The content of a financial plan

 A financial plan is just as important as your business plan. It is important that you write it yourself and that you fully understand its contents.

The financial plan needs to be transparent and clear. It is no use drawing up a financial plan for a long period (more than three years). No investor will give it credence. Explain your plan thoroughly. Graphics will clarify matters and will give the candidate investor an immediate overview.

Make sure your financial plan corresponds with the forecasts in your business plan.

It is important that you (yourself) examine the vulnerability of the dependences in the financial plan. You will try to capture the strengths and weaknesses in your financial plan by changing certain parameters (one at the time). That will also help you gain a clear insight into the weaknesses of your start-up. This can lead to a best case scenario or a worst case scenario. It shows the investor how much time you will need to get break even.

What happens if?

●        The first order is postponed?

●        The second order fails?

●        More people are required to get the order ready?

●        The licensing rights are higher than budgeted?

●        The royalties are higher than expected?

●        The margins on your product are lower?

●        The production cost is higher than expected?

The first turning point is when your monthly expenses and your monthly income are identical. From this point onwards you will no longer lose extra money.

A second turning point is when your accumulated income is equal to your accumulated expenses.

You can alternatively present the financial plan to your accountant and together draft a profit and loss account on the basis of your cash flow analysis. Your cash flow prognosis will probably be the main concern of your investor.

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