Being an entrepreneur is tough. Having great business venture ideas is not enough. You need to actually develop that innovation, and there are many steps to take before the business can be in full swing. You have to study your market, scout around for funding (sometimes applying for grants and loans), get investors interested, and develop a business plan. Entrepreneurship is all about the risks, about constantly working against the odds, but that does not mean you have to be unprepared for the challenges you are destined to face. 

A business plan can help you clearly visualize the strategies to take even before you start looking for financial assistance. The plan begins with an executive summary, which includes an overview of your business and mission and vision statements. A company description follows, explaining the legal structure of the organization and summarizing its history. 

The third section clearly describes the products and services you will be offering and contains any intellectual property protection—like copyrights and patents—and explanation of the product’s market role. Then you have to demonstrate the industry knowledge you have gained through market research in a market analysis. Follow that with a strategy and implementation section and a portion dedicated to the organization and management team. 

The last, but probably most important, section is the financial plan which is the typical portion where you could get help from a startup M&A advisor. It is meant to be written out after finishing the market analysis and setting goals for the company. Before you can begin the financial plan all the expense-related details for the business have to be defined. The point of the plan is to operate on a prewritten budget, helping the business to look forward so you make no expenses that could lead to bad debt or other detrimental situations. It is also a key tool in selling your vision and the strengths of your venture to investors.

We are going to go through the six parts of the financial plan and what you need to complete each one.

Spreadsheets are the most useful tool when it comes to sales forecasting. Estimate what your revenue will look every quarter for the next three years. The first year should be estimated by month. Try to include any scenarios—both good and bad—in the estimates to show how your business could move on from difficult situations. Find any patterns or trends in your projections, this will help you see how the company could grow and attract investors. 

Continue using spreadsheets to record your expenses. This will help you balance out the sales forecast. Lay out the three types of expenses you will be having for the next three years: regular expenses, future costs and associated expenses. Regular expenses consist of the ongoing costs of your business—rent, utilities, payroll, conference attendance, marketing expenses, etc. Having a list of regular expenses will help you understand how to differentiate them from essential expenses that cannot be eliminated. 

Future costs include increasing tax rates, changes to the minimum wage and maintenance needs. Part of your expenses budget should be dedicated to emergency future costs like unexpected disasters, helping you be financially ready for any situation.

Associated expenses are made up of extra things like expansion or new hire training. be sure to differentiate between fixed costs and variable costs of sales.

Your spreadsheet will be mostly divided into assets and liabilities. Assets are items that your company owns which can be profitable in the future. Your property, inventory and machinery are all part of your assets. Liabilities, on the other hand, are things you owe to others. The combination of these two things is what determines your business’s net worth. 

If you do not account for everything you have and everything you owe you will not be able to show how the business performs over the years.

A cash flow statement is what you get by combining your expenses budget and sales forecast. Through a record of cash revenues and disbursements, the statement helps you predict how much money will be coming in and how much will go out on a monthly, quarterly and annual basis. 

The projection will allow you to see how much you should have left at the end of every period. This will help you get ahead of any possible financial struggles to come and plan appropriately for expansion projects. Additionally, it shows investors that your business is a good credit risk and lets you know whether the business is applicable for any type of loan, grant or long-term investment.

Breaking even is to reach a point in your venture where your profits are equal to your costs. The break-even analysis helps you understand your business’s revenue and potential costs in contrast against the growth of your output. This is the best way to know your pricing, and how many units must be sold at that price point to cover for costs. 

Finally, create a summary that details your operational needs. What will you need for your business to run smoothly? How much work can each employee take? The operations plan will help you figure out how much needs to be spent on payroll, supplies and growth. It will also help you keep control of those expenses so you can optimize operations.

To complete a proper plan, you will need to study. Do as much research as possible.

These steps do not have to be written in any particular order, but they all require the same amount of detailed work. If you lack the experience, you might consider getting professional help. 

In addition, you can use the Small Business Association (SBA)’s templates and tips for financial planning. SCORE, a network of business mentors, also has a catalog of financial statement templates you can use as your work on your own.

Do not forget, making a financial plan for your business should not be a chore you disregard once it is done. Keep using it as your company grows older and expands.