You have your hands full with the design of your startup: You take care of the optimal planning of your new product or your new service. You need to do marketing to get a lot of customers. In addition to all this, it is particularly important that you always keep a close eye on your finances right from the start and plan them with foresight - even before you really start your start-up project. That is why the financial plan is the core of every business plan. But what exactly is a financial plan all about and what do you need it for? Read now on pusatinfoloker which information you should include in your budget plan and which sequence you have to take into account.
What is a financial plan?
In short: A financial plan is a plan for all finances within your company , your budget, so to speak, that you need to be able to implement your start -up . The analysis of financial developments is of immense importance for you as an entrepreneur. Especially if you want to motivate financiers to support you financially with your financial plan as a young startup with your self-employment.
Why is a financial plan so important?
You will only convince an investor of your start-up and your business idea if you give them an insight into your finances. Then he will weigh up for himself whether he thinks your company is profitable and wants to raise money for your business. With your financial plan, you reveal all your financial pots and show how profitable your company and the business idea behind it can be and how high your total capital requirement is.
But the financial plan is not only used to prove the profitability of an investment in your business at the beginning of the foundation. It is also essential for companies that have been on the market for some time. With this you always know from which turnover you cover your expenses and when you make a profit . In your financial plan, you can finally calculate with different values, get an overview of your capital, run through different financial scenarios and thus identify any liquidity bottlenecks in advance .
How do I create a convincing financial plan?
So now you know why you need a financial plan and why it is important for your self-employment and your company. Given the importance of this document, you must be wondering what the financial plan should actually look like? Which building blocks do you have to list in your financial plan and how do you avoid possible mistakes? As with the general business plan , there are also a few things to consider with the financial plan.
1. Revenue Planning
With the calculations for sales planning, you show how much income you generate by selling your product or by performing your service. Anyone who opens your budget plan can see how much profit you are making from your company by looking at the sales.
profit in the foreground
In business or in your own company, it is always about profit. With this you show within your financial plan how successful your business is and thus create a good first impression, especially when it comes to convincing someone of your start-up. Therefore, it is important to include sales planning at the beginning of your financial plan.
The important thing here is that you remain realistic . Especially as a startup you are new to the market with your independence and your product or service is still unknown . As a new entrepreneur, there is also the fact that you cannot look back on several years of sales. You can actually only make a forecast for your project with sales planning within the financial plan. Therefore, do not go too far with your assessment or calculations and keep in mind that sales figures for newcomers are only increasing slowly.
2. Cost planning
The cost planning in your financial plan provides information about the direct costs incurred in your company . Also note that these costs are listed second, since all expenses must be covered by income. As an entrepreneur you have:
a) fixed costs = wages & salaries, rent, electricity, insurance, marketing costs.
As in private life, insurance is also essential for start-ups and is one of the fixed costs. These are always the same and also independent of turnover . Because: No matter how much or how little profit you make, the rent for your company, the payment of your employees and the insurance remain. Therefore, these are also called operating costs .
b) variable costs = costs for material or goods purchases.
You cannot influence how expensive or cheap you buy material. That always depends on the prices at which your working materials are on the market and how affordable you buy your raw materials. A skilful hand in negotiations when purchasing materials is therefore useful.
The contribution margin or the contribution margin calculation results from these two factors. With this calculation you have to deduct the variable costs from your turnover, which you then state in the financial plan.
Your invoice: turnover - variable costs = contribution margin
You need the contribution margin that remains from this invoice to cover your fixed costs. The aim of this calculation or calculation is always that the turnover is higher than the variable costs and that the contribution margin always results in a positive value. So if you are in the process of creating your personal financial plan, you should put these two factors first.
c) Incorporation costs
From this point of view, you need to factor in all the costs you will incur when starting a business in your financial plan. These include:
- Entry in the commercial register
- notary fees
- trademark application
- Possible business consultancy(s)
Another financial plan component in the area of costs are the investments that you make once when you start your company when you start it, but also all follow-up investments. This includes all the purchases you need, such as:
- Equip your office with furniture, computers, etc.
- Kitchen equipment and catering equipment
- Vehicles, machines or devices
- training courses you attend
Within your financial plan, the investment plan follows after the start -up costs . The two items may seem similar to you, but they should definitely be treated separately and included in the budget.
3. Liquidity planning
The center or intersection of your financial plan is the liquidity plan, because this results from practically all incoming and outgoing payments. For this reason, it can only be listed in the financial plan structure after cost planning. So you put the calculations or analyzes from the operative business (= sale of your products or services) as well as your expenses (foundation costs and investments) on the scales and use this to determine the liquidity of your company. So in this step you can see how “liquid” your company is. With the liquidity plan, you create an outline of how much money is flowing into your startup and whether your company is still solvent or whether you need additional capital for yourself, but also for anyone who wants or needs to look at your books. Your start-up capital is also included in this planning. What every advisor will tell you: As a new and young founder, the account balance determined here will probably be in the red at first. However, don't let this put you off.
4. Determination of capital requirements
The capital requirement plan of your financial plan results from the liquidity planning. A simple calculation looks like this:
- €60,000 pre-financed by you - €40,000 start-up costs & investments) + €30,000 seed capital = - €70,000 capital requirement
Your company has a requirement of €70,000. In your financial plan you now have to describe how you want to generate this money . You should always separate the start-up capital into equity and debt capital. At this point, you note how much equity you contributed to founding the company .
Note on seed capital and capital requirements
After you have determined your capital requirements, you should also use a financing plan to show from which sources you draw the money you need for your company.
5. Profitability calculation
At the end of your financial plan is the profitability forecast. With this you show the most important key figures of the operative business on an annual basis . This is important for potential financiers looking at your financial plan, because they can see at a glance how profitable your startup is. So is it profitable for the investor to pay into and invest in your business model? You usually give a preview of your own profitability for 3 years. Within the profitability forecast , further calculations are added to economic parameters, such as the contribution margin, gross profit, gross margins and EBIT and EBITDA margins.
EBIT = “Earnings before interests and taxes” = Earnings before taxes and interest
EBITDA = Earnings before interests, taxes, depreciation and amortization
Know budget and financial plan
With your profitability calculation, you present all the important figures again in the financial plan. For an investor, this can figuratively be seen as a kind of summary and the most potent point in their decision to give you money. Therefore, profitability should always be at the bottom of your financial plan. In order to confidently represent your business, you need to know both your budget and financial plan inside and out.
How long should the financial plan cover?
As you can see from this article, the financial plan is immensely important for controlling your company. You know what you need it for and which factors you have to calculate. You're probably wondering how often you have to do this cost statement for the financial plan.
You create your financial plan once at the beginning of your start-up . If you want to introduce yourself to banks or investors, your financial plan usually has to cover the first three full financial years. It is also important here that you basically show every single month in the first year . In the case of larger and more expensive start-ups, it can also be the case that five years in advance should be planned. It also depends on which financial planning tool you choose. Again, some are designed for three or five years .
Is there a template for your financial plan?
You have now found out which components must be included in your financial plan and in which order. Now it remains to be clarified whether you use a financial plan tool or what other options you can use to create a financial plan.
There are many different options and providers of tools on the Internet that can help you create your financial plan, some of which can be done easily online. However, it is important that you clarify how up-to-date they are and whether they contain all the necessary components . Before you decide on a financial plan template, you can compare several in advance and look at examples of financial plans. The other option would be to create your financial plan in Excel. However, you should be familiar with the calculation program in order to avoid mistakes. Before you start here, you should make comparisons again in this case so that you don't forget any important points and stick to the order. If you want to create your entire business plan