Entrepreneurship, Second Edition

8.7. Putting It All Together

Once you have completed the financial spreadsheets, write a two-to three-page explanation to precede them. Although you understand all the assumptions and comparables that went into building the financial forecast, the reader needs the background spelled out. Describing the financials is also a good exercise in articulation. If your reader understands the financials and believes the assumptions are valid, you have passed an important test. If not, work with the reader to understand her concerns. Continual iterations strengthen your financials and should give you further confidence in the viability of your business model.

This section of the business plan should include a description of the key drivers that affect your revenues and costs so that the reader can follow your pro-forma financials. This description is typically broken down into four main sections. First, the "overview" paragraph briefly introduces the business model.

The first subsection should discuss the income statement. Talk about the factors that drive revenue, such as store traffic, percentage of store visitors that buy, average ticket price, and so forth. It is also important to talk about seasonality and other factors that might cause uneven sales growth. Then discuss the expense categories, paying attention to the cost of goods sold and major operating expense categories, such as rent, interest expense, and so forth. Based on your description, the reader should be able to look at ...