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At a minimum, produce monthly projections for the first year covered by your plan plus quarterly (or annual) projections for the next two years. In the case of a complex or seasonal business, monthly projections may be required for 2+ years with less detailed projections for subsequent years. Projections for each forecasting interval should comprise fully-integrated income statements, cashflows, balance sheets and key ratios.

Keep this section within four-eight pages* by ensuring that only high-level financial projections are included in summary tables. Place all detailed schedules in appendices.

* If you choose to use Exl-Plan, our Excel-based business financial planner, it will automatically generates a Textual Summary Report which could form the basis for the financial section of your plan. Its mini-charts and summary tables can be pasted straight into a plan being prepared using Word etc.

Financial projections must not be prepared in isolation from the rest of the plan. For example, the results of market research should flow into your sales projections which, in turn, should drive the revenue forecasts. Under no circumstances should you do the detailed financial projections and then write a plan to suit. By all means, do some high-level financial planning* at an early stage to get a feel for the basic figures and sensitivities but don't let the plan become a financially-driven document without any strong market basis. For further tips and traps, refer to the white paper on Preparing Financial Projections. Also, review the white papers dealing with Making Cashflow Forecasts and Managing Working Capital.

* You can use the Quik-Plan facility within Exl-Plan, our Excel-based business financial planner, to generate first-cut three/five year projections within minutes. Alternatively, you can try the free On-Line Financial Planner.

The presentation of financial projections is covered in five sub-sections as follows:

1. Key Assumptions
2. Income Statements
3. Cashflow Projections
4. Projected Balance Sheets
5. Sensitivity Analysis
6. Ratio Analyses

Note: Free-Plan, a 150-page Word-based template based on this business plan guide, can be downloaded for free here.

Help with Financial Projections

	Exl-Plan - Comprehensive Financial Projections
	Requires: Excel 5, 7, 8, 95, 97, 2000 or XP with Windows 95/98/Me/NT/2000/XP Price: Free to US$ 309.00
	Details  Trial Downloads Buy Now

11.1. Key Assumptions

Use this section to review and pull together the key assumptions used in the financial projections. Relate your assumptions for sales, costs, manpower etc. back to the plans/schedules described in preceding sections.

Also, specify the assumptions used for capital expenditure, external funding and working capital. For further insights into working capital, see the white paper on Managing Working Capital.

The following table indicates the diversity of assumption variables that may need to be considered in order to produce projected P&Ls, cashflows and balance sheets for a business.

Place the details relating to assumptions in an Appendix.

11.2. Projected Income Statements

Introduce the projected income statements (profit & loss accounts) using a short paragraph or bullet points highlighting the key expected outcomes for sales and income. Use simple tables to summarize the key figures and place all detailed analyses in appendices. As shown below, simple charts (pasted from a set of Exl-Plan projections) can show trends and patterns very clearly.

More detailed projections can be placed in an appendix for Finance.

11.3. Cashflow Projections

You should present monthly cash flow projections for the first year, or longer depending on the importance of cashflow and time needed for your business to become cashflow positive. Many readers of your plan - bankers, venture capitalists and other investors - will pay far more attention to the cashflow projections than to the income statements. They will seek to establish that the business will not run out of cash before it reaches profitability - more businesses fail for lack of cash than for want of profit.

For more guidance, check the white papers on Making Cashflow Projections and Managing Working Capital. See also the Checklist for Improving Cashflow.

Less detailed projections (quarterly or annual) may suffice for subsequent years as per the specimen table below.

Use text and bullets to highlight and explain any key values or trends shown in tables or charts. Place the detail in an appendix for Finance.

11.4. Projected Balance Sheets

When presenting projected balance sheets, you will need an opening balance sheet which is based on audited figures (for last year) or estimated data (for current year). The projected balance sheets must link into the projected income statements and cashflow projections*.

* Projections generated using Exl-Plan are fully-integrated. This means that changes to assumptions value are immediately reflected in projected income statements, cashflows, balance sheets and related charts and tables.

11.5. Sensitivity Analyses

Present the key results of 'what-if' analyses based on "best" and "worst" case scenarios. As a general guide, be conservative even when presenting the "best" case.

When planning scenarios*, take account of possible project start-up delays, sales volume shortfalls, lower price levels and higher costs. For example, what would be the financial outcome if sales volumes and prices are both 90% of targets but direct and overhead costs are each 110% of planned?

* All versions of Exl-Plan can be used to explore alternative scenarios. The more powerful versions contain facilities for doing 'high-level' sensitivity analyses; creating automatically-generated 'what-if' tables; and dynamically assessing future profitability (see DuPont Chart profitability planner).

Indicate breakeven points and explore the consequences of incrementing volumes, prices and costs (e.g. by 10%, 15%, 20% etc.). Only present high-level summaries - relegate the details to an appendix for Finance or retain them in your working papers.

11.6. Ratio Analyses

Highlight the key financial ratios and their trends over time. Compare your projected ratios with industry norms and justify any significant deviations.

Additional Help
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The development of an integrated, error-free, spreadsheet-based financial planner is a difficult and time-consuming task even for experienced accountants and spreadsheet users. Bear in mind that you will not want to spend days developing a computer model when you should be really concentrating on planning your business.

All the charts and tables presented above were copied directly from output reports within Exl-Plan. This financial planner runs with Excel 5, 7, 8, 95, 97, 2000 or XP with Windows 95/98/Me/NT/2000/XP. Sixteen variants are available to cover different sizes of businesses and accounting formats. Prices range from US$49 to US$289. Check the benefits of using Exl-Plan over building your own spreadsheet-based planner.

Typically, Exl-Plan produces fully-integrated 1-3-5 year financial projections - monthly for the first year, quarterly for second-third, and annual for fourth-fifth. Based on a user's assumptions, it generates an income statement, cash flow, balance sheet, ratios and charts for each period (month, quarter & year). Exl-Plan can be used in conjunction with Free-Plan, a Word-based guide and template.

Have a look at a trial version of Exl-Plan for ideas on the range of assumptions to be considered and the layout and contents of its projections. The Quik-Plan facility within Exl-Plan can be used to produce 'first-cut' projections. You can get detailed information about Exl-Plan and access trial version downloads.

There is also a freeware version called Exl-Plan Free which can be used to produce fully-integrated, short-term, financial projections. It is a useful tool in its own right as well as a great introduction to the more powerful versions of Exl-Plan.

Help with Financial Projections

	Exl-Plan - Comprehensive Financial Projections
	Requires: Excel 5, 7, 8, 95, 97, 2000 or XP with Windows 95/98/Me/NT/2000/XP Price: Free to US$ 309.00
	Details  Trial Downloads Buy Now

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