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Financial Plan

This guide outlines key financial concepts critical for entrepreneurs starting a business. It covers important financial statements, including cash flow statements, income statements, and balance sheets, illustrating their roles in tracking revenue, expenses, assets, and liabilities. Additionally, it details common startup costs, financing options like bank loans and equity capital, and necessary insurance types safeguarding against risks. Understanding these elements is crucial for making informed decisions, ensuring long-term business sustainability and growth.

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Financial Plan

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  1. Financial Plan Ms. Alexander Entrepreneurship

  2. Financial Statements • A list of start-up costs, one time expenses paid to establish a business • Common start-up costs • Equipment and supplies • Furniture and fixtures • Vehicles • Remodeling expenses • Legal and accounting fees • Licensing fees

  3. Cash Flow Statement • A cash flow statement describes how much cash comes in and goes out of a business • Revenue – the amount of cash coming in • Expenses – the amount of cash going out • Operating expenses – monthly expenses incurred by a business

  4. Income Statement • An income statement indicates how much money a business earns or loses in a particular period • An income statement is also known as a profit and loss statement • An income statement shows revenues not yet collected and expenses not yet paid

  5. Balance Sheet • Balance Sheet -Shows what a business owns, owes, and how much it’s worth at a point in time • Based on the accounting equation • Assets = Liabilities + Owner’s Equity • Assets are items of value owned by the business such as • Cash • Equipment • Inventory

  6. Balance Sheet • Liabilities are items that the business owes to others, such as • Loans • Outstanding invoices • Owner’s equity is the value of all assets less all liabilities

  7. Accounting Equation The balance sheet is base on an equation called the accounting equation Assets = Liabilities + Owner’s Equity

  8. Supply & Demand • Supply • Is how much of a good or service a producer is willing to produce at different prices. • Demand • Is an individual’s need or desire for a product or service at a given price

  9. Equilibrium Price & Quantity • Equilibrium price and quantity is the price at which supply equals demand

  10. Fixed Costs • Fixed costs are costs that must be paid regardless of how much of a good or service is produced. • Examples of fixed costs include: • Rent • Insurance fees • Interest on loans

  11. Variable Costs • Variable costs are costs that go up and down depending on the quantity of the good or service produced. • Examples of variable costs include: • Raw materials • Labor • Overhead directly related to producing goods or services.

  12. Financing For Your Business • Bank Loans • Secured—guaranteed with collateral • Unsecured—no collateral needed • Equity Capital • Personal financing • Friends and family • Venture capitalists

  13. Financing For Your Business • SBA Loans • Other Loan Sources • Small Business Investment Companies • Minority Enterprise Small Business Investment Companies • Department of Housing and Urban Development (HUD) • The Economic Development Administration • State Governments • Local and Municipal Goverments

  14. Types of Insurance • Property Insurance • Insures all business property against normal risks, including fire, robbery, and storm damage. • Casualty Insurance • Protects a business against lawsuits • Life Insurance • Pays out in the event that the holder of the policy dies

  15. Types of Insurance • Workers’ Compensation • Consists of payments to workers who are injured on the job • Other Insurance • Includes coverage for floods, business interruption, crime and renter’s needs

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