growthink's Ultimate Business Plan Template includes a complete financial plan template to easily create these financial statements and more so you can write a great business plan in hours.

BUSINESS PLAN TEMPLATE OUTLINE

• Business Plan Template Home
• 1. Executive Summary
• 2. Company Overview
• 3. Industry Analysis
• 4. Customer Analysis
• 5. Competitive Analysis
• 6. Marketing Plan
• 7. Operations Plan
• 8. Management Team
• 9. Financial Plan
• 10. Appendix
• Business Plan Summary

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6 Small Business Financial Statements for Startup Financing

Financial Statements You'll Need for Your Startup Business Plan

You're ready to start your small business and your're working on a great business plan to take to a bank or other lender. A key part of that plan is the financial statements. These statements will be looked at carefully by the lender, so here are some tips for making these documents SELL your business plan . 

Financial Statements You Will Need

You may need several different types of statements, depending on the requirements of your lender and your own technical expertise. 

The statements you will certainly need are:

• A startup budget or cash flow statement
• A startup costs worksheet
• A pro forma (projected) profit and loss statement
• A pro forma (projected) balance sheet 

Your lender may also want these financial statements: 

• Sources and uses of funds statement
• Break-even analysis

Putting these Statements in Order

First, work on your startup budget and your startup costs worksheet. You'll need to do a lot of estimating.

The trick is to underestimate income and overestimate expenses, so you can create a more realistic picture of your business over the first year or two.

Then work on a profit and loss statement for the first year. A lender will definitely want to see this one. And, even though it's not going to be accurate, lenders like to see a startup balance sheet. 

Some lenders may ask for a break-even analysis, a cash flow statement, or a sources and uses of funds statement. We'll go over these statements so you can quickly provide them if asked.

Business Startup Budget

 A startup budget is like a projected cash flow statement, but with a little more guesswork.

Your lender wants to know your budget - that is, what you expect to bring in and how much to expect to spend each month. Lenders want to know that you can follow a budget and that you will not over-spend. 

They also want to see how much you will need to pay your bills while your business is starting out (working capital), and how long it will take you to have a positive cash flow (bring in more money than you are spending). 

Include some key information on your budget:

• What products or services you are selling, including prices and estimated volumes
• Key drivers for expenses, like how many employees you'll need and your marketing initiatives  

A typical budget worksheet should be carried through three years, so your lender can see how you expect to generate the cash to make your monthly loan payments.

Startup Costs Worksheet

A startup costs worksheet answers the question "What do you need the money for?" In other words, it shows all the purchases you will need to make in order to open your doors for business. This could be called a "Day One" statement  because it's everything you will need on your first day of business. 

• Facilities costs, like deposits on insurance and utilities
• Office equipment, computers, phones
• Supplies and advertising materials like signs and business cards
• Fees to set up your business website and email
• Legal fees licenses and permits

Profit and Loss Statement/Income Statement

After you have completed the monthly budget and you have gathered some other information, you should be able to complete a Profit and Loss  or Income Statement. This statement shows your business activity over a specific period of time, like a month, quarter, or year.

To create this statement, you'll need to list all your sources to get your gross income over that time. Then, list all expenses for the same time.

Because you haven't started yet, this statement is a called a projected P&L, because it projects out your estimates into the future.  

This statement gathers up all your sources of income, including shows your profit or loss for the year and how much tax you estimate having to pay.

Break-Even Analysis

A break-even analysis shows your lender that you know the point at which you will start making a profit or the price that will cover your fixed costs . The break-even analysis is primarily for businesses making or selling products, or to set the right price for a product or service.  

It's usually shown as a graph with sales volume on the X axis and revenue on the Y axis. Then fixed an variable costs (those you must pay) are included. The break-even point marks the place where costs are covered.

This analysis can also be useful for service-type businesses to show an overall profit point for specific services. If you include a break-even analysis, be sure you can explain it.

Beginning Balance Sheet

A startup balance sheet is difficult to prepare, even if there isn't much to include. The balance sheet shows the value of the assets you have purchased for startup, how much you owe to lenders and other creditors, and any initial investments you have made to get started. The date for this spreadsheet is the day you open the business.

Sources and Uses of Funds Statement

Large businesses use Sources and Uses of Funds statements in their annual reports, but you can create a slightly different simple statement to show your lender what you need the money for, what sources you have already, and what's left over to be financed.

To create this statement, list all your startup and working capital(on-going cash needs), how much collateral you will be bringing to the business, other sources of funding, and how much you need to borrow. 

Optional: A Business Requirements Document

 A business requirements document is similar to a proposal document, but for a larger, more complex project or startup. It gives a complete picture of the project or the business plan. It goes into more detail on the project that will be using the financial statements. 

Include Financial Statements in Your Business Plan

You will need a complete startup business plan to take to a bank or other business lender. The financial statements are a key part of this plan. Give the main points in the executive summary and include all the statements in the financial section. 

Finally, Check for Mistakes!

Before you submit your startup business plan and financial statements, check this list. Don't make these  common business plan mistakes !

Check all numbers for accuracy and consistency. Especially make sure the amounts you are requesting are specific and that they are the same throughout all the parts of your business plan.

SCORE.org. " How to Set Up and Maintain a Budget for Your Small Business ." Accessed Sept. 10, 2020.

SCORE.org. " Financial Projections Template ." Accessed Sept. 10, 2020.

Harvard Business Review. " A Quick Guide to Breakeven Analysis ." Accessed Sept. 10, 2020.

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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.

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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

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Start » startup, business plan financials: 3 statements to include.

The finance section of your business plan is essential to securing investors and determining whether your idea is even viable. Here's what to include.

If your business plan is the blueprint of how to run your company, the financials section is the key to making it happen. The finance section of your business plan is essential to determining whether your idea is even viable in the long term. It’s also necessary to convince investors of this viability and subsequently secure the type and amount of funding you need. Here’s what to include in your business plan financials.

[Read: How to Write a One-Page Business Plan ]

What are business plan financials?

Business plan financials is the section of your business plan that outlines your past, current and projected financial state. This section includes all the numbers and hard data you’ll need to plan for your business’s future, and to make your case to potential investors. You will need to include supporting financial documents and any funding requests in this part of your business plan.

Business plan financials are vital because they allow you to budget for existing or future expenses, as well as forecast your business’s future finances. A strongly written finance section also helps you obtain necessary funding from investors, allowing you to grow your business.

Sections to include in your business plan financials

Here are the three statements to include in the finance section of your business plan:

Profit and loss statement

A profit and loss statement , also known as an income statement, identifies your business’s revenue (profit) and expenses (loss). This document describes your company’s overall financial health in a given time period. While profit and loss statements are typically prepared quarterly, you will need to do so at least annually before filing your business tax return with the IRS.

Common items to include on a profit and loss statement :

• Revenue: total sales and refunds, including any money gained from selling property or equipment.
• Expenditures: total expenses.
• Cost of goods sold (COGS): the cost of making products, including materials and time.
• Gross margin: revenue minus COGS.
• Operational expenditures (OPEX): the cost of running your business, including paying employees, rent, equipment and travel expenses.
• Depreciation: any loss of value over time, such as with equipment.
• Earnings before tax (EBT): revenue minus COGS, OPEX, interest, loan payments and depreciation.
• Profit: revenue minus all of your expenses.

Businesses that have not yet started should provide projected income statements in their financials section. Currently operational businesses should include past and present income statements, in addition to any future projections.

[Read: Top Small Business Planning Strategies ]

A strongly written finance section also helps you obtain necessary funding from investors, allowing you to grow your business.

Balance sheet

A balance sheet provides a snapshot of your company’s finances, allowing you to keep track of earnings and expenses. It includes what your business owns (assets) versus what it owes (liabilities), as well as how much your business is currently worth (equity).

On the assets side of your balance sheet, you will have three subsections: current assets, fixed assets and other assets. Current assets include cash or its equivalent value, while fixed assets refer to long-term investments like equipment or buildings. Any assets that do not fall within these categories, such as patents and copyrights, can be classified as other assets.

On the liabilities side of your balance sheet, include a total of what your business owes. These can be broken down into two parts: current liabilities (amounts to be paid within a year) and long-term liabilities (amounts due for longer than a year, including mortgages and employee benefits).

Once you’ve calculated your assets and liabilities, you can determine your business’s net worth, also known as equity. This can be calculated by subtracting what you owe from what you own, or assets minus liabilities.

Cash flow statement

A cash flow statement shows the exact amount of money coming into your business (inflow) and going out of it (outflow). Each cost incurred or amount earned should be documented on its own line, and categorized into one of the following three categories: operating activities, investment activities and financing activities. These three categories can all have inflow and outflow activities.

Operating activities involve any ongoing expenses necessary for day-to-day operations; these are likely to make up the majority of your cash flow statement. Investment activities, on the other hand, cover any long-term payments that are needed to start and run your business. Finally, financing activities include the money you’ve used to fund your business venture, including transactions with creditors or funders.

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How to Write an Executive Summary in 6 Steps

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When you’re starting a business, one of the first things you need to do is write a business plan. Your business plan is like a roadmap for your business, so you can lay out your goals and a concrete plan for how you’ll reach them.

Not only is a business plan essential for any business owner, but it’s also a requirement if you decide to apply for small business funding or find investors. After all, before a bank or individual hands over any money, they’ll want to be sure your company is on solid ground (so they can get their money back).

A business plan consists of several pieces, from an executive summary and market analysis to a financial plan and projections. The executive summary will be the first part of your business plan.

If wondering how to write an executive summary has kept you from completing your business plan, we’re here to help. In this guide, we’ll explain what an executive summary is and provide tips for writing your own so your business plan can start strong.

What is an executive summary?

An executive summary is a short, informative, and easy-to-read opening statement to your business plan. Even though it’s just one to two pages, the executive summary is incredibly important.

An executive summary tells the story of what your business does, why an investor might be interested in giving funds to your business, why their investment will be well-spent, and why you do what you do. An executive summary should be informative, but it should also capture a busy reader’s attention.

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Why write an executive summary?

Anyone you’re sending your executive summary and business plan to is likely busy—very busy. An entire business plan is long, involved, and deals with a lot of numbers.

Someone busy wants to get an understanding of your business, and they want to do it quickly, which is to say not by diving into a complicated, 80-page business plan. That’s where your executive summary comes in.

An executive summary provides just the opportunity to hook someone’s interest, tell them about your business, and offer a clear selling point as to why they should consider investing in your business.

Your executive summary is your chance to sell your business to potential investors and show them your business is worth not only their money but also their time.

What to include in an executive summary

By its nature, an executive summary is short. You must be able to clearly communicate the idea of your business, what sets you apart, and how you plan to grow into a successful enterprise.

The subsequent sections of your business plan will go into more detail, but your executive summary should include the most critical pieces of your business plan—enough to stand on its own, as it’s often the only thing a prospective investor will read. Here’s what your executive summary should include—consider it an executive summary template from which you can model your own.

1. The hook

The first sentence and paragraph of your executive summary determine whether or not the entire executive summary gets read. That’s why the hook or introduction is so important.

In general, a hook is considered anything that will get a reader’s attention. While an executive summary is a formal business document, you do want your hook to make you stand out from the crowd—without wasting time.

Your hook can be sharing something creative about your company, an interesting fact, or just a very well-crafted description of your business. It’s crucial to craft your hook with the personality of your reader in mind. Give them something that will make your company stand out and be memorable among a sea of other business plans.

Grab their attention in the first paragraph, and you’re much more likely to get your executive summary read, which could lead to an investment.

2. Company description summary

Now that you’ve hooked your reader, it’s time to get into some general information about your business. If an investor is going to give you money, after all, they first need to understand what your company does or what product you sell and who is managing the company.

Your company description should include information about your business, such as when it was formed and where you’re located; your products or services; the founders or executive team, including names and specific roles; and any additional details about the management team or style.

3. Market analysis

Your market analysis in the executive summary is a brief description of what the market for your business looks like. You want to show that you have done your research and proven that there is a need for your specific product or services. Some questions you should answer:

Who are your competitors?

Is there a demand for your products or services?

What advantages do you have that make your business unique in comparison to others?

To reiterate, stick to the highlights of your market analysis in your executive summary. You’ll provide a complete analysis in a separate section of your business plan, but you should be able to communicate enough in the executive summary that a potential investor can gauge whether your business has potential.

4. Products and services

Now that you’ve established a need in the market, it’s time to show just how your business will fill it. This section of your executive summary is all about highlighting the product or service that your company offers. Talk about your current sales, the growth you’ve seen so far, and any other highlights that are a selling point for your company.

This is also a good time to identify what sets your business apart and gives you a competitive advantage. After all, it’s unlikely that your business is the first of its kind. Highlight what you do better than the competition and why potential customers will choose your product or service over the other options on the market.

5. Financial information and projections

In this section of your executive summary, you want to give the reader an overview of your current business financials. Again, you’ll go more in-depth into this section later in your business plan, so just provide some highlights. Include your current sales and profits (if you have any), as well as what funding you’re hoping to acquire and how this will affect your financials in the next few years.

This is also where you can explain what funding, if any, you’ve received in the past. If you paid back your loan on time, this is an especially bright selling point for potential lenders.

6. Future plans

While asking for what funding you need is essential, you’ve also got to make clear what you’re going to use that funding for. If you’re asking for money, you want the person to know you have a plan to put those funds to good use.

Are you hoping to open another location, expand your product line, invest in your marketing efforts? This final section of your executive summary should detail where you want your business to go in the future, as well as drive home how funding can help you get there.

Tips for writing an executive summary

Even if you include each part of a good executive summary, you might not get noticed. What is written can be just as important as how it’s written. An executive summary has to strike a delicate balance between formal, personable, confident, and humble.

1. Be concise

An executive summary should include everything that’s in your business plan, just in a much shorter format. Writing a concise executive summary is no easy task and will require many revisions to get to the final draft. And while this is the first section of your executive summary, you’ll want to write it last, after you’ve put together all the other elements.

To choose your most important points and what should be included in the executive summary, go through your business plan, and pull out single-line bullet points. Go back through those bullet points and eliminate everything unnecessary to understanding your business.

Once you have your list of bullet points narrowed down, you can start writing your executive summary. Once it’s written, go back in and remove any unnecessary information. Remember, you should only be including the highlights—you have the rest of your business plan to go into more detail. The shorter and clearer your executive summary is, the more likely someone is to read it.

2. Use bullet points

One simple way to make your executive summary more readable is to use bullet points. If someone is reading quickly or skimming your executive summary, extra whitespace can make the content faster and easier to read.

Short paragraphs, short sentences, and bullet points all make an executive summary easier to skim—which is likely what the reader is doing. If important numbers and convincing stats jump out at the reader, they’re more likely to keep reading.

3. Speak to your audience

When writing your executive summary, be sure to think about who will be reading it; that’s who you’re speaking to. If you can personalize your executive summary to the personality and interests of the person who will read it, you’re more likely to capture their attention.

Personalizing might come in the form of a name in the salutation, sharing details in a specific way you know that person likes and the tone of your writing. An executive summary deals with business, so it will generally have a formal tone. But, different industries may be comfortable with some creativity of language or using shorthand to refer to certain ideas.

Know who you’re speaking to and use the right tone to speak to them. That might be formal and deferential, expert and clipped, informal and personable, or any other appropriate tone. This may also involve writing different versions of your executive summary for different audiences.

4. Play to your strengths

One of the best ways to catch the attention of your reader is to share why your business is unique. What makes your business unique is also what makes your business strong, which can capture a reader’s interest and show them why your business is worth investing in. Be sure to highlight these strengths from the start of your executive summary.

5. Get a test reader

Once you’ve written and edited your executive summary, you need a test reader. While someone in your industry or another business owner can be a great resource, you should also consider finding a test reader with limited knowledge of your business and industry. Your executive summary should be so clear that anyone can understand it, so having a variety of test readers can help identify any confusing language.

If you don’t have access to a test reader, consider using tools such as Hemingway App and Grammarly to ensure you’ve written something that’s easy to read and uses proper grammar.

How long should an executive summary be?

There’s no firm rule on how long an executive summary should be, as it depends on the length of your business plan and the depth of understanding needed by the reader to fully grasp your ask.

That being said, it should be as short and concise as you can get it. In general, an executive summary should be one to two pages in length.

You can fudge the length slightly by adjusting the margin and font size, but don’t forget readability is just as important as length. You want to leave plenty of white space and have a large enough font that the reader is comfortable while reading your executive summary. If your executive summary is hard to read, it’s less likely your reader will take the time to read your business plan.

What to avoid in an executive summary

While the rules for writing a stellar executive summary can be fuzzy, there are a few clear rules for what to avoid in your executive summary.

Your executive summary should avoid:

Focusing on investment. Instead, focus on getting the reader to be interested enough to continue and read your business plan or at least schedule a meeting with you.

Clichés, superlatives, and claims that aren’t backed up by fact. Your executive summary isn’t marketing material. It should be straightforward and clear.

Avoiding the executive summary no-nos is just as important as striking the right tone and getting in the necessary information for your reader.

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The bottom line

While an executive summary is short, it’s challenging to write. Your executive summary condenses your entire introduction, business description, business plan, market analysis, financial projections, and ask into one to two pages. Condensing information down to its most essential form takes time and many drafts. When you’re putting together your business plan’s executive summary, be sure to give yourself plenty of time to write it and to seek the help of friends or colleagues for editing it to perfection.

However, some tools make crafting a business plan, including your executive summary, a simpler process. A business plan template is a great place to start, and business plan software can especially help with the design of your business plan. After all, a well-written executive summary can make all the difference in obtaining funding for your business, so you’ll want all the help you can get.

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.

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Business Plan Financials Summary

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Business Plan Financials Summary Presentation

The presentation of the business plan financials summary will depend on the nature of the business and the information selected from the detailed financial projections. In order to gain an understanding of the business, the investor will want to see the numbers for between three and five years ahead, and if available, two years back.

This is part of the financial projections and Contents of a Business Plan Guide , a series of posts on what each section of a simple business plan should include. The next post in this series sets out a summary of the existing investors in the business.

About the Author

Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.

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