Generating Funding from your Business Plan

• Income forecast

• Cash flow Forecast

• Projected balance sheet
• Break even analysis
• Repayment options

Income Forecast

Determine and enter industry averages for total sales. The information can be found through libraries or online. If your business is already operational in any way, use those figures to estimate the year’s numbers. Otherwise, take your most educated guess as to sales figures and costs.

Cash Flow Forecast

This is simply a monthly estimate of all the money you will expect to come in and out of the business. Potential Investors will expect to see estimates of how much finance you will need for 2–3 years or until you start to make a profit. Indicate contingency funds needed for rough patches. Cash shortages will stifle business development and prolonged cash famines. usually end in business failure. Projecting future cash flows can only identify where the scarcities are going to arise. The only way to avoid either shortages or famines is to have enough. Shortage of cash is the immediate cause of almost every business failure - hence the importance of cash planning and control.

Projected Balance Sheet

A projected balance sheet outlines what you forecast your business will own (assets) minus what it will owe to others (liabilities) in order to determine its net worth at any particular point in time. Assets are resources such as inventory, cash, or equipment. Liabilities are debts owed to others, both short-term and long-term.

Breakeven Analysis

After you have completed the above three pro forma statements, you should address a vital question: What is your breakeven point-- at what point do your total costs equal your total revenue? The breakeven point tells you when you can expect to begin making profits.

It is essential to know this before you proceed with your enterprise. Lenders expect to see this information in addition to the other statements, as part of your documentation. Ultimately, if it appears that the breakeven volume of sales cannot be achieved, then the business may be destined to fail and should be abandoned before investing further time and money.

Repayment Options

Be specific about how a loan will be repaid, how investors can get their money back, and when.

Finally

• Include details of any capital provided by the management team
• Indicate key risks to the business and any mitigating action you can take.
• Figures must be reasonable. Avoid being over optimistic.
• When presenting your plan, you are selling the project and the potential investor is the customer. Make sure you are familiar with every detail, every fact and figure.
• The involvement of a qualified accountant in financial planning is recommended to ensure you are meeting current legal and financial requirements.