Business Plan and Business

Business Plan There are several essential components to the business plan. The Executive Summary is one. This is a summary that goes at the front of the business plan, and it contains all of the key information that is contained within the plan. The Exec Summ fills a couple of key purposes as part of the plan. First, it serves as a shorthand for someone who wants to get the basics of the plan, without getting into the deeper details. There are many stakeholders who might prefer this.

But the executive summary also serves as something of a roadmap of the rest of the document. For someone who wants to learn more about the business, in great detail, the executive summary plays an important role in explaining what information they can expect to find, and how the rest of the business plan is structured. So the executive summary ends up being a fairly important document, because it communicates the basic elements of the plan quickly, in an easy-to-digest format that suits a number of important stakeholders (Ciccarelli, 2014).

The financial summary is another important element to the plan, and again there are a few different reasons why the financial summary is important. First, many stakeholders including creditors and investors want to see the financial summary. They need this information because it helps them to understand what the company's expected financial performance is. But more than that, the financial summary is important because it is a garbage-in, garbage-out element.

You could in theory make up a bunch of numbers to fill out this section, but then your business plan will have no value. The value lies in the discipline that the financial section instils. It forces you to research costs, to estimate what price you can sell for, to understand the dynamics of the middlemen, taxes and other costs elements of the industry in which you are going to compete. The more work you put into the financial plan, the more realistic it will be.

And the investors or creditors will see this -- they will know the difference between a financial plan that took weeks to research and prepare and one that did not. By taking a disciplined approach to the financial plan, you will learn a lot about your company. The financial plan can even result in changes, such as a change in the "go/no-go" decision, or changes in tactical approach should you realize that your first strategy will not make as much money as you thought it might.

For these reasons, the financial summary is one of the most important parts of the business plan, and requires extensive research and modeling to make it as good as possible (Wasserman, 2016). The financial section will also help teach you the basics of financial and managerial accounting, because you will need to prepare pro forma financial statements, and you will need to prepare forecasts. The research you did into your market will help prepare the sales forecast and expense budget, for example.

Learning these financial management techniques from the outset will help put your business into a much better situation. The sales forecast is defined as the forecast of the sales you anticipate. Typically this is done for a set of periods -- months, quarters, and a year or two. The sales forecast starts by understanding the potential market, and how much of that can be captured. You have to set a price point, and estimate price elasticity of demand.

The sales forecast is therefore fairly complex, not just something randomly thrown out there. The balance sheet is the financial accounting statement of all of the company's assets, liabilities and owner's equity. The balance sheet is built through the t-accounts, so that it is ultimately an aggregate of the different transactions that occur.