With most things, there are no definite rules but here are some guidelines that I generally recommend…
- Cover at least the first 3 years, although up to 5 years is acceptable. Rarely 5+ years
- Breakdown monthly for the first 12 months, then quarterly or even annually for Years 2,3 etc
- Preferably show your figures under a named time period e.g. Jul, Aug, Sep, 2011, 2012 etc although if the dates have slipped by when you present your Plan it will appear redundant.
- If you show your figures in the generic format of Month 1, Month 2, Year 1, Year 2 etc be prepared to state in your Plan what Month 1 actually is e.g. it may be 3 months after you raise your equity stake or you raise your debt finance or receive a grant
- Make sure opening and closing balances reconcile and all figures correctly balance
- Provide full assumptions on every line item of income and expense, no exceptions
- If you are proposing to borrow long term, show separately how you will repay that i.e. if say £100,000 / €100,000 over a 10 year term, include a schedule / table showing the annual repayments and source of those over the full 10 years (even if you have only completed 3 year projections)
- Provide sensitivity analysis for at least each month of Year 1 e.g. if sales were 20% above or below projections, what effect would that have on cash, profit and balance sheet? Similarly show what would happen if costs were 20% above projections
- Consider including industry benchmarks to show why you are better, the same or worse than the competition. If you don’t, the Bank most certainly will and you are better anticipating this.
- Consider the specific circumstances of your own business, sector, location, country etc and then adjust the above guidelines to reflect them e.g. if you are opening a new restaurant, you should also consider a week-by-week cashflow forecast for the critical first 3 months (not necessarily profit & loss or balance sheet). You should review this every week to can keep on top of the cash.
- If you are in a particularly volatile sector, complete more than one set of sensitivities even consider compiling one set based on the ‘worst case’ and another on the ‘best case’ to show how your business could cope.
- Completing financials can become very intense and when you adjust certain figures you need to make sure you adjust other related figures to ensure consistency
- Get an independent professional who knows what they are doing to go over the final figures before you submit your Business Plan.
Final note: Management of the Cashflow and Profits after start-up is a separate and even more critical task.