The most difficult part of the financial forecast for a business plan is usually the balance sheet. The factors that go into it come from all over the plan and must be reflected correctly. Inversely, it is probably the least looked at by investors and banks when determining loans and investments because it's more an accounting tool than something that needs to be ironed out. Recently, in working with a client on a business plan written in Miami, it became apparent they were spending too much time worrying about the net worth of the business, the bottom line of the balance sheet, than they were about profit and loss and cash balances. The net worth can be affected by so many things that have no material effect on return on investment that it is usually better to use to discover how much assets the business plan states, and how much debt.
Using the balance sheet for the business plan writer in Miami demonstrated that you can use the long term assets as part of the exit strategy. Since the business was planning to be acquired in 7 years, we took the total net income in the 7th year and added assets to make a simple valuation of the potential acquisition value. This doesn't take into account different methods, such as discounted cash flow methods, etc.
Finally, crafting the balance sheet in the business plan is something we find most of our clients have a hard time doing, and a harder time understanding. It's difficult to track where the contributing business planning numbers are come from. We can help you out! Give us a call to have us help you make and understand a proper balance sheet. As little used as they generally are, they still have to be there for the bank or investor.
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