Writing A Business Plan Series: Week 7: The Balance Sheet and Income Projection

The Other Side of The Bridge, a photo by Maxim34374 on Flickr.

It turns out that WIBO is having their 2nd Annual Business Plan Competition, open to all WIBO alumni. What better way to test the theories of Garrett Sutton's book and this blog post than by entering and hopefully winning $20,000 for my business!

Now to discuss the Balance Sheet. If you remember from a few posts back, Sutton compared it to "the audio/video mix in terms of production. It answers the question: what is your business worth? It's the balance of your company's finances and present data on it's assets, liabilities and net worth. All balance sheets use the same format and are simple to create." Here's a sample balance sheet from www.accountingcoach.com.

"Your assets fall under four categories: 

• current: can be converted to cash within one year 
• long-term: investments to be kept for at least one year 
• fixed: resources not meant for resale 
• other: assorted assets unique to business' circumstances 

Your liabilities fall under only two categories:

• current: payable within one operating cycle 
• long-term: mortgages, vehicles, notes, etc.

And your business' net worth is given according to the legal structure of your business. This should be prepared on a regular basis because it helps you spot trends and plug cash leaks before they sink your company. For a new business, you can choose to include a personal balance sheet of your personal finances to show your ability to handle money, or not to show you value your privacy."

"Income Projections need to be based on realistic expectations and real world experience (talk to or hire professionals) to help you get the numbers right. There are two types of forecasting types: button-up and top-down.

• Button-up: uses the knowledge from the frontlines to predict the future needs of your business
• Top-down: plans for the future with the end in mind; starts with goals from 3 years out, then backtracks the steps it will take to get there. Think big picture."

Well, I'm playing catch up now. Our previous family emergency plus my own little encounter with the gases in my basement office has temporarily stalled the creation of my plan. But with the SMART goal of entering the WIBO competition, I am renewed. Onward!

Until next week...