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

Financial Statements Template

Free Financial Statements Template

Ajay Jagtap

  • December 7, 2023

13 Min Read

financial plan for startup business

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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start up business financial plan

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.

start up business financial plan

Create a Financial Plan with Upmetrics in no time

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

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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:

Upmetrics financial projections visual report

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 Balance Sheet

Projected Cash-Flow Statement

Cash-Flow Statement

Projected Profit & Loss Statement

Profit & Loss Statement

Break Even Analysis

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.

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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

start up business financial plan

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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Creating a Financial Plan for Startups: The Ultimate Guide

Brittany Wren

The top reason startups fail is because they run out of money, according to a 2020 survey by Wilbur Labs . And one of the main reasons they run out of money is because their financial planning consists of rosy projections of the best-case scenario, based on bad data — or no financial planning at all.

Creating a financial plan is essential to a startup’s success. For one thing, most investors need to see a startup’s financial plan before they even consider funding it. More importantly, a financial plan allows you to quantify your business assumptions, define specific benchmarks, plan for worst- and best-case scenarios, and measure your company’s success (even before you start making a profit).

The bottom line is: if you have expenses, you should have a financial plan. But you don’t need an accounting degree (or even an accountant) to get started.

What is startup financial planning?

Your startup’s financial plan is the roadmap that lays out the path for your company’s future financial success. In it, you make predictions and plans based on historical performance and industry research. Start with your company’s current financial situation, add in future goals and predictions, and strategize how to get there. Financial plans include details about:

  • Fixed/variable expenses
  • Gross/operating margins
  • Profit potential and durability
  • Break-even point
  • Cash balance
  • Cash flow changes

Don’t have all that information close at hand? That’s okay. The first financial plan you create may not be very detailed. You’ll keep building and tweaking it as your company iterates.

A financial plan is NOT the same as a business plan

A business plan is written in paragraphs. A financial plan is (traditionally) a giant Excel spreadsheet. It’s synonymous with Pro Forma financial, which is the finance industry term for three detailed reports: cash flow statement, profit and loss (P&L) , and balance sheet . Financial planning is part of the due diligence process , which you’ll need to provide to investors prior to signing a Series A term sheet.

Financial planning is made up of several smaller activities:

These activities include:

  • Creating a hiring plan
  • Making projections about sales, expenses, cash flow, income statement, and balance sheet
  • Analyzing projections
  • Producing profit and loss statements
  • Financial projections and modeling
  • Analyzing internal controls
  • Creating annual growth strategies

Before you start: collect data and tools

You can’t create a financial plan in a vacuum. First, you’ll need to assemble some critical things:

start up business financial plan

Before you can accurately create a financial plan, identify and assemble all your existing financial data. What financial accounts (bank accounts, credit cards) are you using for your business income and expenses? Where/how are you doing your bookkeeping (e.g., QuickBooks, Xero, NetSuite), and is that information up to date?

You’ll need to import the above information into your financial plan. Updates can be done manually with a spreadsheet or automatically using software (more on that below). Generally, it’s better if updates can be automated so you know you’re looking at the latest data and can be more nimble with decision-making.

Now you need to decide what tools you’ll use to create a financial plan. Options include a spreadsheet, dedicated software, or outsourcing to a CPA.

If you opt for a spreadsheet, you can download an Excel or Google Sheet template from an online resource, or you can create it yourself. If you create it yourself, a finance analyst, HR manager, or office manager can maintain it, and then later, a CFO can run point on the whole process.

The problem with a spreadsheet is that it’s often too fragile for everyone to use collaboratively — it’s not automatically version controlled, and it’s too manual. That’s why you might choose software like Pry, Finmark, Brixx, or Causal. Obviously, we think Pry is the best choice for financial planning. But whatever you choose, the main reason to use software is it will scale as you grow.

Finally, you can hire a CPA to build a financial plan for you. This option can afford you some peace of mind. However, it costs a lot more than a DIY spreadsheet or software approach. Additionally, you’ll understand your business better if you create your financial plan internally.

Steps to create a financial plan

Startup financial planning can seem daunting at first, especially if you’re an early-stage founder and this is your first time. We’ll break it down below.

1. Visualize the end result

At the beginning of the financial planning process, you should sketch out long-term strategies and goals. If you’re pursuing a financing round, ask your investors about what metrics matter the most to them. That way you can bring those details to the forefront instead of burying them in a series of complex tabs.

A good starting point is to determine your company’s KPIs. What are the things you want to track and forecast? Remember that different metrics are important to different business models . For example, SaaS companies should include metrics like MRR (monthly recurring revenue) , as well as bank balance and budget vs. actuals.

Thinking back to your best lever of growth, what will be your key milestones? This could include acquiring a certain number of customers, raising a round of fundraising, or making an acquisition.

This sounds like, “To reach X, we need to hit A, B, C, and D milestones. Here’s how we think we’ll get from A to B, then B to C, then C to D.” – Underscore VC

start up business financial plan

2. Pick the right template or software

It’s hard to create a generic template for all sorts of businesses, so find a template that matches your business model. Sometimes you can access these templates for free, like the one in this LinkedIn thread . Or you can download a template in exchange for your contact info, like this one for SaaS startups.

Of course, you can also choose software that creates this template for you instead of trying to retrofit some random online spreadsheet template. At Pry, we can customize reports and dashboards to your specific business model for $500 with our custom onboarding.

start up business financial plan

3. Import existing data

Now you’ll need to import your existing information from different financial accounts like QuickBooks or Xero (depending on which you use), bank account(s), and/or credit card(s). This is sometimes referred to as the “ Chart of Accounts .” Your bank data could be a statement, or it could just be today’s balance. Ideally, you should pull as much as possible, so you have the clearest, most detailed picture.

The information you should import can be broken down as follows:

  • Assets (e.g., checking, savings, amounts owed to the company from customers, inventory, prepaid expenses)
  • Liabilities (e.g., line of credit, credit card payable, the amount owed to vendors, payroll taxes payable)
  • Equity (assets minus liabilities)
  • Income (e.g., product sales, interest)
  • Expenses (e.g., cost of goods sold, marketing, travel, rent, office supplies)

If your financial plan is a spreadsheet, you’ll need to manually export your existing data and then import it into your spreadsheet. This process looks slightly different for each different financial account. QuickBooks and Xero both outline how to do this on their websites.

If you’re using a financial planning tool like Pry, you can connect these accounts so they sync automatically via an API integration .

start up business financial plan

4. Project expenses

Once you have an accurate picture of current accounts, you should start projecting future expenses. These can be broken into two broad categories: direct expenses (aka, costs of sales) and indirect expenses (aka, selling, general, and administrative expenses). Direct expenses include any raw materials, production equipment depreciation, hosting fees, etc. Everything else (other than product costs and capital purchases) is considered an indirect expense.

Salaries and benefits (an indirect expense) are usually the biggest expense at this point, so we recommend starting with this one. You should add existing employees and forecast future hires to predict the additional cost of roles and salaries over time. Be sure to include benefits and payroll taxes. Also, don’t project people out by dollars spent on them — do it by name/role/salary, then convert salary into a monthly cost. For example, 4 Software Engineers, $100k each, Start Dates: July 2021, September 2021, November 2021, January 2022 .

Build a headcount plan by role for the pro forma period by month. This approach creates a hiring plan based on revenue timing to properly support the business. It also allows for quick adjustments when modeling revenue changes. – Tiffany Hovland, CPA, Journal of Accountancy

  • Legal and professional services (e.g., the costs of incorporating a new business, like business license fees)
  • IT (e.g., data storage, software, data security)
  • Office rent
  • Office supplies

As you make projections about future expenses, remember to focus on high-level estimates based on industry standards, location, and company size.A lot of things can change, and you shouldn’t waste time perfecting predictions — they may not come true, anyway.

start up business financial plan

5. Project revenue

Now you’ll describe how your company will produce income. If your company is pre-revenue, you can start with industry standards. Realistic revenue projections are important to investors, and they influence all other assumptions about profit and loss (P&L) . If revenue projections are drastically wrong, you may over- or understaff your company or make big purchases you can’t afford.

To make accurate projections, define the revenue levers, drivers, and assumptions. Revenue levers could be products and/or services, software maintenance agreements, or channel partner sales. You also need to identify which activities increase or decrease revenue, as well as pricing and activity assumptions.

One important revenue projection for SaaS businesses is MRR. Here’s an example of this type of revenue projection:

  • Revenue lever: monthly subscription revenue
  • Revenue driver: marketing spend and conversion rates
  • Revenue assumptions: $200 subscription price, 100 initial customers, 25 new signups per month, two churned customers per month

To project MRR using software like Pry, use this formula: MRR = total customers * average subscription price.

start up business financial plan

6. Build a report

After you have collected all your current financial information and built out some projections, it’s time to present it in an easily digestible format to drive decision-making. A dashboard is a visual way to summarize and report on the data. It makes it easy for business owners, board members, and investors to look at and know the status of the company.

Now that the estimates are complete, it is time to transform the work into a collection of facts that potential investors and business owners can use to drive decisions. The initial information and discussions should focus on high-level assumptions and give confidence that the business can scale and grow as the example outlines. – Tiffany Hovland, CPA, Journal of Accountancy

If you’re using Excel for your financial plan, you can build these reports as pivot tables. Or, if you find pivot tables too cumbersome, you can create a dashboard easily using software. Here’s what Pry’s dashboard looks like:

start up business financial plan

7. Test assumptions

The final step of financial planning is often called a what-if analysis or sensitivity analysis. Now that you’ve built some assumptions about the future, try playing with some different ones — some aggressive and some conservative. Change some inputs and review the reports in different scenarios. This will help you see how the assumptions relate and ensure that the end model makes sense.

Another way to test your assumptions is to compare your company’s metrics to those of other companies. Larger companies might check the SEC’s website for public competitors or companies in a similar space with similar net revenue. If you can’t find a good comparison, though, you can check with investors to see which assumptions you should tweak. Then revise accordingly.

We picked a list of IPO comparables—enterprise-class SaaS companies that had gone public. We look at up to three years of their financial data, and based on our growth rate, revenue, and expenses as a percentage of revenue, we compare ourselves against their metrics. These comparables are a way to validate our progress against our three-year plan. – Jason Purcell, CEO of Salsify

Now it’s your turn (we can help)

The bottom line is that if your startup has expenses, you should also have a financial plan. And now that you know how to create one, it’s time to get started.If the prospect of making pivot tables in Excel intimidates you, try creating a financial plan with an out-of-box tool like Pry. It does everything the expensive firms do but without the hefty price tag.

View Pry’s pricing ->

Keep reading...

Revenue forecasting for founders: how to make projections early.

Revenue forecasting is looking at existing data and predicting how much money your company will bring in from sales in future months, quarters, or years. Even early-stage startups need to track these metrics because accurate and realistic revenue forecasts are the only way you can avoid a big cash flow shortage and complete company meltdown.

How to Write a Small Business Financial Plan

Stairs leading up to a dollar sign. Represents creating a financial plan to achieve profitability.

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.

start up business 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.

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

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Content Author: Noah Parsons

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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4 Steps to Creating a Financial Plan for Your Small Business

Rami Ali

When it comes to long-term business success, preparation is the name of the game. And the key to that preparation is a solid financial plan that sets forth a business’s short- and long-term financial goals and how it intends to reach them. Used by company decision-makers and potential partners, investors and lenders, alike, a financial plan typically includes the company’s sales forecast, cash flow projection, expected expenses, key financial metrics and more. Here is what small businesses should understand to create a comprehensive financial plan of their own.

What Is a Financial Plan?

A financial plan is a document that businesses use to detail and manage their finances, ensure efficient allocation of resources and inform a plethora of decisions — everything from setting prices, to expanding the business, to optimizing operations, to name just a few. The financial plan provides a clear understanding of the company’s current financial standing; outlines its strategies, goals and projections; makes clear whether an idea is sustainable and worthy of investment; and monitors the business’s financial health as it grows and matures. Financial plans can be adjusted over time as forecasts become replaced with real-world results and market forces change.

A financial plan is an integral part of an overall business plan, ensuring financial objectives align with overall business goals. It typically contains a description of the business, financial statements, personnel plan, risk analysis and relevant key performance indicators (KPIs) and ratios. By providing a comprehensive view of the company’s finances and future goals, financial plans also assist in attracting investors and other sources of funding.

Key Takeaways

  • A financial plan details a business’s current standing and helps business leaders make informed decisions about future endeavors and strategies.
  • A financial plan includes three major financial statements: the income statement, balance sheet and cash flow statement.
  • A financial plan answers essential questions and helps track progress toward goals.
  • Financial management software gives decision-makers the tools they need to make strategic decisions.

Why Is a Financial Plan Important to Your Small Business?

A financial plan can provide small businesses with greater confidence in their short- and long-term endeavors by helping them determine ways to best allocate and invest their resources. The process of creating the plan forces businesses to think through how different decisions could impact revenue and which occasions call for dipping into reserve funds. It’s also a helpful tool for monitoring performance, managing cash flow and tracking financial metrics.

Simply put, a financial plan shows where the business stands; over time, its analysis will reveal whether its investments were worthwhile and worth repeating. In addition, when a business is courting potential partners, investors and lenders, the financial plan spotlights the business’s commitment to spending wisely and meeting its financial obligations.

Benefits of a Financial Plan

A financial plan is only as effective as the data foundation it’s built on and the business’s flexibility to revisit it amid changing market forces and demand shifts. Done correctly, a financial plan helps small businesses stay on track so they can reach their short-term and long-term goals. Among the benefits that effective financial planning delivers:

  • A clear view of goals and objectives: As with any type of business plan, it’s imperative that everyone in a company is on the same financial page. With clear responsibilities and expected results mapped out, every team member from the top down sees what needs to be done, when to do it and why.
  • More accurate budgets and projections: A comprehensive financial plan leads to realistic budgets that allocate resources appropriately and plan for future revenue and expenses. Financial projections also help small businesses lay out steps to maintain business continuity during periods of cash flow volatility or market uncertainty.
  • External funding opportunities: With a detailed financial plan in hand, potential partners, lenders and investors can see exactly where their money will go and how it will be used. The inclusion of stellar financial records, including past and current liabilities, can also assure external funding sources that they will be repaid.
  • Performance monitoring and course correction: Small businesses can continue to benefit from their financial plans long after the plan has been created. By continuously monitoring results and comparing them with initial projections, businesses have the opportunity to adjust their plans as needed.

Components of a Small Business Financial Plan

A sound financial plan is instrumental to the success and stability of a small business. Whether the business is starting from scratch or modifying its plan, the best financial plans include the following elements:

Income statement: The income statement reports the business’s net profit or loss over a specific period of time, such a month, quarter or year. Also known as a profit-and-loss statement (P&L) or pro forma income statement, the income statement includes the following elements:

  • Cost of goods sold (COGS): The direct costs involved in producing goods or services.
  • Operating expenses: Rent, utilities and other costs involved in running the business.
  • Revenue streams: Usually in the form of sales and subscription services, among other sources.
  • Total net profit or loss: Derived from the total amount of sales less expenses and taxes.

Balance sheet: The balance sheet reports the business’s current financial standing, focusing on what it owns, what it owes and shareholder equity:

  • Assets: Available cash, goods and other owned resources.
  • Liabilities: Amounts owed to suppliers, personnel, landlords, creditors, etc.

Shareholder equity: Measures the company’s net worth, calculated with this formula:

Shareholder Equity = Assets – Liability

The balance sheet lists assets, liabilities and equity in chart format, with assets in the left column and liabilities and equity on the right. When complete — and as the name implies —the two sides should balance out to zero, as shown on the sample balance sheet below. The balance sheet is used with other financial statements to calculate business financial ratios (discussed soon).

Balance Sheet

Cash flow projection: Cash flow projection is a part of the cash flow statement , which is perhaps one of the most critical aspects of a financial plan. After all, businesses run on cash. The cash flow statement documents how much cash came in and went out of the business during a specific time period. This reveals its liquidity, meaning how much cash it has on hand. The cash flow projection should display how much cash a business currently has, where it’s going, where future cash will come from and a schedule for each activity.

Personnel plan: A business needs the right people to meet its goals and maintain a healthy cash flow. A personnel plan looks at existing positions, helps determine when it’s time to bring on more team members and determines whether new hires should be full-time, part-time or work on a contractual basis. It also examines compensation levels, including benefits, and forecasts those costs against potential business growth to gauge whether the potential benefits of new hires justify the expense.

Business ratios: In addition to a big-picture view of the business, decision-makers will need to drill down to specific aspects of the business to understand how individual areas are performing. Business ratios , such as net profit margin, return on equity, accounts payable turnover, assets to sales, working capital and total debt to total assets, help evaluate the business’s financial health. Data used to calculate these ratios come from the P&L statement, balance sheet and cash flow statement. Business ratios contextualize financial data — for example, net profit margin shows the profitability of a company’s operations in relation to its revenue. They are often used to help request funding from a bank or investor, as well.

Sales forecast: How much will you sell in a specific period? A sales forecast needs to be an ongoing part of any planning process since it helps predict cash flow and the organization’s overall health. A forecast needs to be consistent with the sales number within your P&L statement. Organizing and segmenting your sales forecast will depend on how thoroughly you want to track sales and the business you have. For example, if you own a hotel and giftshop, you may want to track separately sales from guests staying the night and sales from the shop.

Cash flow projection: Perhaps one of the most critical aspects of your financial plan is your cash flow statement . Your business runs on cash. Understanding how much cash is coming in and when to expect it shows the difference between your profit and cash position. It should display how much cash you have now, where it’s going, where it will come from and a schedule for each activity.

Income projections: Businesses can use their sales forecasts to estimate how much money they are on track to make in a given period, usually a year. This income projection is calculated by subtracting anticipated expenses from revenue. In some cases, the income projection is rolled into the P&L statement.

Assets and liabilities: Assets and liabilities appear on the business’s balance sheet. Assets are what a company owns and are typically divided into current and long-term assets. Current assets can be converted into cash within a year and include stocks, inventory and accounts receivable. Long-term assets are tangible or fixed assets designed for long-term use, such as furniture, fixtures, buildings, machinery and vehicles.

Liabilities are business obligations that are also classified as current and long-term. Current liabilities are due to be paid within a year and include accrued payroll, taxes payable and short-term loans. Long-term liabilities include shareholder loans or bank debt that mature more than a year later.

Break-even analysis: The break-even point is how much a business must sell to exactly cover all of its fixed and variable expenses, including COGS, salaries and rent. When revenue exceeds expenses, the business makes a profit. The break-even point is used to guide sales revenue and volume goals; determination requires first calculating contribution margin , which is the amount of sales revenue a company has, less its variable costs, to put toward paying its fixed costs. Businesses can use break-even analyses to better evaluate their expenses and calculate how much to mark up its goods and services to be able to turn a profit.

Four Steps to Create a Financial Plan for Your Small Business

Financial plans require deliberate planning and careful implementation. The following four steps can help small businesses get started and ensure their plans can help them achieve their goals.

Create a strategic plan

Before looking at any numbers, a strategic plan focuses on what the company wants to accomplish and what it needs to achieve its goals. Will it need to buy more equipment or hire additional staff? How will its goals affect cash flow? What other resources are needed to meet its goals? A strategic financial plan answers these questions and determines how the plan will impact the company’s finances. Creating a list of existing  expenses  and assets is also helpful and will inform the remaining financial planning steps.

Create financial projections

Financial projections should be based on  anticipated expenses and sales forecasts . These projections look at the business’s goals and estimate the costs needed to reach them in the face of a variety of potential scenarios, such as best-case, worst-case and most likely to happen. Accountants may be brought in to review the plan with stakeholders and suggest how to explain the plan to external audiences, such as investors and lenders.

Plan for contingencies

Financial plans should use data from the cash flow statement and balance sheet to inform worst-case scenario plans, such as when incoming cash dries up or the business takes an unexpected turn. Some common contingencies include keeping cash reserves or a substantial line of credit for quick access to funds during slow periods. Another option is to produce a plan to sell off assets to help break even.

Monitor and compare goals

Actual results in the cash flow statement, income projections and relevant business ratios should be analyzed throughout the year to see how closely real-life results adhered to projections. Regular check-ins also help businesses spot potential problems before they can get worse and inform course corrections.

Three Questions Your Financial Plan Should Answer

A small business financial plan should be tailored to the needs and expectations of its intended audience, whether it is potential investors, lenders, partners or internal stakeholders. Once the plan is created, all parties should, at minimum, understand:

How will the business make money?

What does the business need to achieve its goals?

What is the business’s  operating budget ?

Financial plans that don’t answer these questions will need more work. Otherwise, a business risks starting a new venture without a clear path forward, and decision-makers will lack the necessary insights that a detailed financial plan would have provided.

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NetSuite’s cloud-based financial management platform simplifies the labor-intensive process through automation. NetSuite Planning and Budgeting automatically consolidates real-time data for analysis, reporting and forecasting, thereby improving efficiency. With intuitive dashboards and sophisticated forecasting tools, businesses can create accurate financial plans, track progress and modify strategies in order to achieve and maintain long-term success. The solution also allows for scenario planning and workforce planning, plus prebuilt data synchronization with NetSuite ERP means the entire business is working with the same up-to-date information.

Whether a business is first getting started, looking to expand, trying to secure outside funding or monitoring its growth, it will need to create a financial plan. This plan lays out the business’s short- and long-term objectives, details its current and projected finances, specifies how it will invest its resources and helps track its progress. Not only does a financial plan guide the business along its way, but it is typically required by outside sources of funding that don’t invest or lend their money to just any company. Creating a financial plan may take some time, but successful small businesses know it is well worth the effort.

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Small Business Financial Plan FAQs

How do I write a small business financial plan?

Writing a small business financial plan is a four-step process. It begins with creating a strategic plan, which covers the company’s goals and what it needs to achieve them. The next step is to create financial projections, which are dependent on anticipating sales and expenses. Step three plans for contingencies: For example, what if the business were to lose a significant client? Finally, the business must monitor its goals, comparing actual results to projections and adjusting as needed.

What is the best financial statement for a small business?

The income statement, also known as the profit and loss (P&L) statement, is often considered the most important financial statement for small businesses, as it summarizes profits and losses and the business’s bottom line over a specific financial period. For financial plans, the cash flow statement and the balance sheet are also critical financial statements.

How often should businesses update their financial plans?

Financial plans can be updated whenever a business deems appropriate. Many businesses create three- and five-year plans and adjust them annually. If a market experiences a large shift, such as a spike in demand or an economic downturn, a financial plan may need to be updated to reflect the new market.

What are some common mistakes to avoid when creating a small business financial plan?

Some common mistakes to avoid when creating a small business financial plan include underestimating expenses, overestimating revenue, failing to plan for contingencies and adhering to plans too strictly when circumstances change. Plans should be regularly updated to reflect real-world results and current market trends.

How do I account for uncertainty and potential risks in my small business financial plan?

Small businesses can plan for uncertainty by maintaining cash reserves and opening lines of credit to cover periods of lower income or high expenses. Plans and projections should also take into account a variety of potential scenarios, from best case to worst case.

What is a typical business financial plan?

A typical business financial plan is a document that details a business’s goals, strategies and projections over a specific period of time. It is used as a roadmap for the organization’s financial activities and provides a framework for decision-making, resource allocation and performance evaluation.

What are the seven components of a financial plan?

Financial plans can vary to suit the business’s needs, but seven components to include are the income statement, operating income, net income, cash flow statement, balance sheet, financial projections and business ratios. Various financial key performance indicators and a break-even analysis are typically included as well.

What is an example of a financial plan?

A financial plan serves as a snapshot of the business’s current standing and how it plans to grow. For example, a restaurant looking to secure approval for a loan will be asked to provide a financial plan. This plan will include an executive summary of the business, a description and history of the company, market research into customer base and competition, sales and marketing strategies, key performance indicators and organizational structure. It will also include elements focusing on the future, such as financial projections, potential risks and funding requirements and strategies.

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Small Business Financial Management: Tips, Importance and Challenges

It is remarkably difficult to start a small business. Only about half stay open for five years, and only a third make it to the 10-year mark. That’s why it’s vital to make every effort to succeed. And one of the most fundamental skills and tools for any small business owner is sound financial management.

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The Complete Guide to Building a Startup Financial Plan from Scratch

1. the basics of financial planning, 2. building your startup financial plan, 3. key components of a startup financial plan, 4. how to make your startup financial plan work for you, 5. managing and adjusting your startup financial plan, 6. exit strategies for your startup financial plan, 7. common mistakes in creating a startup financial plan, 8. the benefits of having a solid startup financial plan.

financial planning is one of the most important aspects of starting a business. Without a solid plan in place, it can be difficult to make informed decisions about how to allocate resources and manage cash flow . A well-thought-out financial plan can help you navigate the early stages of business ownership and give you a roadmap for success.

There are a few key components that should be included in any startup financial plan . First, you'll need to create a sales forecast that outlines your expected revenue for the next 12 months . This will help you establish how much money you'll need to bring in to cover your expenses . Next, you'll need to create a budget that details your projected expenses for the same time period. This will help you keep track of your spending and make sure you're not overspending. Finally, you'll need to establish some financial goals. These can be short-term goals , like ensuring you have enough cash on hand to cover your operating expenses, or long-term goals , like saving for a down payment on a new office space.

creating a financial plan from scratch can seem daunting, but it doesn't have to be. By following these simple steps, you can put together a solid plan that will help you achieve your business goals .

A startup financial plan is a road map that will guide your business from its inception to profitability. While there is no one-size-fits-all approach to creating a financial plan, there are some key components that should be included in every plan.

The first step in creating a startup financial plan is to determine your businesss financial needs. This will involve estimating your startup costs, which include both one-time costs (such as equipment purchases) and ongoing costs (such as rent and employee salaries). You will also need to estimate your revenue and expenses for the first few years of operation.

Once you have a good understanding of your financial needs, you can begin to develop your funding strategy. This will involve identifying the sources of funding that are available to you and deciding how much money you need to raise. You may need to consider both debt and equity financing options.

Once you have a solid understanding of your financial needs and funding options, you can begin to develop your financial projections. Financial projections are an important part of any business plan, but they are especially important for startups. Your projections will give you a good idea of how much money you will need to raise, how quickly your business will grow, and when you can expect to achieve profitability .

While a startup financial plan is an important part of any business , it is not something that should be created in a vacuum. Rather, your financial plan should be developed in consultation with experienced business professionals , such as accountants and lawyers . These individuals can help you navigate the legal and tax implications of starting a business , and they can also provide valuable insights into developing a sound financial plan.

A comprehensive financial plan is a critical component of any startup business. Without a sound financial plan, it will be difficult to make informed decisions about how to allocate resources, manage risks, and grow the business.

There are four key components of a startup financial plan:

1. A sales forecast: This forecast projects future sales based on historical sales data and market trends .

2. A expense budget: This budget outlines all of the costs associated with running the business, including fixed costs (e.g., rent, insurance) and variable costs (e.g., raw materials , employee salaries).

3. A cash flow statement : This statement tracks inflows and outflows of cash, and is used to assess the business's liquidity (i.e., its ability to meet short-term obligations).

4. A profitability analysis: This analysis calculates the business's net profit margin , which is a key metric for assessing overall financial health.

The sales forecast is the foundation of the financial plan, as it drives all other projections. The expense budget and cash flow statement are closely interrelated, as expenses must be paid out of cash flow. The profitability analysis is important for two reasons: first, it provides a target for the business to strive for; and second, it can be used to assess the impact of different strategic decisions on profitability.

A well-crafted financial plan will give startup businesses a clear roadmap for achieving their financial goals.

Key Components of a Startup Financial Plan - The Complete Guide to Building a Startup Financial Plan from Scratch

You've started a business. Congratulations! You've taken the first step on a long and exciting journey.

Now it's time to start thinking about your startup's finances. A financial plan is a necessary component of any business , but it's especially important for startups. Your financial plan will help you track your progress, set goals, and make informed decisions about your business .

Here are a few tips to help you make your startup financial plan work for you:

1. Keep It Simple

Your financial plan doesn't need to be complicated. In fact, the simpler it is, the easier it will be to understand and use. Start by creating a basic income statement and balance sheet . You can find templates for these documents online or in accounting software programs.

2. Know Your Numbers

You can't manage what you don't measure. Make sure you understand your startup's key financial indicators , such as revenue, expenses, profit, cash flow, and burn rate. These numbers will give you a clear picture of your business's financial health and help you identify areas that need improvement .

3. Set Goals

What do you want your startup to achieve financially? Do you want to achieve profitability within a certain timeframe? Do you need to raise capital? Your financial plan should include specific, measurable goals so you can track your progress and make adjustments as needed.

4. Know Your Sources of Funding

Where will your startup get the money it needs to grow ? Will you self-fund or seek investment from venture capitalists ? Will you take out loans or lines of credit ? Each source of funding has its own terms and conditions that you'll need to be aware of.

5. Plan for the Worst

What would happen if your startup ran into financial trouble ? What if you couldn't make payroll or had to close your doors? It's important to have a contingency plan in place so you know what to do if things go wrong . This plan should include measures such as reducing expenses , increasing revenue, or raising additional capital .

making your startup financial plan work for you doesn't have to be difficult. Just keep it simple, know your numbers, set goals, and be prepared for the worst. By following these tips, you'll be on your way to financial success.

How to Make Your Startup Financial Plan Work For You - The Complete Guide to Building a Startup Financial Plan from Scratch

Every startup is different, so there is no one-size-fits-all answer to the question of how to manage and adjust your startup financial plan. However, there are some key considerations that all startups should keep in mind when it comes to their finances.

First and foremost, it is important to have a clear understanding of your startup's financial situation . This means having a clear picture of your income, expenses, and cash flow. It is also important to have a clear understanding of your startup's financial goals. What are you trying to achieve with your business? What are your short-term and long-term financial goals?

Once you have a clear understanding of your financial situation and goals, you can start to develop a plan for how to best manage your finances . There are a number of different ways to do this, but some common methods include creating a budget , setting up a system for tracking expenses , and setting up a system for invoicing and payments .

Another key consideration when it comes to managing your startup finances is to make sure that you are always seeking out new sources of funding. This could include seeking out investment from venture capitalists, applying for grants , or looking into crowdfunding platforms. It is also important to keep in mind that your financial needs will likely change as your startup grows and develops. As such, it is important to be prepared to adjust your financial plan as needed.

Finally, it is important to remember that managing your startup finances is an ongoing process. There is no one-time solution that will work for all startups . Instead, it is important to regularly review your finances and make changes as needed. By doing so, you can ensure that your startup remains on solid financial footing and is able to achieve its long-term goals.

'This will pass and it always does.' I consistently have to keep telling myself that because being an entrepreneur means that you go to those dark places a lot, and sometimes they're real. You're wondering if you can you make payroll. There is a deadline, and you haven't slept in a while. It's real. Majora Carter

If you're like most startup founders, you're probably not thinking about how your business will end. You're focused on building something great, and you're hoping that your company will be around for a long time.

But it's important to have an exit strategy in mind from the start. Your exit strategy will determine how you raise money, how you structure your business , and ultimately, how much money you make.

There are four main exit strategies for startups :

1. Sell to a larger company

2. Go public

3. Sell to a private equity firm

4. Shut down

Each of these exit strategies has its own pros and cons . The one that's right for your business will depend on your specific circumstances.

One common exit strategy for startups is to sell to a larger company. This can be an attractive option because it allows you to cash out quickly and for a potentially high price .

The downside is that you may not have much control over what happens to your business after the sale. The new owners may decide to shut down your product or change the direction of the company entirely.

Another option is to take your company public. This can be a great way to raise a lot of money and give yourself and your employees liquidity. It can also be a good way to keep control of your company .

The downside of going public is that it's a lot of work and it can be expensive. You'll also be subject to more regulations than you are as a private company .

A third option is to sell your company to a private equity firm. This can be attractive because you'll get a lump sum of cash up front and you won't have to deal with the hassle and expense of going public.

The downside is that the private equity firm will likely want to make changes to your business in order to make it more profitable. They may also bring in a new management team that you don't have control over.

Finally, you may decide to simply shut down your business if it's not working out. This is not necessarily a bad thing; it may be the best thing for your employees and shareholders if the business is not successful.

The downside of shutting down is that you will not make any money from the sale of the business . But if you've run out of ideas or if the market has changed, it may be the best thing for everyone involved.

No matter what exit strategy you choose , it's important to have a plan in place from the beginning. That way, you can make the best decision for your business when the time comes.

Exit Strategies for Your Startup Financial Plan - The Complete Guide to Building a Startup Financial Plan from Scratch

One of the most common mistakes startup founders make when creating their financial plan is failing to account for all the costs associated with launching and growing their business . A complete financial plan should include not only the costs of goods and services , but also the costs of marketing , advertising, and overhead.

Another common mistake is failing to account for the impact of inflation on future costs. Inflation can have a significant impact on the cost of goods and services, as well as the cost of labor. In order to ensure that your financial plan is accurate, it is important to account for the impact of inflation in your projections.

Another common mistake is failing to account for the fact that most businesses do not generate revenue immediately. It can take months, or even years, for a business to generate enough revenue to cover its costs. For this reason, it is important to have a realistic timeline for generating revenue in your financial plan.

Finally, another common mistake is failing to account for the fact that businesses often need to raise additional capital as they grow. As your business grows, you may need to invest in new equipment, hire additional staff, or expand into new markets. In order to account for this possibility, you should include a section in your financial plan that outlines how you will raise additional capital .

By avoiding these common mistakes, you can ensure that your startup financial plan is accurate and complete.

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When it comes to starting a business, one of the most important things you can do is create a solid financial plan . This document will outline your businesss income, expenses, and profitability. It will also help you secure funding from investors and lenders.

A well-thought-out financial plan will give your business a road map to success . It will help you make sound financial decisions and keep your business on track .

Here are some of the benefits of having a solid financial plan for your startup :

1. It will help you secure funding.

If you're looking for funding from investors or lenders, a detailed financial plan is a must. This document will give them a clear picture of your businesss finances and how you plan to use their money .

2. It will keep you organized.

A financial plan will help you keep track of your income and expenses . This information is critical for making sound financial decisions and keeping your business on track.

3. It will help you find areas of improvement .

By tracking your income and expenses, you'll be able to identify areas where your business could be more efficient . This information can help you make changes that will improve your bottom line .

4. It will help you set goals.

Your financial plan can help you set realistic goals for your business. This information can guide you as you make decisions about how to grow your company .

5. It will give you peace of mind.

Having a financial plan in place will give you peace of mind knowing that your business is on solid financial footing. This document can help you weather any storms that come your way.

Creating a financial plan may seem like a daunting task, but its well worth the effort . These documents are critical for the success of any startup business .

The Benefits of Having a Solid Startup Financial Plan - The Complete Guide to Building a Startup Financial Plan from Scratch

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8 Tips to Create a Startup Financial Plan

start up business financial plan

What is Financial Planning?

One of the primary benefits of financial planning for startups is that it provides a clear understanding of their financial performance. By analyzing financial data and identifying key performance metrics, startups can develop strategies to improve their financial performance and achieve their business goals. This allows businesses to make informed decisions and ensures that they have the necessary resources to execute their plans.

Investors are also more likely to invest in startups that have well-developed financial plans. A comprehensive financial plan demonstrates a startup's ability to manage its finances effectively and provides investors with the confidence that their investment is secure. Therefore, having a well-designed financial plan is crucial to securing funding from investors.

While financial planning and business planning are closely related, they serve different purposes. Business planning focuses on creating a vision, setting goals, and developing strategies to achieve them, whereas financial planning is more focused on managing the financial resources required to achieve these goals. Financial planning is an integral part of business planning as it helps businesses to make informed decisions and ensures that they have the necessary resources to execute their plans.

Forecasting and budgeting are two essential components of financial planning. Estimating future financial performance is one of the tasks involved in forecasting. This is done by looking at historical data as well as current trends. Budgeting involves setting financial goals and developing a plan to allocate resources to achieve them. Forecasting and budgeting allow startups to recognize potential threats and opportunities and to make decisions about resource allocation that are based on accurate information. This makes it easier for new businesses to stay on track and accomplish their financial objectives.

Financial statements such as the balance sheet, income statement, and cash flow statement are critical components of financial planning. These statements provide an overview of a startup's financial performance, including its assets, liabilities, income, and expenses. By analyzing these financial statements, startups can identify their strengths and weaknesses and make informed decisions about their financial resources.

start up business financial plan

External factors such as market trends, competition, and economic conditions can significantly impact a startup's financial performance. Financial planning should consider the impact of these external factors and develop strategies to mitigate risks and capitalize on opportunities. For example, a startup may need to adjust its pricing strategy in response to changes in the market or invest in marketing to remain competitive. By considering external factors, startups can make better decisions and adapt to changing market conditions.

Risk management is another crucial component of financial planning. When creating a financial plan, it's important to consider the potential risks and uncertainties that can impact your business. Examples of financial risks that startups may face include market volatility, unexpected expenses, changes in regulations, and disruptions in supply chains. By incorporating risk management into your financial planning process, you can proactively identify and address potential issues before they become major financial setbacks. This can help you maintain financial stability and ensure the long-term success of your startup.

Financial planning provides a roadmap to achieving financial goals, allows businesses to make informed decisions about resource allocation, and helps secure funding from investors. By considering external factors, forecasting and budgeting, analyzing financial statements, and incorporating risk management into the financial planning process, startups can maintain financial stability and ensure their long-term success.

Why is Financial Planning Important for Startups?

By creating a financial plan, entrepreneurs can forecast revenue and expenses, identify potential risks, and make informed decisions. This process is not only important for securing funding but also for ensuring the long-term sustainability of the business.

One of the key benefits of financial planning is the ability to understand market principles. By analyzing market trends, startups can make informed decisions about product development, pricing strategies, and marketing efforts. A financial plan can also help startups to develop a realistic revenue model and understand the potential impact of changes in the market.

Another important aspect of financial planning is creating a plan that works. Startups can use financial planning to identify the key drivers of their business, such as customer acquisition cost and lifetime value, and develop strategies to optimize these metrics. By setting achievable goals and tracking progress over time, startups can stay on track and make data-driven decisions.

Financial planning also helps startups to identify potential obstacles and develop contingency plans. By conducting a thorough risk analysis, startups can anticipate challenges and develop strategies to mitigate them. This can help to minimize the impact of unforeseen events and maintain business continuity.

In addition, financial planning allows startups to understand different scenarios and develop strategies for each. By creating a variety of financial models, entrepreneurs can assess the impact of different market conditions and make informed decisions about resource allocation. This helps to ensure that the business is well-positioned to weather any economic or market fluctuations.

Financial planning can also save startups both time and money. By having a clear understanding of their financial position and goals, entrepreneurs can focus their efforts on high-value activities and avoid wasting resources on unproductive projects or initiatives. This helps to ensure that the company runs efficiently and effectively.

Having a plan helps to keep startups focused on their goals. By setting targets and tracking progress, entrepreneurs can maintain their motivation and focus on achieving their objectives. This can help to drive innovation and growth and ensure the long-term success of the business. With a clear plan in place, startups can stay focused, save time and money, and achieve their goals more quickly.

start up business financial plan

What Makes a Good Financial Plan for a Start-up Business?

A well-designed financial plan can help entrepreneurs avoid unexpected costs, forecast cash flow, and determine the viability of business ideas. To create a financial plan that works, startups must keep in mind some essential tips.

Entrepreneurs must be creative and think outside the box when developing a financial plan. This means considering various sources of revenue, cost-cutting measures, and unique financing options. By being creative, startups can find new opportunities to generate revenue, reduce costs, and improve profitability.

Another crucial aspect of financial planning is cash flow management. Startups must never underestimate the importance of cash, particularly in the early stages of business development. Without sufficient cash, startups may struggle to cover expenses and survive market downturns. Therefore, a good plan must prioritize cash management by tracking cash inflows and outflows, maintaining cash reserves, and anticipating future cash needs.

Financial planning is not a one-time event; it is an ongoing process that never ends. Startups must realize that their financial plan is a living document that should be continuously updated to reflect changes in the market and the business itself. By regularly reviewing and updating the financial plan, startups can stay ahead of any potential problems and keep their financials on track.

Furthermore, a good financial plan must align with the startup's business goals and objectives. The financial plan should support the startup's broader strategy, and the projections included in the plan should be realistic and attainable. Startups should avoid creating financial plans that are too optimistic, as this may lead to unrealistic expectations and disappointment down the line.

Creating a successful plan is the key foundation to building and maintaining a successful startup. Startups must be creative, prioritize cash management, view financial planning as a continuous process, incorporate multiple scenarios, align the plan with business goals, and regularly review and update the plan. By following these suggestions, startups can develop a financial plan that supports the business strategy to help them achieve their long-term objectives.

How to Produce a Startup Financial Plan?

Starting a new business venture can be an exhilarating experience, but it also requires a great deal of planning, especially when it comes to finances. Developing a financial plan that will set your business up for success is crucial, and it all starts with defining your business goals. Identifying your short-term and long-term objectives using the SMART criteria (specific, measurable, achievable, relevant, and time-bound) will help you stay focused on what you want to achieve.

Once you have defined your goals, the next step is to identify the key performance indicators (KPIs) that you will use to measure your progress. By doing so, you can keep track of your performance and make necessary adjustments as needed. For example, if your goal is to increase revenue, your KPIs might include sales growth rate, customer acquisition cost, and customer lifetime value.

Collecting and importing data about your business is also an important step in developing an accurate financial plan. This includes financial statements, balance sheets, cash flow statements, and income statements. By having a baseline for your financial projections, you can identify areas where you need to focus your efforts.

When it comes to tools to use, there are several options available, such as Excel spreadsheets, financial planning software, and business plan templates. Choosing the right tool will depend on your business needs, budget, and level of expertise. It is essential to choose a tool that is user-friendly, easy to navigate, and provides accurate results.

Estimating your start-up costs and cash flow needs is crucial when starting a new business. This includes identifying the initial investment needed to get your business off the ground and ongoing cash flow needs. By projecting all revenue and expense projections, as well as any financing or investment that you may require, you can accurately estimate your cash flow needs.

One important tool for assessing the financial viability of your start-up is a break-even analysis. It helps you determine the point at which your revenue will cover your costs and when you will begin to make a profit. Identifying your fixed and variable costs, as well as your revenue projections, is essential in preparing a break-even analysis.

Finally, developing contingency plans is crucial for mitigating risks and ensuring your business's financial stability in the long run. Contingency plans outline what steps you will take if unexpected events, such as economic downturns or supply chain disruptions, occur. Having contingency plans in place can help you stay on track and ensure that your business is financially resilient.

Developing a financial plan is a crucial step in setting your new business up for success. Defining your business goals, identifying key performance metrics, collecting and importing data about your business, estimating startup costs and cash flow, preparing a break-even analysis, and developing contingency plans are all essential components of a comprehensive financial plan. By following these steps, you can set your business on the path to financial stability and success.

start up business financial plan

8 Tips to Create a Financial Plan for Startups

Tip 1: determine your revenue streams.

As you begin to develop your financial plan, it's important to think about different ways your business can generate revenue. To do this, you should determine your revenue streams. Revenue streams refer to the various sources of income for your business, such as sales of products or services, membership fees, or advertising revenue. By identifying your revenue streams, you can create a solid foundation for your financial projections.

Once you have identified your revenue streams, you can estimate the potential amount of money each stream may generate. This estimate will serve as a starting point for your financial projections. To make accurate projections, you will need to consider factors such as market demand, competition, and pricing strategies. By carefully analyzing your revenue streams, you can develop a plan that maximizes your earning potential and sets your business up for success.

Tip 2: Estimate Your Expenses

Once you've identified your revenue streams, it's time to estimate your expenses. Your expenses will include fixed costs, as well as variable costs like those related to marketing and supply. Fixed costs are expenses that do not vary with changes in the volume of goods or services produced, such as rent or salaries. Variable costs are expenses that do vary with changes in the volume of goods or services produced, such as marketing or supply costs.

It's important to carefully consider any early expenses that are essential for starting your company, such as the acquisition of any necessary equipment. You can try to be creative and think of any possible unforeseen expenses that may arise. Having a solid understanding of your expenses will help you to create an accurate financial plan and ensure that your business remains financially stable in the long run.

Tip 3:  Create Financial Assumptions

When it comes to creating financial assumptions, don't overlook the potential impact of external factors such as competition, changes in the economy, and shifts in consumer behavior. These factors can have a significant impact on your business's financial performance, so it's essential to consider them in your assumptions. In addition, consider the potential risks associated with your assumptions and develop contingency plans to address them.

Another aspect to consider when creating financial assumptions is the timing of revenue and expenses. For example, if you're launching a new product, it may take time for sales to ramp up and generate revenue. Similarly, expenses may be higher in the early stages of the business as you invest in marketing and infrastructure. By considering the timing of revenue and expenses, you can create more accurate financial assumptions that will help you plan for the future.

Overall, creating financial assumptions requires careful consideration of both internal and external factors, as well as a realistic view of the timing of revenue and expenses. By taking the time to create accurate assumptions, you'll be better equipped to create financial forecasts that will guide your business decisions and set you up for long-term success.

Tip 4: Develop Realistic Financial Projections 

Creating financial projections for your business requires a careful analysis of several key factors. Begin by determining the sources of income that your business will rely on, and estimate the expected amounts of revenue that each of these streams will generate. This might include sales of products or services, membership fees, or any other revenue-generating activities. Next, take into account the costs your business will incur, including fixed expenses such as rent, salaries, and utilities, as well as variable costs like marketing and supplies. Be sure to also consider any early expenses that may be necessary to start your company, such as the purchase of equipment or inventory.

Once you have a clear picture of your potential revenue and expenses, it's time to develop realistic financial projections. This means looking ahead three to five years into the future and making educated assumptions about the growth of the market, customer adoption rates, and any other factors that could impact your business. By taking a methodical approach and basing your projections on solid data and reasonable assumptions, you can create a financial plan that will guide your company toward long-term success.

Tip 5: Identify Funding Sources

As an entrepreneur, it's important to be creative and consider alternative methods for securing funds that may not be immediately apparent. For example, you may want to consider using crowdfunding platforms to raise capital from a large number of small investors. You may also want to look into angel investors or venture capitalists who may be interested in investing in promising new ventures.

When seeking funding, it's important to understand the terms and conditions of any funding sources that you're considering. Be sure to carefully review any contracts or agreements that you're asked to sign, and make sure that you understand the repayment terms, interest rates, and any other fees or charges associated with the funding. It's also a good idea to have a clear plan in place for how you will use the funds that you receive and to have a solid understanding of your company's financial needs and goals. By taking the time to carefully consider your funding options and create a solid plan, you'll be better equipped to secure the funding you need to launch and grow your new business.

Tip 6: Set Realistic Growth Goals

Setting growth goals for your company is critical to its success, but it's also essential to establish objectives that are both realistic and achievable. By considering your company's financial projections, you can determine the growth goals that are both feasible and maximize your company's potential. When setting growth objectives, it's critical to strike a balance between goals that are achievable while still presenting a challenge. Your objectives should also be aligned with your firm's overall goals.

One way to set realistic growth goals is by breaking them down into smaller, more manageable targets. For example, you can set monthly or quarterly growth goals that align with your overall annual goals. This approach allows you to track progress more frequently and make necessary adjustments to your strategy as you move forward. Additionally, consider utilizing KPIs to track progress and measure success. This can help you identify areas that need improvement and those where you're excelling, allowing you to make data-driven decisions to optimize growth.

Tip 7: Monitor and Adjust Your Financial Plan

Once you have established your financial plan, it's crucial to continuously monitor your progress and make necessary adjustments. This will ensure that your plan remains effective and responsive to any changes in the market or your business. Keep a close eye on your actual sales and expenses and regularly compare them to your projections. Use this information to identify areas where you may need to make changes to your strategy.

Be proactive in making any necessary changes to your financial plan. Don't wait until you're in a difficult situation before taking action. Regularly review your financial goals and adjust them as needed. This can involve reevaluating your revenue streams, reducing expenses, or exploring new funding sources. By staying on top of your finances and making proactive adjustments, you can ensure that your business remains financially healthy and well-positioned for growth.

Tip 8: Seek Professional Assistance

Creating a financial plan for your new company venture can be daunting, especially if you lack expertise in financial management. However, seeking professional assistance can be a game-changer. You should consider utilizing the services of a professional financial planner or accountant who can help you establish realistic financial projections and ensure that your plan aligns with the objectives you have set for your business.

In addition to a financial planner or accountant, you might also want to consider hiring a business coach or mentor. These professionals can provide guidance and support in all areas of your business, not just financial management. They can help you develop strategies for growth, improve your decision-making skills, and provide a fresh perspective on your business operations. Moreover, a mentor can share valuable insights from their own experience, providing you with valuable advice and guidance along the way.

Another option to consider is joining a business accelerator or incubator program. These programs offer resources and support to help entrepreneurs grow and scale their businesses. They provide access to mentorship, networking opportunities, funding, and other resources that can help you achieve your goals. Additionally, you may also receive training and education on various aspects of business management, including financial planning.

How Can Sturppy Help You?

At Sturppy, we understand the challenges that come with financial planning for startups, which is why we have developed a platform that makes the process easier, faster, and more efficient.

One of the biggest obstacles for startups (especially startups that are planning on raising funding) is developing a comprehensive financial plan. Our platform is designed to address this challenge by enabling you to create a financial model for your startup in just a few minutes. We offer customizable templates and financial tools to make the process as easy as possible. All you need to do is input your assumptions, and our software will generate a detailed financial plan that is tailored to your business needs. No financial expertise required!

Sturppy is an affordable and accessible financial planning solution for startups of all sizes. We offer flexible pricing plans that allow you to choose the package that suits your business best. We understand that startups have limited resources and budgets, which is why we don't charge outrageous fees for financial planning services. We believe that every dollar counts, and we're committed to providing startups with a cost-effective solution to financial planning.

One of the biggest advantages of Sturppy is the ability to create multiple scenarios. This feature allows you to test different assumptions and see the financial impact of different strategies. It's particularly useful when determining the most effective growth strategies or exploring new markets. With Sturppy, you can quickly and easily see the impact of these decisions on your financial performance.

Sturppy is also a valuable tool for monitoring your real-time data and comparing it to your forecasts. This is essential when determining whether your business is on track to meet its financial goals. Sturppy provides you with the tools to make data-driven decisions so you can optimize your business performance and grow your startup.

We understand that startups are unique, and that's why our platform is customizable to meet your specific needs. Whether you're a tech startup, a service-based business, or a brick-and-mortar store, Sturppy can help you create a financial plan that is tailored to your business needs. Our templates are easy to use and can be customized to include the specific metrics that are most important to your business.

At Sturppy, we pride ourselves on providing exceptional customer service. Our team is available to answer any questions you may have and provide you with the support you need to make the most of our platform. We are committed to ensuring that our customers have a seamless experience and can achieve their financial planning goals with ease.

Our platform provides a fast, affordable, and customizable solution that enables you to make data-driven decisions and optimize your business performance. With Sturppy, you can avoid painful mistakes and go to market faster, so you can focus on what really matters — growing your startup. Sign up with Sturppy today and take the first step towards creating a comprehensive financial plan for your business.

Sturppy Planning dashboard example - the image is of a financial model dashboard containing graphs for a fictitious company called Slacker.

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Business Startup Financial Plan Template

Business Startup Financial Plan Template

What is a Business Startup Financial Plan?

A business startup financial plan is a comprehensive plan that helps business owners and entrepreneurs manage cash flow, fund operations, and reach financial goals. It is a roadmap that provides a clear view of current financial standings and outlines the steps to be taken to reach future goals. The plan should include revenue and expense projections and should be tailored to fit the unique needs of each business.

What's included in this Business Startup Financial Plan template?

  • 3 focus areas
  • 6 objectives

Each focus area has its own objectives, projects, and KPIs to ensure that the strategy is comprehensive and effective.

Who is the Business Startup Financial Plan template for?

The Business Startup Financial Plan template is for entrepreneurs, business owners, and startups who are looking for an effective way to manage and grow their business. This template provides an easy-to-understand and comprehensive approach to financial planning, allowing entrepreneurs to make informed decisions that will help their business succeed.

1. Define clear examples of your focus areas

Focus areas are the broad topics that need to be addressed in order to achieve success. Examples of focus areas in a business startup financial plan include financial management, human resources, and product development. Each focus area will have its own objectives, actions, and KPIs that need to be identified and tracked.

2. Think about the objectives that could fall under that focus area

The objectives are the specific goals that need to be achieved to reach success within a focus area. For example, under the focus area of financial management, objectives may include managing cash flow, securing credit or capital, and budgeting. The objectives should be specific and measurable.

3. Set measurable targets (KPIs) to tackle the objective

KPIs (Key Performance Indicators) are measurable targets that should be set to track the progress of an objective. For example, under the objective of managing cash flow, a KPI may be to monitor cash balance with a target of reaching $500. It is important to set targets that are realistic and achievable.

4. Implement related projects to achieve the KPIs

Projects (actions) are the steps needed to achieve a KPI. For example, to reach the KPI of monitoring cash balance, an action may be to analyze revenue and expenses. Projects should be specific, measurable, achievable, and time-bound.

5. Utilize Cascade Strategy Execution Platform to see faster results from your strategy

Cascade is a strategy execution platform that helps businesses implement their financial plans and track progress towards financial goals. With its easy-to-use dashboards, Cascade enables businesses to quickly and accurately track KPIs and ensure that objectives are met. Cascade is a powerful tool that can help businesses reach their financial goals faster and more efficiently.

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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.

How to Start a Business: A Comprehensive Guide and Essential Steps

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Conducting Market Research

Crafting a business plan, reviewing funding options, understanding legal requirements, implementing marketing strategies, how much does it cost to start a business, what should i do before starting a business, what types of funding are available to start a business, do you need to write a business plan, the bottom line.

Building an effective business launch plan

start up business financial plan

Starting a business in the United States involves a number of different steps, spanning legal considerations, market research, creating a business plan, securing funding, and developing a marketing strategy. It also entails decisions around a business’s location, structure, name, taxation, and registration.

This article covers the key steps involved in starting a business, as well as important aspects of the process for entrepreneurs to consider.

Key Takeaways

  • Entrepreneurs seeking to develop their own business should start by conducting market research to understand their industry space and competition, and to target customers.
  • The next step is to write a comprehensive business plan, outlining the company’s structure, vision, and strategy. Potential funders and partners may want to review the business plan in advance of signing any agreements.
  • Securing funding is crucial in launching a business. Funding can come in the form of grants, loans, venture capital, or crowdfunded money; entrepreneurs may also opt to self-fund instead of or in combination with any of these avenues.
  • Choosing a location and business structure can have many implications for legal aspects of business ownership, such as taxation, registration, and permitting, so it’s important to fully understand the regulations and requirements for the jurisdiction in which the business will operate. 
  • Another key aspect of launching a new business is having a strategic marketing plan that addresses the specifics of the business, industry, and target market.

Before starting a business, entrepreneurs should conduct market research to determine their target audience, competition, and market trends. 

The U.S. Small Business Administration (SBA) recommends researching demographic data around potential customers to understand a given consumer base and reduce business risk. It also breaks down common market considerations as follows:

  • Demand : Do people want or need this product or service?
  • Market size : How many people might be interested?
  • Economic indicators : These include income, employment rate, and spending habits of potential customers.
  • Location : Where are the target market and the business located?
  • Market saturation : How competitive is the business space, and how many similar offerings exist?
  • Pricing : What might a customer be willing to pay?

Market research should also include an analysis of the competition (including their strengths and weaknesses compared to those of the proposed business), market opportunities and barriers to entry, industry trends, and competitors’ market share .

There are various methods for conducting market research, and the usefulness of different sources and methodologies will depend on the nature of the industry and potential business. Data can come from a variety of sources: statistical agencies, economic and financial institutions, and industry sources, as well as direct consumer research through focus groups, interviews, surveys, or questionnaires.

A comprehensive business plan is like a blueprint for a business. It will help lay the foundation for business development and can assist in decision making, day-to-day operations, and growth. 

Potential investors or business partners may want to review and assess a business plan in advance of agreeing to work together. Financial institutions often request business plans as part of an application for a loan or other forms of capital. 

Business plans will differ according to the needs and nature of the company and only need to include what makes sense for the business in question. As such, they can vary in length and structure depending on their intended purpose. 

Business plans can generally be divided into two formats: traditional business plans and lean startup business plans. The latter is typically more useful for businesses that will need to adjust their planning quickly and frequently, as they are shorter and provide a higher-level overview of the company.

The process of funding a business can be as unique as the business itself—that is, it will depend on the needs and vision of the business and the current financial situation of the business owner. 

The first step in seeking funding is to calculate how much it will cost to start the business. Estimate startup costs by identifying a list of expenses and putting a number to each of them through research and requesting quotes. The SBA has a startup costs calculator for small businesses that includes common types of business expenses. 

From there, an entrepreneur will need to determine how to secure the required funding. Common funding methods include:

  • Self-funding , also known as bootstrapping  
  • Seeking funding from investors, also known as venture capital  
  • Raising money by crowdfunding
  • Securing a business loan
  • Winning a business grant

Each method will hold advantages and disadvantages depending on the situation of the business. It’s important to consider the obligations associated with any avenue of funding. For example, investors generally provide funding in exchange for a degree of ownership or control in the company, whereas self-funding may allow business owners to maintain complete control (albeit while taking on all of the risk). 

The availability of funding sources is another potential consideration. Unlike loans, grants do not have to be paid back—however, as a result, they are a highly competitive form of business funding. The federal government also does not provide grants for the purposes of starting or growing a business, although private organizations may. On the other hand, the SBA guarantees several categories of loans to support small business owners in accessing capital that may not be available through traditional lenders.

Whichever funding method (or methods) an entrepreneur decides to pursue, it’s essential to evaluate in detail how the funding will be used and lay out a future financial plan for the business, including sales projections and loan repayments , as applicable.  

Legally, businesses operating in the U.S. are subject to regulations and requirements under many jurisdictions, across local, county, state, and federal levels. Legal business requirements are often tied to the location and structure of the business, which then determine obligations around taxation, business IDs, registration, and permits.

Choosing a Business Location

The location—that is, the neighborhood, city, and state—in which a business operates will have an impact on many different aspects of running the business, such as the applicable taxes, zoning laws (for brick-and-mortar, or physical locations), and regulations.

A business needs to be registered in a certain location; this location then determines the taxes, licenses, and permits required. Other factors to consider when choosing a location might include:

  • Human factors : Such as the target audience for your business, and preferences of business owners and partners around convenience, knowledge of the area, and commuting distance
  • Regulations and restrictions : Concerning applicable jurisdictions or government agencies, including zoning laws
  • Regionally specific expenses : Such as average salaries (including required minimum wages), property or rental prices, insurance rates, utilities, and government fees and licensing
  • The tax and financial environment : Including income tax, sales tax, corporate tax, and property tax, or the availability of tax credits, incentives, or loan programs

Picking a Business Structure

The structure of a business should reflect the desired number of owners, liability characteristics, and tax status. Because these have legal and tax compliance implications , it’s important to fully understand and choose a business structure carefully and, if necessary, consult a business counselor, lawyer, and/or accountant.

Common business structures include:

  • Sole proprietorship : An unincorporated business that has just one owner, who pays personal income tax on profits
  • Partnership : Options include a limited partnership (LP) or a limited liability partnership (LLP)
  • Limited liability company (LLC) : A business structure that protects its owners from personal responsibility for its debts or liabilities
  • Corporation : Options include a C corp , S corp , B corp , closed corporation , or nonprofit

Getting a Tax ID Number

A tax ID number is like a Social Security number for a business. Whether or not a state and/or federal tax ID number is required for any given business will depend on the nature of the business, as well as the location in which the business is registered.

If a business is required to pay state taxes (such as income taxes and employment taxes), then a state tax ID will be necessary. The process and requirements around state tax IDs vary by state and can be found on individual states’ official websites. In some situations, state tax IDs can also be used for other purposes, such as protecting sole proprietors against identity theft.

A federal tax ID, also known as an employer identification number (EIN) , is required if a business:

  • Operates as a corporation or partnership
  • Pays federal taxes
  • Wants to open a business bank account
  • Applies for federal business licenses and permits
  • Files employment, excise, alcohol, tobacco, or firearms tax returns

There are further situations in which a business might need a federal tax ID number, specific to income taxation, certain types of pension plans, and working with certain types of organizations. Business owners can check with the Internal Revenue Service (IRS) about whether they need an EIN.

Registering a Business

Registration of a business will depend on its location and business structure, and can look quite different depending on the nature and size of the business. 

For example, small businesses may not require any steps beyond registering their business name with local and state governments, and business owners whose business name is their own legal name might not need to register at all. However, registration can include personal liability protection as well as legal and tax benefits, so it can be beneficial even if it’s not strictly required. 

Most LLCs, corporations, partnerships, and nonprofits are required to register at the state level and will require a registered agent to file on their behalf. Determining which state to register with can depend on factors such as:

  • Whether the business has a physical presence in the state
  • If the business often conducts in-person client meetings in the state
  • If a large portion of business revenue comes from the state
  • Whether the business has employees working in the state

If a business operates in more than one state, it may need to file for foreign qualification in other states in which it conducts business. In this case, the business would register in the state in which it was formed (this would be considered the domestic state), and file for foreign qualification in any additional states.

Some businesses may decide to register with the federal government if they are seeking tax-exempt status or trademark protection, but federal registration is not required for many businesses.

Overall registration requirements, costs, and documentation will vary depending on the governing jurisdictions and business structure.

Obtaining Permits

Filing for the applicable government licenses and permits will depend on the industry and nature of the business, and might include submitting an application to a federal agency, state, county, and/or city. The SBA lists federally regulated business activities alongside the corresponding license-issuing agency, while state, county, and city regulations can be found on the official government websites for each region.

Every business should have a marketing plan that outlines an overall strategy and the day-to-day tactics used to execute it. A successful marketing plan will lay out tactics for how to connect with customers and convince them to buy what the company is selling. 

Marketing plans will vary according to the specifics of the industry , target market, and business, but they should aim to include descriptions of and strategies around the following:

  • A target customer : Including market size, demographics, traits, and relevant trends
  • Unique value propositions or business differentiators : Essentially, an overview of the company’s competitive advantage with regard to employees, certifications, or offerings
  • A sales and marketing plan : Including methods, channels, and a customer’s journey through interacting with the business
  • Goals : Should cover different aspects of the marketing and sales strategy, such as social media follower growth, public relations opportunities, or sales targets
  • An execution plan : Should detail tactics and break down higher-level goals into specific actions
  • A budget : Detailing how much different marketing projects and activities will cost

The startup costs for any given business will vary greatly depending on the industry, business activity, and product or service offering. Home-based online businesses will usually cost less than those that require an office setting to meet with customers. The estimated cost can be calculated by first identifying a list of expenses and then researching and requesting quotes for each one. Use the SBA’s startup costs calculator for common types of expenses associated with starting a small business.

Entrepreneurs seeking to start their own business should fully research and understand all the legal and funding considerations involved, conduct market research, and create marketing and business plans. They will also need to secure any necessary permits, licenses, funding, and business bank accounts.

Startup capital can come in the form of loans, grants, crowdfunding, venture capital, or self-funding. Note that the federal government does not provide grant funding for the purposes of starting a business, although private sources do.

Business plans are comprehensive documents that lay out the most important information about a business. They are important references for the growth, development, and decision-making processes of a business, and financial institutions as well as potential investors and partners generally request to review them in advance of agreeing to provide funding or work together.

Starting a business is no easy feat, but research and preparation can help smooth the way. Having a firm understanding of the target market, competition, industry, business goals, business structure, funding requirements, tax and operating regulations, and marketing strategy, and conducting research and consulting experts where necessary, are all things that entrepreneurs can do to set themselves up for success.

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

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

U.S. Small Business Administration. “ Loans .”

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

U.S. Small Business Administration. “ Pick Your Business Location .”

U.S. Small Business Administration. “ Choose a Business Structure .”

U.S. Small Business Administration. “ Get Federal and State Tax ID Numbers .”

Internal Revenue Service. “ Do You Need an EIN? ”

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

U.S. Small Business Administration. “ Apply for Licenses and Permits .”

U.S. Small Business Administration. “ Marketing and Sales .”

U.S. Small Business Administration. “ Grants .”

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  • How to Do Market Research, Types, and Example 2 of 25
  • Marketing Strategy: What It Is, How It Works, and How to Create One 3 of 25
  • Marketing in Business: Strategies and Types Explained 4 of 25
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  • Business Development: Definition, Strategies, Steps & Skills 6 of 25
  • Business Plan: What It Is, What's Included, and How to Write One 7 of 25
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  • Business Startup Costs: It’s in the Details 10 of 25
  • Startup Capital Definition, Types, and Risks 11 of 25
  • Bootstrapping Definition, Strategies, and Pros/Cons 12 of 25
  • Crowdfunding: What It Is, How It Works, and Popular Websites 13 of 25
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The ultimate guide to financial modeling for startups

The ultimate guide to financial modeling for startups

Multidisciplinary professional services organization

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Do you have a startup and do you want to build a sustainable financial future discover the best practices in the ultimate guide to financial modeling for startups..

W e have three very easy questions for you:  

  • Do you want to build a (financially) sustainable business?
  • Are you looking for funding?
  • Do you want to avoid going bankrupt?

Probably you have answered yes at least once. If you have founded your own company, probably yes applies to all three questions.

To cover all three having (some form of) a financial model is crucial. Whatever the reason is for you ending up at looking at this article, apparently also for you financial modeling is an important topic, otherwise you wouldn’t be here, right? ;)

Well, you have come to the right place! Having supported around a thousand startups and scale-ups with their financial models over the past couple of years with the EY Finance Navigator team, we have written everything you need to know and all the best practices available around financial modeling for starting businesses: the ultimate guide to financial modeling for startups!

NOTE: in this article we are not sharing any financial modeling templates. Why? There are tons and tons of them already available online: simply look for ‘financial model template’ on the web and you are done.

This article is written with the purpose of doing something a template cannot do for you: helping you understand the different elements and technicalities of a startup’s financial model, learn how to fill it in and do checks on your data so you are able of making sense out of the outcomes yourself. And if you need  additional support, feel free to reach out using the contact form.

Need help building your financial projections?

Check out EY Finance Navigator: our financial modelling software for startups, trusted by entrepreneurs in more than 50 countries.

Find out more

Three reasons for having a financial model as a startup

Why it’s important to build an economically viable business

Before we dive into the technicalities and different elements of a startup’s financial model we are going to broaden our view a bit and address why forecasting in general is an important topic for startups. Almost all companies perform some kind of financial planning or budgeting, but there are particular reasons why a financial plan is important for startups specifically:

  • You need one to build an economically viable business. Why? Because by quantifying (and then validating) your business plan and business model, assumptions and vision you are able of finding out whether you can turn your ideas into a sustainably operating business. Moreover, if you build different versions (“scenarios”) you are better prepared for the future, especially if things do not go the way you planned. What if you launch half a year later? Answering such a question in your “worst case scenario” helps you anticipate how your cash flow, profitability and funding need are impacted.
  • You need one as part of the fundraising process. Financiers will typically ask you for a financial plan when you engage with them to raise funding, whether them being angel investor, VC, bank or subsidy provider. Certain investors will require more details then other, but building a model is wise even if you only need to provide them with high-level data. Why? Because it helps you answer the tricky questions a financier might have when he or she dives into your business case. Moreover, how are you planning to raise funding if you did not properly calculate how much funding you actually need?
  • You need one to inform yourself and shareholders. How do you know how your company is doing if you don’t have any targets to achieve or steering information to compare against? How are you going to update your shareholders on how you are spending their money and whether you are performing as promised without any financial plan to benchmark against? You will need a forecast to do so.

Do these reasons apply to your case as well? Good! Then definitely continue reading…

Two different approaches to financial modelling for startups

Building a financial model is not difficult, but how to get the numbers?

Often building a financial model is not really an issue. The amount of templates you can find online are countless and there’s always someone Excel-savvy around to help you out with the technicalities. The REAL problem (and question we get most often) is: how to get to the numbers?

…how do you forecast sales? …what is the market size of my sector? …how much should I spend on marketing? Etc.

There are two main methods to answer these questions: top down forecasting and bottom up forecasting.

Top down forecasting

Using the top down approach you work from a macro/outside-in perspective towards a micro view. Typically industry estimates are taken as starting point and narrowed down into targets that are fit for your company.

In essence the top down method helps you to define a forecast based on the market share you would like to capture within a reasonable timeframe. A useful aid to perform top down forecasting is the TAM SAM SOM model.

The TAM SAM SOM model captures the market size on three levels: the total worldwide market for a product or service (TAM: total available market), the part of that market you address with your specific offering (the niche market) adjusted for your geographical reach (SAM: serviceable available market), and the part of SAM you can actually realistically capture (SOM: serviceable obtainable market), given the existing competition. SOM is therefore equal to your sales target as it represents the value of the market share you aim to capture.

Example of a TAM SAM SOM visualization (source: EY Finance Navigator’s financial planning software for startups)

Example of a TAM SAM SOM visualization (source: EY Finance Navigator’s financial planning software for startups)

Based on the sales targets you define using the TAM SAM SOM model the next step is to estimate all costs that are needed to build or deliver your product or service and all expenses that are needed to perform all sales and marketing, research and development, and general and administrative tasks for your company to stay alive.

When estimating these you obviously aim for profitability within a reasonable timeframe. In other words: at some point all costs and expenses should not exceed your revenue targets anymore so that you get to a positive EBITDA (earnings before interest, taxes, depreciation and amortization).

Bottom up forecasting

The pitfall of the top down approach is that it might seduce you to forecast too optimistically (especially sales). Often entrepreneurs calculate SOM (equal to sales) by taking a random percentage of the market, without really assessing whether this target is realistically achievable.

A tiny percentage of a market might seem insignificant, but could be way too optimistic for instance in the year of your launch. Therefore, it could be useful to complement the top down method with the bottom up approach.

The bottom up approach is less dependent on external factors (the market), but leverages internal company specific data such as sales data or your company’s internal capacity. Contrary to the top down method, the bottom up approach begins with a micro/inside-out view and builds towards a macro view. This means a projection is made based on the main value drivers of your business.

Short example: let’s assume one of the main drivers of an online SaaS business is online marketing. One of its online marketing tactics is to advertise its product via LinkedIn. The company could define the costs per click using LinkedIn’s advertising tool, estimate the number of website visitors it will attract as a result, the conversion from website visitor to a lead, and the conversion from lead to customer.

Based on these metrics the company will have a good idea of potential sales, of course constrained by the budget available for online advertising. Performing a bottom up analysis therefore does not only force you to think about what are realistic targets for your company, but also to think about the ways in which you will spend your resources.

With the bottom up approach, you estimate revenues, costs, expenses and investments in the same way as described above: based on the resources at hand and the company data that is available. The pitfall of the bottom up method though is that it might fail to show the optimism needed to convince others of the potential of your company.

If you are a startup founder and you are looking to raise funding, the bottom up approach might not do the trick. Investors usually expect startups to grow fast and gain significant market share rapidly. The bottom up method might fail to reflect that.

It is difficult to create a forecast with a steep growth curve if every sale has to be rationalized and if its point of departure is the maximal capacity of your company (or budget for advertising purposes). With the bottom up approach it is hard to take into account factors such as virality or word of mouth. Moreover, the whole reason why external financing is needed, is often to expand capacity and grow faster than a company would do organically.

Therefore, when you build your startup’s forecast it could be advisable to combine both the bottom up and top down methods, especially when you plan to achieve a strong growth curve by means of external funding. Use the bottom up method for your short term forecast (1-2 years ahead) and the top down method for the longer term (3-5 years ahead). This makes you able to substantiate and defend your short term targets very well and your long term targets demonstrate the desired market share and the ambition an investor is looking for.

Assumptions

No matter what approach you use to build your startup’s financial model, it is crucial you are able of substantiating your numbers with assumptions. As a startup, historic data is often not available so you need to be able to present the ‘proof’ behind your numbers.

This will also help you when you start discussing with investors, as they are typically interested in knowing the reasoning behind your numbers. They are considering to put money in your company, so you do not want to give them the feeling you are selling baloney!

Assumptions can be anything that validate your numbers: market research, web search volume, contracts with suppliers, pricing validation, historic sales, conversion rates, bills of materials, website traffic, etc. It could be useful to create a “data room” (e.g. a Drive folder) in which you collect these kinds of evidence. By doing so, you are slowly building a library that underpins all the numbers you have put in your model and you are well prepared in case an investor might request a due diligence process.

Now, that is more than enough background to get started. Let’s get to it: the financial overviews a good financial model (of a startup) should include!

Three outcomes of a startup’s financial model

Every sector, company, business owner and investor is different, but a good financial model usually contains at least the three outputs.

Every sector, company, business owner and investor is different. All of them have their own interests and all of them value different metrics. From that perspective it is thus fair to say every financial model has its own characteristics. Therefore it is possible to customize every model to its user.

However, a good financial model usually contains at least the three following outputs: the financial statements, an operational cash flow forecast and a KPI overview.

1. Financial statements

Any decent financial model includes a forecast of the three financial statements: the profit and loss statement (P&L), the balance sheet (BS) and the cash flow statement (CF). The financial statements are the generally accepted way of communicating financial information across companies, banks, investors, governments and basically anyone that needs to show and/or understand financial performance in some way. Since any financial professional is able of interpreting financial statements having a forecast of them in place is typically a requirement in practically any fundraising process.

The profit and loss (or income) statement is basically an overview of all the income and costs your company has generated over a specific period of time and shows you whether you are profitable or not.

The P&L shows several crucial performance metrics such as the gross margin, EBITDA and net margin. EBITDA (earnings before interest, taxes, depreciation and amortization) is very important for investors as it provides insights in the operational performance of a company and allows them to compare efficiency when comparing different companies. The P&L can be used for comparing different time periods, budget vs. actual performance, performance against other companies etc. and can therefore show weak or strong performance.

Example of a TAM SAM SOM visualization (source: EY Finance Navigator’s financial planning software for startups)

Example of a profit and loss statement (or: income statement) (source: EY Finance Navigator’s financial planning software for startups)

The balance sheet is an overview of everything a company owns (its assets) and owes (its liabilities) at a specific point in time. It shows a snapshot in time (for instance the end of the year) and is therefore different compared to the profit and loss statement which shows all revenues and costs that were generated during a certain time period.

Liabilities show the obligations of a company and how it has financed itself using debt, whereas assets show how these funds are used within the company (for instance as capital to pay for inventory or assets such as computers and buildings). The difference between the value of assets and liabilities consists of equity, which is the paid-in capital by investors that finance the assets not covered by debt (assets = liabilities + equity).

Because of this the balance sheet is always ‘in balance’. Shareholders' equity represents the net value of a company. In other words: the amount that would be returned to shareholders if all the company's assets were liquidated and all its debts repaid.

Example of a TAM SAM SOM visualization (source: EY Finance Navigator’s financial planning software for startups)

Example of a balance sheet (source: EY Finance Navigator’s financial planning software for startups)

The cash flow statement shows all cash going in and out of a company over a specific time period. The cash flow statement consists of three different parts: the operational cash flow, the investment cash flow and the financial cash flow. The separation between these three categories provides you with insights on where money is going in and out of the company.

Operational cash flow shows the cash inflows and outflows caused by core business operations. Investment cash flow shows changes in investments in assets and equipment. In most cases (concerning startups) investment cash flow will have a cash outflow (because investing in assets costs money), but in some cases investment cash flow can also be positive in case a company is divesting (selling assets, e.g. selling real estate).

Financial cash flow relates to cash changes arising from financing activities. Cash inflow occurs in case of raising capital (such as loans or equity) and cash outflow occurs in case dividends are paid or when interests on cash financing are paid (e.g. to bondholders).

The cash flow statement allows management to make informed decisions on business operations and allows it to prevent and monitor company debt. Moreover it helps define a company’s investment needs and supports the timely payment of expenses and debts.

Example of a TAM SAM SOM visualization (source: EY Finance Navigator’s financial planning software for startups)

Example of a cash flow statement (source: EY Finance Navigator’s financial planning software for startups)

2. operational cash flow overview.

For fundraising purposes a forecast of the financial statements is typically shown on a yearly basis. Monthly overviews are in most cases not really needed, because for early-stage startups it is more about showing the long term growth potential than about giving an insight in monthly operations.

However, for the actual day to day financial management of your company it is useful to include an operational cash flow for the coming 12 months ahead in your financial model.

Why? Because it addresses questions yearly financial statements cannot answer, for instance about the timing of cash in and outflows. This is important to anticipate (see section ‘Working Capital’ below).

Moreover, it provides you with an opportunity to track your actual performance versus your expected budget on a monthly basis, which helps you cut costs (if needed) and anticipate to potential cash dips months ahead.

To build an operational cash flow forecast you simply list all the categories of cash inflows and outflows (for instance in an Excel), add a starting balance (the cash you own at this very moment) and see what remains at the end of each month.

An example can be found below. If you would also add columns where you can enter your actual numbers (against the forecasted cash in-and outflows) you are able of tracking performance over time and anticipate cash issues early on.

start up business financial plan

Example of an operational cash flow budget (source: EY, 2018)

3. kpi overview.

The outputs of a startup’s financial model typically also include some company and/or sector specific KPIs (key performance indicators). As the name already implies KPIs are crucial metrics for your business.

KPIs do not only matter for an investor, but also for you as a company owner. Based on these metrics you track the performance of your company, experiment with different acquisition channels, business models and cost structures, and you use them to make you and your co-founders laser-focused on the targets you defined.

There are KPIs that show sales and profitability performance (such as revenue growth rate, gross margin, EBITDA margin or profits), KPIs related to cash flow and raising investment (such as the burn rate, runway and funding need breakdown) and company or industry specific KPIs.

SaaS companies for instance typically estimate and track, amongst others, the customer life time value (LTV), customer acquisition costs (CAC), LTV/CAC ratio and the churn rate. For SaaS businesses, these are crucial.

For your business or industry some other metrics might be more important. Perform a bit of research on the web, think about the most important drivers of your company and identify the ones most relevant to you and to potential investors. Include these in your financial model as well.

start up business financial plan

Example of several KPIs that could be relevant to startups (source: EY Finance Navigator’s financial planning software for startups)

The inputs to a startup’s financial model.

What are the six common elements that typically serve as the input sheets of a financial model?

The outputs discussed above do not all of a sudden appear out of nothing, obviously. They are the result of many calculations taking place in the background of a financial model, based on the data entered into different input pagessubstantiated by the assumptions and research performed by the person filling in the financial model.

In this article we are not discussing all the calculations that take place in a financial model, as that would be a heck of a job! As mentioned earlier, we focus on helping you understand the different elements and technicalities of a startup’s financial model, learn how to fill it in and make sense out of the outcomes.

If you want insights in the calculations you can download a financial modeling template online. If you do not want to worry about (errors in) calculations at all, try out our financial planning software for startups.

Below we have listed six common elements that typically serve as the input sheets of a financial model. One element we have left out as an input sheet is what you could call the financial model’s ‘settings’.

These define the setup of the complete model and include things such as the forecasting period (which is typically 3-5 years, sometimes ten for certain industries), the currency used, taxes that might apply, etc.

Before moving to the different inputs of a startup’s financial model, it is important to realize financial modeling is not a goal in itself. It should be a means to an end. And that end is typically to get more insights in the financial side of building a business, whether those insights are meant for yourself or for a potential investor.

A financial model is a quantification of your overall business and should therefore be a reflection of your strategy, business model and vision. It is therefore fair to say your financial model and business model canvas are two sides of the same coin.

If you are ever in doubt on what to include in your financial model or if you need to take a step back from the numbers, you can use your business model canvas as a tool to help you think about your financial plan.

1. Revenues

The first (and maybe also most fun) input sheet of a financial plan is the revenue forecast. Revenue projections can be tricky though, for instance when you have not achieved any sales in the past yet. So how would you go about this? For a deep dive we would recommend to have a look at our earlier article on how to create a killer sales forecast for your startup, but we will present the key takeaways below.

Forecasting revenues is typically performed using a combination of the top down (TAM SAM SOM model) and bottom up methods which have been discussed earlier in this article. Use the bottom up method for your short term sales forecast (1-2 years ahead) and the top down method for the longer term (3-5 years ahead). This makes you able to substantiate your short term targets on a detailed level, while at the same time your long term targets demonstrate the desired market share and the ambition an investor is looking for.

If you find it difficult estimating demand at all one way of tackling this is to perform keyword research. Keyword tools give you insights in the search volumes for keywords that relate to your offering. They can show you per city, country, continent (whatever you want) how much monthly searches are performed for that specific keyword on the internet.

This can give you a good indication on demand for certain offerings, compared across different countries. You could try for instance the keyword tool Ubersuggest. If you sell 3D printers, you could search “buy 3D printer” and see how much people search for these words per month.

Now you know the approaches to forecasting, this is how you actually put your forecast down on paper:

  • List all the products or services that you are selling.
  • Determine in which units you want to present your sales: for a soda producer, this could for instance be bottles sold, but also liters sold.
  • Forecast per sales unit the number of units sold. This is based on the top down and bottom up analysis you have performed above.
  • Add selling prices. Check out our article on new product pricing strategies if you want to learn more on how to determine pricing.

You could for instance end up with something that looks like this if you would prepare the forecast in Excel:

start up business financial plan

Revenue forecast example in Excel (source: EY, 2018)

The way in which you build up your revenue forecast depends a bit on your business model. The example above includes a traditional business model of a company selling products/services per unit.

However, for a SaaS business it could be better to prepare a revenue forecast based on existing customers, new customers and the churn rate. You can look for a financial modeling template for specific companies or business models on the web. Our financial planning software for startups also includes the usage of different business models to build up your revenue forecast.

2. Cost of goods sold (COGS)

Cost of goods sold (COGS) are those costs that undoubtedly need to be made in order for a company to deliver a service or produce a good. Without these costs, the product or service would simply not exist.

COGS differ based on the type of offering you sell. For a company that sells tangible products they would include for instance the costs of the materials used in creating the good. For a company that sells consultancy hours they would include the personnel costs of the employees delivering the service.

For a SaaS business COGS are different compared to ‘normal’ businesses as there is no regular production or service delivery process involved. However, also SaaS companies definitely incur COGS, such as hosting costs, customer support and onboarding costs, and online payment costs. From these examples you can notice that all of these costs have to be incurred in order to produce the good or deliver the service.

Not sure how to forecast COGS? One way of tackling this, is by looking at the sales targets defined in your revenue forecast. Let’s assume you sell a tangible good. From creating the revenue projections you know already how many units of sales you aim to have. You then add per unit of sales the costs of raw materials and labor costs involved in producing those goods.

Example: if you sell plastic bottles, you could calculate how much plastic (in grams) you need per bottle and what would be the price of a kilogram of plastic. Moreover, you need to know how much paper label you need per bottle and what is the price of that. Also, you need to know the costs of the cap.

If you know all of these costs required to produce one bottle you can multiply them by the total number of bottles sold. Finally you add the personnel costs for employees that are involved in production.

If you would prepare this in Excel it would probably look something like this:

start up business financial plan

Cost of goods sold forecast example in Excel (source: EY, 2018)

How to forecast COGS also depends on your business model. Sometimes it would make more sense to forecast COGS on total level, for instance per month. Or they could be a percentage of your revenues (for instance when you work with sales commissions). Our financial planning software for startups includes different types of COGS forecasting.

3. Operating expenses (OPEX)

Operating expenses are those expenses that a business incurs as a result of performing its normal business operations. Unlike the cost of goods sold, they are not necessarily needed to produce the goods that are sold or to deliver the services promised. They include costs related to the supporting and operational side of business, such as sales and marketing, research and development and general and administrative tasks.

Typical operating expenses for startups include: events, travelling, legal costs, online marketing, payroll costs (of employees not part of COGS), accounting, rent, utilities, insurance, prototyping, patent costs, IT costs, office supplies, promotional materials, etc.

If you are not sure about which expenses you might incur in the long term, you could always save a certain percentage of your revenues for the different expense categories. E.g. you could include 10% of your yearly revenues on a budget for sales and marketing activities.

Most important is that your spending on operating expenses aligns with your company strategy. Is the growth of your company heavily reliant on online marketing? Then you would expect significant spending in that category.

An example of what an operating expenses forecast could look like for instance for spending on sales and marketing, can be found below.

start up business financial plan

Operating expenses forecast example in Excel (source: EY, 2018)

4. personnel.

Personnel is probably one of the easier forecasts to build. With your personnel forecast you project the number of employees hired including their respective salaries, additional benefits and payroll taxes. To make personnel forecasting more simple you could split up your personnel into different categories, for instance:

  • Direct labor: here you include the employees that will be solely engaged with the production of the goods sold or services delivered. Think of engineers and technicians for companies selling tangible hardware products, a junior advisor in a consultancy company, or customer onboarding personnel in a SaaS business. These costs are not part of operating expenses but are part of the cost of goods sold.
  • Sales and marketing: for instance sales managers, marketing managers, copywriters, social media experts, etc. These employees are part of your operating expenses.
  • Research and development: R&D managers, (software) engineers, technicians, etc. These employees are part of your operating expenses.
  • General and administration: here you include back office and C-level personnel, such as the CEO, CFO, CMO, secretaries, bookkeepers, etc. These employees are part of your operating expenses.

An example of what a personnel forecast could look like, for instance for personnel working on sales and marketing, can be found below.

start up business financial plan

Personnel forecast example in Excel (source: EY, 2018)

If you want to check whether your personnel forecast is realistic, you could divide your projected revenues in a given year by the number of employees (‘FTEs’ or full time equivalents) for that year. This tells you how much revenue you expect to generate per employee and provides a solid basis for comparison with competitors and industry leaders.

When your revenue per employee is at a similar level compared to the top twenty tech companies (see the graph below) already in just a few years after your launch, this is a strong indicator that you might be too optimistic regarding your expected revenues or that you might invest insufficiently in personnel.

start up business financial plan

Revenue per employe (source: EY, 2018)

5. investments in assets (capital expenditures).

The fifth input sheet to your startup’s financial model are the investments in assets (or: capital expenditures). Capital expenditures are funds used by a company to acquire or upgrade physical assets such as physical property, intellectual property, buildings or equipment. This type of expense is made by companies to maintain or increase the scope of their operations. They can include everything from repairing a roof to building a brand new factory.

Typical capital expenditures depend on the type of business and industry. For startups it is quite common to invest in computers, software, office equipment and machinery, but buying a building would also apply as a capital expenditure.

Many startups are incentivized to categorize their expenses as capital expenditures instead of as operating expenses. This has to do with the fact that due to an accounting technicality payments related to investments in assets are spread out over several years in the profit and loss statement (see section ‘Deprecation’ below) and therefore do not show up all at once in the year of purchase. This means they have a less visible reducing impact on profits. Be aware that the rules for categorizing expenses as assets are quite strict though!

6. Financing

The final potential input sheet of a startup’s financial model could be a financing module. In this sheet you would add financing streams such as equity, loans or subsidies. The main goal of this would be to check the impact on your funding need when you add different types of funding in different years of the model.

When a model includes the possibility to input loans, it needs to account for the loan repayment and interest payments, as these have an impact on cash flows. Below you can find a simple example of a €100,000 loan with a duration of 10 years and an interest rate of 10%.

start up business financial plan

Loan input and repayment scheme example in Excel (source: EY, 2018)

The six different input sheets that are discussed above are all in some way linked to the outputs of the financial model. For the financial statements specifically the links are as follows:

  • Revenues impact the top line of the profit and loss statement. In the P&L you deduct all costs, expenses and depreciation from the revenues to arrive at EBIT (earnings before interest and taxes). EBIT serves as input for the operational cash flow in the cash flow statement. If you deduct interest and taxes (see section ‘Taxes’ below) from EBIT, you arrive at the net profit. Revenues even impact the balance sheet as they define the accounts receivable position.
  • Cost of goods sold also turns up in the profit and loss statement. Deducting them from the revenues results in the gross margin. The gross margin can also be presented as a percentage: the higher this percentage is, the more revenue is left for covering costs that are not directly related to production. Cost of goods sold also impacts the balance sheet as they define accounts payable and inventory.
  • Operating expenses show up in the profit and loss statement as well. Deducting operating expenses and cost of goods sold from the revenues results in EBITDA (earnings before interest, taxes, depreciation and amortization).
  • Personnel either shows up in the profit and loss statement as a separate line or it is included in the cost of goods sold or operating expenses. Personnel involved in delivering services or producing goods end up in cost of goods sold. All other personnel is part of operating expenses.
  • Investments in assets (capital expenditures) do not show up in the profit and loss statement because, accounting-wise, they are not seen as costs or expenses. They are investments and can be capitalized, meaning a company can leverage their value for several years. Therefore, they show up as something a company owns in the assets side of the balance sheet. Their value is depreciated (reduced in value) over their lifetime which is shown as depreciation in the profit and loss statement. Even though investments do not show up as a cost or expense, investing in something does mean there is a cash outflow for your company (you have to pay, right?). Therefore investments also show up in the cash flow statement as investment cash flow.
  • Financing impacts the financial statements in two ways. Firstly, new financing and changes in debt shows up in the cash flow statement as financing cash flow. Secondly, interest paid on debts end up in the profit and loss statement.

The financial statements themselves are also interrelated (see image below). For that reason it could be wise to have an experienced person supporting you building your model if you do not have this experience yourself, especially if you are looking for a more complex model including supporting schemes such as the ones mentioned in the next section.

start up business financial plan

Interdependencies in the financial statements (source: EY, 2018)

If you do not want to worry about all the calculations and the interdependencies in a financial model, you could try out our financial planning software for startups, which does all the thinking for you.

Other supporting elements of a startup’s financial model

What other elements are essential for your financial model?

As you might have noticed already, some of the elements mentioned above include some tweaking of the numbers before you get to the right information that is presented in the financial statements. Supporting schemes such as working capital, depreciation and taxes might be needed.

Moreover, when you build a financial model you automatically structure a whole lot of data which you can also use for other purposes, such as a company valuation. Therefore, below we present four elements that support a startup’s financial model.

1. Working capital

Working capital is the capital that you need in order to sustain your daily operations. Technically speaking working capital is a comparison of the value of your current assets compared to your current liabilities.

In other words: the value of the things your company owns and that can be converted to cash on the short term (in less than one year) compared to the value of the things your company owes to others that are due on the short term (less than one year as well). Current assets include cash, accounts receivable and inventory. Current liabilities for instance include accounts payable.

Working capital is extremely important for startups, because it is a measure of both a company's efficiency and its short-term financial health. Working capital can significantly affect cash flow, so if a company's current assets do not exceed its current liabilities, then it may run into trouble paying back creditors in the short term. The worst-case scenario is bankruptcy.

Working capital can be impacted by payment terms. In order to assess your working capital position you should therefore not only steer your company based on revenue targets, but also on your cash flows. Forecasting for cash flow provides you with an overview of the timing of incoming and outgoing cash flows. How to do this is discussed in section ‘Operational cash flow overview’.

Why is this important? Well, when you focus only on costs and revenues and not on the timing of receiving and sending payments you could end up in serious trouble.

Consider that a large firm orders one hundred 3D printers at a startup producing a new type of 3D printers. The client expects the printers to be delivered within one month. As large firms often use long payment terms it might take up to 90 days before the startup receives the actual payment for the order.

This means that our 3D printer startup needs to finance the raw materials and production process itself. After all, the company has to deliver within 30 days, but still has to wait for 90 days before the payment is received.

If the funds required for production are not available for the startup then the order might be cancelled leaving both parties unsatisfied. If this happens consistently, the startup could go bankrupt even though orders are coming in.

Working capital is calculated based on the number of days your sales and payables are outstanding and the number of days you hold inventory before selling it. It shows up in the balance sheet. Therefore, a financial model might need a separate scheme that calculates working capital based on revenues, cost of goods sold and days outstanding.

See for instance the example of the calculation of accounts receivable below. With revenues being €100,000 in year one and payment terms of 15 days for outgoing invoices the accounts receivable position at the end of the year is €4,110.

start up business financial plan

Accounts receivable calculation example in Excel (source: EY, 2018)

2. depreciation.

Deprecation indicates the value reduction of assets a company owns. Based on the value of an asset and its useful lifetime depreciation is calculated. Depreciation is part of the profit and loss statement and impacts the value of assets on your balance sheet.

As an example, let’s say you want to buy some computers for your company. They cost you €20,000 and you can use them for four years. This means you will write off the total investment of €20,000 over a period of four years, which means you will depreciate their value with €5,000 every year for the coming four years (if they do not have any residual value left after that).

 A financial model needs a separate scheme that calculates depreciation based on investments and their related useful lifetime. Below you can find an example calculation of depreciation.

As you can see, in year one €20,000 was invested in computers, software and equipment and in year two €30,000. Both are depreciated over four years, resulting in the total depreciation per year; being €5,000 for year one, €12,500 for year 2-4 and €7.500 for year five.

start up business financial plan

Depreciation calculation example in Excel (source: EY, 2018)

Every company that is incorporated and registered at the Chamber of Commerce has to pay yearly taxes over its financial results: the corporate income tax. Taxes are deducted from your results in the profit and loss statement. Here you can find a list of corporate income tax rates per country.

If you want to include tax carryforwards in your financial model, you likely need a separate tax scheme as part of your model. A tax carryforward works as follows. As an entrepreneur it is likely that you have negative results in the first couple of years of operations. If you have negative results this basically means you have expenses that exceed revenues (more costs than income) leading to an operating loss. If you have a loss, there is obviously no income to be taxed by the tax authorities. This loss can be leveraged in future tax reporting periods to offset taxable income (you can ‘carry it forward’), which reduce the amount of tax you will pay in that specific tax reporting period.

Below you can find an example of a tax carryforward calculation based on a corporate income tax rate of 23%. As you will notice, year one had a negative result of -€50,000 which is settled with the positive result of €230,589 for year two resulting in a taxable profit of €180,589, resulting in a lower tax burden for that year.

start up business financial plan

Tax carryforward calculation example in Excel (source: EY, 2018)

4. valuation.

Many startups build a financial model for the purpose of raising funding. Part of the fundraising process are negotiations with an investor about the valuation of the company to be invested in. The good news is that when you have built a financial model for your company, all the ingredients are there to perform a valuation on your company as well by means of the discounted cash flow (DCF) method.

The main advantage of the discounted cash flow method is that it values a firm on the basis of future performance. This is perfect for a startup that might not have realized any historical performance yet, but expects large future earnings. During the (pre-)seed stage it is not uncommon for startups to not generate any revenues at all yet, while discussions with investors regarding ownership percentages and the accompanying valuation already take place. The discounted cash flow method is very suitable in that case, as it weighs future performance more than current performance.

The main downside of the DCF method when valuing startups is that the DCF is nothing more than a formula, a mathematical operation. This means that the quality of the valuation is extremely sensitive to the input variables of the formulas used to calculate the valuation. Moreover, it largely depends on your ability to create an accurate forecast of your firm’s future performance. After all, the future earnings are the foundation of the valuation.

A deep dive into discounted cash flow valuation is out of scope for this article. The main steps of performing a discounted cash flow valuation are presented below, but we have also written a deep dive into startup valuation:

  • Step 1: create financial projections for your firm (tick in the box!).
  • Step 2: determine the projected free cash flows.
  • Step 3: determine the discount factor.
  • Step 4: calculate the net present value of your free cash flows and terminal value by using the discount factor.
  • Step 5: sum up all results of step 4.

Below you can find an example of a discounted cash flow valuation.

start up business financial plan

DCF valuation example in Excel (source: EY, 2018)

Depending on the desired outcomes and the corresponding complexity of your financial model you can decide whether or not to add additional schemes such as working capital, depreciation and tax carryforwards. You can look for a financial model template including these elements on the web. If you do not want to worry about these elements at all, our financial planning software for startups does all the calculations for you.

Scenarios and sanity checks

We have taken a look at all the different elements of a startup’s financial model. That means we are done! Right…? Not quite yet! For the pros there are some additional steps to take.

Firstly, it could be worth it to spend some time creating different versions (called scenarios) of your financial model. Entrepreneurs tend to be optimistic people, which is a good characteristic to have to keep up the energy and push through where others might quit.

Unfortunately, in many cases, the life of an entrepreneur tends to be a bit more disappointing in practice than it is on paper (at least from a financial perspective, don’t get too depressed now). Therefore, next to your default financial plan (called your ‘base case scenario’) you might want to prepare a scenario which is a bit less optimistic (your ‘worst case scenario’).

What if you launch six months later? What if sales do not ramp up as expected? What if your costs turn out to be double of what you expected? Answering such questions helps you anticipate how your cash flow, profitability and funding need are impacted in a less optimistic scenario.

Do not forget to create a ‘best case’ scenario as well. Why? You can give potential investors a sneak preview of the upside potential of your company and most importantly: it is fun to see the financial impact of aiming for the moon!

Secondly, it might be wise to perform some sanity check on your financial model to make sure you avoid common pitfalls in the financial models of startups. You can find ten common errors below:

  • A mismatch between the financial model and the business plan: a financial model should resonate with the overall business strategy
  • Overoptimistic or very pessimistic revenue projections: check out section ‘Revenues’ on how to forecast sales
  • A funding need that is not adequately explained: make sure you include a breakdown of costs
  • Underlying assumptions that are not clearly defined: you should be able to provide clarification or proof to the numbers
  • Not enough employees as part of the personnel forecast: do not underestimate the number (and costs) of employees you need to build a fast-growing company
  • Revenue projections which are not aligned with the market size: by definition revenues cannot be larger than the size of the market
  • Operational expenses that are being left out: make sure expenses are aligned to your strategy
  • Operational expenses which are misaligned with the forecasted revenues: make sure expenses resonate with revenues
  • No realistic view of the gross, EBITDA and net margins: when speaking with investors, always be prepared to answer questions on your current and expected margins
  • Disregarding the importance of working capital: do not underestimate the effect of payment terms on your funding need

How to raise money for your startup?

Many startups create a financial model because they are looking to raise external funding. Whether you are applying for a loan at a bank, trying to convince an investor of the potential of your firm or are applying for a subsidy or grant; in most if not all cases you will need to provide your counterparty with a financial plan.

There are different ways of raising money for your startup and these can be categorized into two main categories.

Financing via debt: an example of financing via debt can be a loan which you receive from a bank, a business or an individual where you agree on specific terms regarding payback and interest. For startups it can be difficult to receive a loan from a bank as they often do not meet the minimum criteria in terms of revenue generation and offering collateral.

Some advantages of using debt are as follows:

  • The control of your company remains with you and your current shareholders.
  • Interest on debt can be deducted from your tax.
  • Debt often has a disciplining effect on a management team, as the resulting cash flows are limited so the management will be encouraged to be more efficient and create value.

Financing via equity: an example of financing via equity is funding you would raise from an angel investor or a VC in return for shares of your startup. For startups, financing via equity is more common than debt financing, because receiving a loan can be difficult (banks are in general more risk averse).

Equity investors take more risk by investing money in a company in exchange for shares, meaning they could lose it all. Since an equity investor becomes a shareholder when he/she invests in your company you will (partly) lose control of the firm. Moreover, you will need to share your profits with your new shareholders and sometimes they might want to be actively involved in the management of your company as well.

Of course there are other ways to fund your startup, such as crowdfunding, convertible notes and subsidies. If you want to learn about even more types of funding, we have listed 12 sources of finance for entrepreneurs . Make sure you pick the right one!

Why you should always engage in financial modeling as a startup

There are different reasons why to engage in financial modeling as a startup. You might need a financial model to build an economically viable business, to be better prepared for the future, to communicate your company’s performance to potential shareholders or new investors, or to set targets for your company you can work towards.

The two main approaches towards financial modeling are the top down method (leveraging market size data to build a forecast for your company) and the bottom up approach (using internal company specific data such as sales data or data on the internal capacity).

It could be useful to combine both methods as it allows you to substantiate short term targets on a detailed level and it allows you to demonstrate the long term desired market share and the ambition an investor is looking for. No matter what approach is used, a forecast stands or falls based on its underlying assumptions.

Typically, the outputs of a startup’s financial model consist of a three to five (sometimes 10) year forecast of the financial statements on a yearly basis (profit and loss statement, balance sheet, cash flow statement), an operational cash flow overview for the coming 12 months ahead, and an overview of the company or sector specific key performance indicators (KPIs).

These outputs are the results of the calculations taking place in the background of a financial model, based on the data entered into different input pages of the financial model. These input pages consist of, for instance, forecasts of: revenues, cost of goods sold, operating expenses, personnel, investments in assets (capital expenditures) and financing.

For some of the outputs supporting calculations and schemes are required. These include, for example, working capital, depreciation and taxes. Using the data that is typically part of a financial model you are also able of creating a valuation of your startup using the discounted cash flow method.

It can be worthwhile to create several scenarios of a financial model (worst vs. base vs. best case) and to check for common pitfalls in financial modeling for startups. Creating multiple scenarios and performing sanity checks helps you get closer to a realistic case, instead of presenting an overly optimistic or an unattractive case.

Having a financial model can help in the fundraising process, as external financers typically require you to provide a forecast. This makes sense, considering the fact you are asking them to put their money in your company.

There are different sources of funding, the main ones being debt and equity financing. However, more and more sources of funding emerge, such as: convertible notes, crowdfunding, initial coin offerings and, of course, subsidies and grants.

If you have made it all the way to the end of this article: well done! With the information we have shared you are well equipped to start forecasting, maybe even build your own financial model and make sense out of the metrics and data that are presented by your model.

As mentioned earlier there are tons of financial model templates for startups to be found on the web. If you need more support, feel free to reach out to us here!

Financial modeling is an important topic especially when you founded your own company. We have written everything you need to know and all the best practices available around financial modeling for starting businesses. If you need help, reach out for us here .

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Do you want to increase the odds that your business startup will be a success? Download this step-by-step business plan template to lay the groundwork for your new business.

Writing a business plan allows you to carefully think through every step of starting your company so you can better prepare and handle any challenges. While a thorough business plan is essential in the financing process, it's helpful even if you don’t need outside financing.

Creating a business plan can:

  • Help you discover any weaknesses in your business idea so you can address them before you open for business
  • Identify business opportunities you may not have considered and plan how to take advantage of them
  • Analyze the market and competition to strengthen your idea
  • Give you a chance to plan strategies for dealing with potential challenges so they don’t derail your startup
  • Convince potential partners, customers, and key employees that you’re serious about your idea and persuade them to work with you
  • Force you to calculate when your business will make a profit and how much money you need to reach that point so that you can be prepared with adequate startup capital
  • Determine your target market and how to reach them

A detailed, step-by-step plan gives you a blueprint you can refer to during the startup process and helps you maintain momentum.

What this business plan template includes

Writing a business plan for a startup can sometimes seem overwhelming. To make the process easier and more manageable, this template will guide you step-by-step. The template includes easy-to-follow instructions for completing each business plan section, questions to help you think through each aspect, and corresponding fillable worksheet/s for critical sections.

After you complete the 11 worksheets, you will have a working business plan for your startup to show your SCORE mentor .

Business plan sections covered in this template:

  • Executive Summary
  • Company Description
  • Products and Services
  • Marketing Plan
  • Operational Plan
  • Management and Organization
  • Startup Expenses and Capitalization
  • Financial Plan

The Appendices include documents that supplement information in the body of the plan.  These might be contracts, leases, purchase orders, intellectual property, key managers’ resumes, market research data or anything that supports assumptions or statements made in the plan.

The last section of the template, “Refining Your Plan,” explains ways to modify your plan for specific purposes, such as getting a bank loan, or for specific industries, such as retail or manufacturing.

Complete the Business Plan Template for a Startup Business to create a working business plan for your startup.

Then, contact a  SCORE mentor  to review and refine your plan online or in person.

Quick Start Business Plan The aim of this module is to give you the tools, direction and ideas you need to build a business plan. If you're starting a business then a business plan is essential, because it forces you to think through your ideas and options.

10 Business Planning Tips for Starting a Business In this webinar, you'll learn 10 business planning tips to help you start your entrepreneurial journey on the right path.

Business Plan 101: Sales & Marketing The sales and marketing section of your business plan describes how you intend to sell your product. Learn what you should include in this section.

Copyright © 2023 SCORE Association, SCORE.org

Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.

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Free Startup Business Plan Templates and Examples

By Joe Weller | May 6, 2020

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In this article, we’ve rounded up a variety of the top, professionally designed startup business plan templates, all of which are free to download in PDF, Word, and Excel formats.

Included on this page, you’ll find a one-page startup business plan template , a business plan outline template for startups , a startup business planning template with a timeline , and a sample startup business plan .

Startup Business Plan Template

start up business financial plan

Download Startup Business Plan Template - Word

Word | Smartsheet

This startup business plan template contains the essential components you need to convey your business idea and strategy to investors and stakeholders, but you can customize this template to fit your needs. The template provides room to include an executive summary, a financial overview, a marketing strategy, details on product or service offerings, and more.

One-Page Startup Business Plan Template

One Page Business Plan For Start Up Template

Download One-Page Startup Business Plan Template

Excel | Word | PDF

This one-page business plan is ideal for startup companies that want to document and organize key business concepts. The template offers an easy-to-scan layout that’s ideal for investors and stakeholders. Use this plan to create a high-level view of your business idea and as a reference as you flesh out a more detailed roadmap for your business.

For additional resources, visit " Free One-Page Business Plan Templates with a Quick How-To Guide ."

Simple Fill-In-the-Blank Business Plan Template for Startups

Simple Fill In The Blank Business Plan Template

Download Simple Fill-in-the-Blank Business Plan Template for Startups

This comprehensive fill-in-the-blank business plan template is designed to guide entrepreneurs through the process of building a startup business plan. This template comes with a customizable cover page and table of contents, and each section includes sample content that you can modify to fit the needs of your business. For more fill-in business templates, read our  "Free Fill-In-the-Blank Business Plan Templates"  article.

Lean Business Plan Template for Startups

Lean Business Plan Templates for Startups

Download Lean Business Plan Template for Startups

This Lean business plan template takes a traditional business plan outline and extracts the most essential elements. Use this template to outline your company and industry overview, convey the problem you are solving, identify customer segments, highlight key performance metrics, and list a timeline of key activities.

Business Plan Outline Template for Startups

Simple Business Plan Outline Template

Download Business Plan Outline Template for Startups

You can use this business plan outline as a basis to create your own business plan. This template contains all the elements of a traditional business plan, including a title page, a table of contents, and information on what to include in each section. Simplify or expand this outline based on the size and needs of your startup business.

Startup Business Planning Template with Timeline

Simple Business Planning Template with Timeline

Download Startup Business Planning Template with Timeline

Excel | Smartsheet

As you create your business plan, this business planning template doubles as a schedule and timeline to track the progress of key activities. This template enables you to break down your plan into phases and provides space to include key tasks and dates for each task. For a visual timeline, shade in the cells according to each task’s start and end dates. The timeline ensures that your plan stays on track.

Business Plan Rubric Template for Startups

start up business financial plan

Download Business Plan Rubric Template for Startups

Excel | Word | PDF | Smartsheet

If you’re starting a business and want to keep all your ducks in a row, use this rubric to evaluate and score each aspect of your startup business plan. You can tailor this template to the needs of your specific business, and can also highlight areas of your plan that require improvement or expansion. Use this template as a tool to make sure your plan is clear, articulate, and organized. A sharp, insightful, well thought-out plan will definitely get the attention of potential investors and partners.

For additional resources to help support your business planning efforts, check out “Free Startup Plan, Budget, and Cost Templates.”

What’s the Best Business Plan Template for Startups?

The template you choose for your startup business depends on a number of factors, including the size and specific needs of your company. Moreover, as your business grows and your objectives change, you will need to adjust your plan (and possibly your choice of template) accordingly. 

Some entrepreneurs find it useful to use a Lean business plan template design in order to jot down a business concept and see if it’s feasible before pursuing it further. Typically one to three pages, a Lean business plan template encourages you to highlight core ideas and strategic activities and remain focused on key points.

Other entrepreneurs prefer a template with a more traditional business plan design, which allows you to go into greater detail and ensure you include every detail. A traditional plan can range from 10 to 100 pages and cover both the high-level and granular particulars of your overall concept, objectives, and strategy.

There is no one-size-fits-all solution, but the following section outlines the minimum that your business plan template should include in order to gain buy-in from potential investors.

What to Include in a Startup Business Plan

Whether you choose to use a template to develop your startup business plan or decide to write one from scratch, you need to include the following elements:

  • An overview of your company and the industry in which it operates
  • The problem you are solving and the proposed solution
  • A description of your product or service offerings, including key features
  • The existing alternatives that customers use and your competitive advantage
  • The target customer segments and the channels you will use to reach them
  • The cost structure and revenue streams associated with your business
  • A financial plan, including sales and revenue projections (ideally 3-5 years)
  • If applicable, the financial requirements to get your business running, including how you will source and allocate funds

Each of the following sections provides an example of a business plan that you can use for reference as you develop your own.

One-Page Lean Business Plan Example

This Lean business plan example displays a visually appealing and scannable one-page illustration of a business plan. It conveys the key strategies you need to meet your main objectives. Each element of this concise plan provides stakeholders and potential investors with links to resources that support and expand upon the plan’s details, and it can also serve as an investor pitch deck.

One Page Business Plan Example

Startup Business Plan Sample

This business plan sample contains all the aspects of a standard business plan. Using a fictional food truck business as the basis for a startup business plan, this sample will give you all the ideas you need to make your plan outstanding.

Basic Business Plan Sample

Download Startup Business Plan Sample - PDF

When the time comes that you need more space to lay out your goals and strategies, choose from our variety of  free simple business plan templates . You can learn how to write a successful simple business plan  here . 

Visit this  free non-profit business plan template roundup  or of 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  free 30-60-90-day business plan templates  to find more tailored options.

Top 10 Tips to Create a Startup Business Plan

Putting together a business plan can be overwhelming and time consuming, especially if you aren’t sure where to begin. Below, we share tips you can use to help simplify the process of developing a startup business plan of your own. 

  • Use a business plan template, or begin with a business plan outline that provides all the elements of a standard plan to get your ideas down on paper in a structured manner. (You can choose from the selection of templates above.)  
  • Remove sections from your outline that aren’t relevant or that aren’t necessary to launch and operate your business.
  • Compile the data you have gathered on your business and industry, including research on your target market and product or service offerings, details on the competitive landscape, and a financial plan that anticipates the next three to five years. Use that information to fill in the sections of your plan outline. 
  • Get input and feedback from team members (e.g., finance, marketing, sales) and subject matter experts to ensure that the information you’ve included in the plan is accurate.
  • Make certain that the objectives of your plan align with marketing, sales, and financial goals to ensure that all team members are moving in the same direction.
  • Although this section of the plan comes first, write the executive summary last to provide an overview of the key points in your business plan.
  • Prepare a pitch deck for potential clients, partners, or investors with whom you plan to meet in order to share vital information about your business, including what sets you apart and the direction you are headed. 
  • Who are the founders and management executives, and what relevant experience do they bring to the table?
  • What is the problem you are solving, and how is your solution better than what currently exists? 
  • What’s the size of the market, and how much market share do you plan to capture?
  • What are the trends in your market, and how are you applying them to your business?
  • Who are your direct competitors, and what is your competitive advantage?
  • What are the key features of your product or service that set it apart from alternative offerings, and what features do you plan to add in the future?
  • What are the potential risks associated with your business, and how do you plan to address them?
  • How much money do you need to get your business running, and how do you plan to source it?
  • With the money you source, how do you plan to use it to scale your business?
  • What are the key performance metrics associated with your business, and how will you know when you’re successful?
  • Revisit and modify your plan on a regular basis as your goals and strategies evolve.
  • Use a work collaboration tool that keeps key information across teams in one place, allows you to track plan progress, and captures updates in real time.

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I'm a financial planner — I have 4 tips for my business owner clients looking to open a business bank account

Our experts choose the best products and services to help make smart decisions with your money ( here's how ). In some cases, we receive a commission from our partners ; however, our opinions are our own. Terms apply to offers listed on this page.

  • Legally protecting yourself in case of an audit is the No. 1 reason to use a business bank account.
  • Different banks will offer different levels of convenience, and they'll come with different fees.
  • Fraud detection and other security features are especially important for protecting your business.

Insider Today

When starting a business, it can be overwhelming thinking about all the things you need to do and consider. However, it is essential that you do not overlook the value of opening a business bank account — usually both a business checking account and a high-yield business savings account .

As a CPA and financial planner, one of the first things I tell all my business owner clients to do is to keep their personal and business transactions separate. While there are a multitude of reasons you should have a separate bank account for your business, legal protection is certainly the most important.

If you experience an audit, it is important to have an easy way to track your business expenses and income. When business finances are commingled with personal finances, it becomes nearly impossible to provide a clear financial trail.

When choosing a business bank account, there are several important factors to consider. Here are four things I tell my business owner clients to consider when choosing a business bank account.

1. Access to banking services and customer service

When it comes to running a business, a variety of banking services can help you effectively manage your business finances. Beyond just opening a business bank account, you want to ensure that the financial institution you choose can provide access to services such as a checking account, savings account, business loans , wire transfers, fraud prevention services, a notary, checkbooks, business credit cards , online and mobile banking, and bill payment services.

If you want more one-on-one attention from a banker, consider opening an account with your local bank or credit union. You may also prefer a physical branch if you plan to make daily deposits or withdrawals of cash or checks.

This may be more challenging to do with an online bank. Many online banks may offer deposits and withdrawals, but their ATM network may not be as large as a well-known brick-and-mortar bank. For this reason, some small business owners open an account at their local bank where they have their personal accounts and know the level of customer service they will receive.

Consider opening your business checking and savings accounts at different financial institutions so that you can have access to both better banking services at a physical branch and higher interest rates at an online bank.

2. Terms and fees (including minimum balance)

The fees associated with business bank accounts can vary widely depending on the financial institution. Some of the most common fees to be aware of include monthly maintenance fees, overdraft fees , wire transfer fees, minimum balance fees, and ATM fees.

You may find that online banks charge fewer fees than brick-and-mortar banks, but you must consider this in conjunction with the other features.

Seek an account with reasonable fees that can accommodate your business.

3. Ease of paying contractors

Some business bank accounts, especially online accounts, offer free invoicing and bookkeeping software/features.

If you use accounting software (such as QuickBooks) to manage your business finances, accessing a business bank account that offers integration features may be desirable. Trust me, this will make your or your accountant's life much easier.

In addition, some accounts allow integrations with payroll and tax preparation software. This will help to make the process of paying contractors with 1099s more seamless.

4. The bank's security offerings

One of the most important things you should consider when choosing a business bank account is security. There are certain features that you want to look for to make sure your account is protected.

First, you want to make sure that the bank you choose is FDIC-insured (or NCUA-insured if a credit union). In addition, you want to make sure that the institution has additional layers of security such as multi-factor authentication and fraud detection services, which include account monitoring and alerts for suspicious activity.

Ensure that whatever bank you choose offers the best security features to protect your business from fraud.

When choosing a bank account, consider all the various banking features offered by different financial institutions to find the one that best suits your business's financial needs. Also, remember that your decision is not permanent. It is easy to switch banks if necessary.

Watch: The 3 most important things you need to know about starting a business

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

    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.

  2. Creating a Financial Plan for Startups: The Ultimate Guide

    Your startup's financial plan is the roadmap that lays out the path for your company's future financial success. In it, you make predictions and plans based on historical performance and industry research. Start with your company's current financial situation, add in future goals and predictions, and strategize how to get there.

  3. Business Plan Financial Templates

    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.

  4. Startup Financial Planning: 14 Tips for Founders

    Why is Financial Planning Important for Startups? It costs money to grow a business, and most people don't have unlimited resources. If you don't plan for how you're going to grow and how much it's going to cost, you can easily waste your two most precious resources—time and money.

  5. How to create a robust startup financial model (tips & examples)

    A startup financial model forecasts your company's financial performance based on its current data, assumptions, and projections. It's a roadmap for your startup, helping your founding team, stakeholders, and potential investors understand the financial trajectory of the business.

  6. How to Write a Financial Plan: Budget and Forecasts

    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.

  7. Small Business Financial Plans

    All small businesses should create a financial plan. This allows you to assess your business's financial needs, recognize areas of opportunity, and project your growth over time. A strong financial plan is also a bonus for potential investors.

  8. Write your business plan

    Executive summary Briefly tell your reader what your company is and why it will be successful. Include your mission statement, your product or service, and basic information about your company's leadership team, employees, and location. You should also include financial information and high-level growth plans if you plan to ask for financing.

  9. 4 Steps to Creating a Financial Plan for Your Small Business

    Whether the business is starting from scratch or modifying its plan, the best financial plans include the following elements: Income statement: The income statement reports the business's net profit or loss over a specific period of time, such a month, quarter or year.

  10. Guide to Writing a Financial Plan for a Business

    When writing a business plan, it's important to put together a financial plan that projects future income, cash flow and changes to the balance sheet.The financial plan section often consists mostly of spreadsheets. It's where the business owner presents a paint-by-numbers case that the business will continue to be profitable or, if it's a startup, become profitable.

  11. How to Write the Financial Section of a Business Plan

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  12. Business Plan Essentials: Writing the Financial Plan

    For your business plan, you should create a pro forma balance sheet that summarizes the information in the income statement and cash flow projections. A business typically prepares a balance sheet once a year. Download the Sample Balance Sheet Template. Once your balance sheet is complete, write a brief analysis for each of the three financial ...

  13. Free Startup Plan, Budget & Cost Templates

    For a startup business, planning is key to developing a thorough understanding of the target market, competition, market conditions, and financing opportunities.

  14. The Complete Guide to Building a Startup Financial Plan from Scratch

    A comprehensive financial plan is a critical component of any startup business. Without a sound financial plan, it will be difficult to make informed decisions about how to allocate resources, manage risks, and grow the business.. There are four key components of a startup financial plan:. 1. A sales forecast: This forecast projects future sales based on historical sales data and market trends.

  15. How To Write A Business Plan (2024 Guide)

    Bottom Line Frequently Asked Questions Show more Every business starts with a vision, which is distilled and communicated through a business plan. In addition to your high-level hopes and...

  16. How to Make a Financial Plan for a Start-up

    When you create the plan, you'll need to think about a broad range of issues, including your business's gross/operating margins, profit potential, fixed/variable costs, break-even point, potential changes to cash flow, and profit durability.

  17. 8 Tips to Create a Startup Financial Plan

    Creating a successful plan is the key foundation to building and maintaining a successful startup. Startups must be creative, prioritize cash management, view financial planning as a continuous process, incorporate multiple scenarios, align the plan with business goals, and regularly review and update the plan.

  18. Business Startup Financial Plan Template

    A business startup financial plan is a comprehensive plan that helps business owners and entrepreneurs manage cash flow, fund operations, and reach financial goals. It is a roadmap that provides a clear view of current financial standings and outlines the steps to be taken to reach future goals.

  19. Financial Statements for Business Plans and Startup

    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. 09 of 09.

  20. How to Start a Business: A Comprehensive Guide and Essential Steps

    Starting a business in the United States involves a number of different steps, spanning legal considerations, market research, creating a business plan, securing funding, and developing a ...

  21. The ultimate guide to financial modeling for startups

    A mismatch between the financial model and the business plan: a financial model should resonate with the overall business strategy; ... Typically, the outputs of a startup's financial model consist of a three to five (sometimes 10) year forecast of the financial statements on a yearly basis (profit and loss statement, balance sheet, cash flow ...

  22. Business Plan Template for a Startup Business

    Writing a business plan for a startup can sometimes seem overwhelming. To make the process easier and more manageable, this template will guide you step-by-step. ... Financial Plan; Appendices; The Appendices include documents that supplement information in the body of the plan. These might be contracts, leases, purchase orders, intellectual ...

  23. Free Startup Business Plan Templates

    This startup business plan template contains the essential components you need to convey your business idea and strategy to investors and stakeholders, but you can customize this template to fit your needs.

  24. Business Plan: What It Is + How to Write One

    The traditional business plan is a long document that explores each component in depth. You can build a traditional business plan to secure funding from lenders or investors. The lean start-up business plan focuses on the key elements of a business's development and is shorter than the traditional format.

  25. How to Create a Five-Year Financial Plan

    A five-year financial plan hones in on just one area: your money. Creating a financial five-year plan can help you gauge where you're at now, get clear on where you want to go, chart your course and stay motivated to get there. Here are five steps you can follow to create your own five-year financial plan.

  26. Tips From a Financial Planner for Opening a Business Bank Account

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