How To Do Financial Analysis For Business Plan? Strategic Planning
In doing a financial analysis, you need to calculate things like:
Startup costs, operating expenses & any expenses you expect.
A lot of people want to see 3-5 year plans.
The reality is, on the ground, 3 months is far as you can predict.
Change happens all the time.
In terms of execution, you have to focus on the next 3,6 & 12 months max.
Think about your best case, middle, and worst-case scenario.
Up to 5 years out.
Start with a sales forecast.
What do you expect?
How many leads do you expect to generate?
At what price per lead?
What % of those leads do you expect to be quality leads?
Where you can have meaningful interactions with them?
How many of those will turn into sales?
How many of those are one-time vs repeat sales?
You have to create a budget for your expenses.
Develop a cash flow / income projection.
You have to include your assets and liabilities.
Include a breakeven analysis.
If you're a business owner, and you're not savvy with accounting software.
Or profit-loss statements.
You need to hire someone to help you.
In beginning, take little steps.
Start with questions like:
How many sales are expected?
What is the research behind it?
Why are those sales available?
How much are the expected expenses?
How many people do we have to hire to do all this?
What are your assets & liabilities?
The process should be in-depth.
Depending on the purposes.
If it's only for your team, it can be more basic.
If you're trying to get financing, or loans from a bank.
Consider getting professional advice.
Before you talk to them, do some research yourself.
It is not something you can easily delegate.
If you're watching this,
You're likely the main principle(s) of the business.
Meaning you're a founder, co-founder, or you have invested interest.
You can't easily delegate to someone, how many sales you expect to make.
It is something that you have to dive into.
You want to include income statements.
Cash flow projections, expected expenses & any future purchases.
Also, think about your accounting practices.
Are you following "GAAP"?
It means "Generally Accepted Accounting Principles".
That would change your plan.
If you're following GAAP,
You can only claim revenue as profit after delivering service.
Meaning: If someone pays you for a year of service.
You can't spend their money right away.
You have to break it into 12 months.
And then as each month goes by, you can claim the money.
Again, it depends on your reason for doing the analysis.
Some say there are 5 parts:
1. Establish your plan & goals.
2. Make rough cash flow projections.
3. Analyze the risk.
4. Create If/Then plans based on the factors above.
Include a Best case, middle & worst-case plan.
5. Review and refine it regularly.
Get other people to look at it and ask what they think.
We can't anticipate everything.
So these are one of those times when you will need collaboration.
A lot of times entrepreneurs and business owners fear sharing their ideas.
But consider getting an adviser to help you.
That's it. That's the financial plan.
Again, results will speak for themselves.
The plan is to facilitate the results you want.
To have an "If this, then that" plan.
If sales are down,
If sales are above expected,
You have to be able to deliver on the promises you make.
That's a rough overview on how to do financial analysis for a business plan.
You need to have an idea of what you expect to make.
How many sales you hope to get. Size of market.
Imagine you have a nice car driving on a dead-end road.
You can't enjoy the full capacity of the engine.
You have to know whether the industry is shrinking or growing.
Right now, there are a lot of great tools online to help you with that.
If you have more questions like this,
You can go to my website:
We interview a lot of experts on different subjects.
Like I said, get lots of advice & input on your plans.
You can also keep searching in google for questions like this.
Do what you can.
It's income vs expenses.
Immediate, short-term, long-term, super long-term.
Income, expenses, and contingency plans.
That's it. At a basic level.