Start-up Business Plan - The Budget

Favorite part of all of the business plan is the financial section. Okay, not true. In fact the only people who love to create financial jocks are picturesque. But it is the favorite part of the venture capitalist who wants to know if you can get a return on his investment and the loan officer who wants to be certain that the funds provided are to be repaid.

When I review a business plan for funding, I always look at the budget first. It 's very easy to understand if the person has no clue what they're doing, looking at these statements. The corollary is not true ... mean just because the budget is complete and rational person does not necessarily know what he or she is doing. That's why the plan is longer than just three pages.

How to prove that you have no clue what you are doing

Revenue grows at an angle of 45 degrees up from day 1 ... and ends at $ 50 million five years. (The rumor is that they expect VC $ 50M for 5 years. Do not be fooled, venture capitalists expect to have a good business plan, can perform well and have a large market).

The costs could not support any business, much less a high-growth business. Having a good understanding of what the costs will be. Recognize that if you hire people, not only to pay salaries, but taxes, health insurance and other benefits, workers comp, and each of these people will need some square footage, a desk, a chair, a computer, a telephone, internet access, etc. You will need to hire lawyers, accountants and other professionals if necessary. You will need to market the product in some way.

Your budget is a disaster. Non-equilibrium. You do not have credits. No account is taken of accumulated depreciation in your shopping DPI. (E 'property, plant and equipment).

He neglects to have a cash flow statement. Your financial statement is not binding on your balance sheet or income statement. You have mistakenly classified as investment income (ie counted twice). The money at the bottom of your cash flow does not match your budget.

How to get at least past that first hurdle

Develop a realistic income that can be supported through the activities and the sales floor. If you need to build a manufacturing plant or even outsource the production, it may take some time before products are ready for sale. If you are selling someone else in the product, understand how to buy. You may have to wait an entire cycle before being able to sell a product - it could be 18 months.

Develop a series of realistic costs. Look at public companies that are doing similar things, the costs should fall into a reasonable range of them. If ten companies in your industry spend 15% of revenue marketing, you must have a good explanation of why marketing costs are only 5%. Moreover, in the very early stages, the costs are probably higher Ganda.

Understanding patterns of payment in your industry. If the standard is for customers to pay 60 days after receiving an invoice, it is unlikely that you will be able to convince your customers to pay in advance.

Make sure that the budgets are put together properly - the budget balances, with cash flow in the ties balance sheet and income statement. This is a skill, just like your car down. If you do not know how to do, bluff - hire someone to build instructions for you. This should not be an expensive accountant or consultant. You can probably find a local MBA finance student who can do for you as long as you provide the appropriate numbers.

Having a clean environment, with realistic financial data is a bit 'like wearing a business suit. And you will not get a loan or an investment, but does so not to be thrown out the door before you have the ability to launch .......