How to incorporate finance into the structure of a business plan

How to incorporate finance into the structure of a business plan

“Send me your business plan,” all entrepreneurs have heard these words when looking for investors or finance for their business. A good business plan will help you obtain financing, arrange strategic alliances and attract potential investors to your business which is becoming critical in the current BEE environment here in South Africa.

From the table of contents to the financial tables, a business plan covers a lot of ground. There are many key aspects to consider when structuring your business plan. The list is long and varied but I am going to focus on how to incorporate finance into the structure of a business plan.

Financial issues

Financial issues tend to be unpopular among entrepreneurs. Some find the subject tedious. Others find it intimidating. That is why it is important to consult a finance expert, such as an experienced chartered accountant, who is well versed in what needs to be included in the finance section of your business plan. They will have had experience in creating and formulating business plans and their advice could be invaluable. They know what investors and financiers want to see when presented with the plan for your business.

Consult an expert

When incorporating finance into your business plan always operate on generally accepted accounting principles. Banks, investors and potential partners are exposed to dozens of financial statements every day and are accustomed to seeing expenses, margins, taxes, and other items identified in their customary ways and in their customary order. Using generally accepted accounting principles enables them to review the financial state of the company quickly and easily. If they see financial statements that are not laid out in the customary way, they are likely to be sceptical about the expertise of the entrepreneurs and the state of the business. That is why it is critical to consult or engage the services of an experienced financial executive. If your business currently does not have such an individual employed within the business, there are companies that outsource experienced chartered accountants and financial executives on a part time or interim basis that can assist you with incorporating finance into the structure of your business plan.

The financial section of the business plan should consist of at least three types of standard financial information (Current and Forecasted):

  • Cash flow statement
  • Income statement (sometimes referred to as profit/loss statement)
  • Balance sheet

Sophisticated investors who are interested in your business will use your financial projections to calculate the potential future value of the company. Companies tend to be valued on the basis of some combination or multiple of sales, profits and net asset value. Investors who are confident in the numbers they see in the financial projections will attempt to calculate a company’s value in the future to determine what an investment today might lead to. If they’re convinced they can get the appreciation / return  they want, they may invest.

It cannot be stressed enough that if the business does not have a financial expert within the business either due to financial resources or work volumes, then one should be consulted. The fact that the financial information is prepared by a seasoned financial expert WILL add a lot of credibility to the information submitted in the plan. The Finance Team has financial experts that can fulfil this need by outsourcing their experts on a part time or interim basis.  It could mean the difference between outright success or complete failure of the business. You only get one shot when targeting investors. If you don’t give them the information and data they need in the first place they will not be willing to invest money with a company that takes two or three attempts to provide information they need to make a decision.

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