Introduction

Financial planning is at the heart of every successful business. A financial plan, which includes detailed financial statements and projections, forms the core of your overall business plan. For more information on preparing a business plan, refer to ED&T's Starting a Small Business.

Financial planning should be completed at least once a year and revised monthly to incorporate actual results. It has two main purposes:

1. It enables you to make sound business decisions about what financial resources your company actually needs, and about what financial moves your company needs to make, to be successful.
2. It helps you plan for and obtain the necessary financing to establish your business, continue its operation, and help it grow.

Solid financial planning demonstrates to potential investors and lenders that you are planning for success and that you are serious, thorough, knowledgeable and realistic.

In addition to impressing upon investors and lenders that you have done your homework and thought through your financial plan, the actual plan allows them to quickly evaluate the following:

• The short and long term prospects for your business
• Your company's profit potential
• Your company's strengths and weaknesses
• Future opportunities and challenges
• The amount and type of financing your business will need to be successful

This publication will help you understand the basics of financial planning. Chapter One describes and provides examples of the key elements of your financial plan. Chapter Two deals with the two main sources of financing for your business: equity and debt. Chapter Three covers internal sources and other methods of financing. Chapter Four describes how to approach lenders and investors.