                       Financial Plan


[]   For a more detailed overview of the topic of a
     Financial Plan, refer to page 9-1 in the BizPlanBuilder
     Reference Guide.

[]   You should have a completed set of projected financial
     statements before you edit this financial plan
     narrative for use in your business plan. (See The
     Financial Plan Spreadsheet Templates in Chapter 9 of
     the BizPlanBuilder Reference Guide.)


Assumptions

[]   Describe the assumptions you made to develop your
     financial statements (your business assumptions, not
     the numbers you entered into the financial
     spreadsheets).

The financial projections are based on the assumption that
the additional [equipment/facility/product lines] will
generate an increase in profits of [$][x][%] within
[years/months].

The new equipment will reduce costs by $[x], thereby
increasing our profit margin by [x]%.

Cost of Goods Sold will be reduced by [x]% by taking
advantage of volume discounts.

We plan to have a working prototype by [month], 19[xx].
Field testing of the product is to start by [month], 19[xx]
and be completed by [month], 19[xx]. Initial market
penetration is anticipated to be $[x] at a margin of [x]%,
and increase to $[x] at the end of the first year and $[x]
by the end of the fifth year.

[]   It is usually assumed that your costs, including labor,
     will increase by the general inflation rate. Hopefully,
     costs will also be decreased by volume discounts and
     better negotiations with suppliers. If costs are shown
     to be level or decreasing, comment on that fact and the
     underlying reasons.

General inflation rates are assumed to be [x]% per year.


Financial Statements

[]   Keep in mind that projected financial statements do not
     stand on their own. Anyone reviewing your financial
     statements will also expect to read a discussion that
     supports the projections that you made (your research
     on your market, competition, etc.).

[]   Discuss briefly the summary/analysis results for each
     of the financial statements that you provide in the
     Supporting Documents section of your business plan.
     Growth rates for sales and any large expense items
     should be discussed. Economies of scale should be
     noted. Any large fluctuation in a category should be
     explained. Volume-adjusted measurements are helpful to
     add perspective to the discussions. These include
     income subtotals as a percent of sales; inventory,
     accounts receivable and accounts payable levels in
     days; return on equity; etc.

[]   The basic question to ask yourself is: "What would I
     want to know to evaluate a business proposal before I
     would consider investing my own money?" If you have
     answered all the questions that you would have as an
     investor, you are probably prepared for lenders or
     outside investors.

The following table highlights the primary income-related
items:

[]   If you have an established business, your operating
     results from any prior years should be included in the
     following table.

[]   The sales dollars, gross profit dollars, operating
     income dollars and net income dollars come respectively
     from the Total Sales, Gross Profit, Income from
     Operations, and Net Income After Taxes lines of your
     Income Statement for years 1 - 5.

Year                       19[xx]  19[xx]  19[xx]  19[xx]  19[xx]

Sales                      $[x]    $[x]    $[x]    $[x]    $[x]

  % Growth                         [x]%    [x]%    [x]%    [x]%

Gross Profit Dollars       $[x]    $[x]    $[x]    $[x]    $[x]

  % Growth                         [x]%    [x]%    [x]%    [x]%

Operating Income Dollars   $[x]    $[x]    $[x]    $[x]    $[x]

  % Growth                         [x]%    [x]%    [x]%    [x]%

Net Income Dollars         $[x]    $[x]    $[x]    $[x]    $[x]

  % Growth                     [x]%   [x]%    [x]%   [x]%

[]   The growth percents over prior years should be manually
     calculated by taking each year's amount minus the
     previous year's amount, then dividing by the previous
     year's amount.

Income Ratios:

Year                      19[xx]  19[xx]  19[xx]  19[xx] 19[xx]

Gross Profit Margin       [x]%    [x]%    [x]%    [x]%   [x]%

Operating Income Margin   [x]%    [x]%    [x]%    [x]%   [x]%

Net Income Margin         [x]%    [x]%    [x]%    [x]%   [x]%

Return on Equity          [x]%    [x]%    [x]%    [x]%   [x]%

[]   Values for the ratios listed above can be obtained from
     the Ratio Analysis section of the Integrated Financials
     Spreadsheet. If you did not use the Integrated
     Financials Spreadsheet to project your financial
     statements, you will need to manually calculate any
     ratios you plan to include. See the Analyzing Financial
     Statements discussion in Chapter 9 of the
     BizPlanBuilder Reference Guide for more information on
     ratios.

Gross Profit Analysis

The Gross Profit Analysis in the Supporting Documents
section shows monthly sales revenue, cost of goods sold and
gross profit values for each of our product lines for the
first year.

Budget

[]   The budget is primarily for internal purposes. You may
     not want to include your budget in your business plan
     package; instead, include a monthly Income Statement
     that summarizes your expenses into categories. During
     your presentation, have the budget available (in case
     your potential lender or investor asks to see it), and
     be prepared to discuss it.

Income Statements

[]   Comment on any large items or changes, such as R&D or
     marketing expenses that are large in your first few
     months (especially as a percentage of sales revenue),
     but taper off over time.

There are two Income Statements in the Supporting Documents
section. One reflects the first year by month, and the
second shows annual values for five years.

Balance Sheets

[]   Comment on any large or unusual items, such as other
     current assets, other assets, other accounts payable,
     or accrued liabilities.

There are two Balance Sheets in the Supporting Documents
section. One reflects the first year by month, and the
second shows annual values for five years.

Break-Even Analysis

The Break-Even Analysis in the Supporting Documents section
indicates that the break-even point will be reached in
[month], 19[xx]. Sales are projected to be $[x] above break-
even in [month], 19[xx]. The contribution margin for the
first year is [x]% representing $[x].

Cash Flows Statements

There are two Statements of Changes in Financial Position
(Cash Flows Statements) in the Supporting Documents section.
One reflects the first year by month, and the second shows
annual values for five years.


Capital Requirements

[]   State what your capital requirements are.

The [initial/first year/total] capital required is $[x]. We
require additional investments of $[x], $[x], $[x] and $[x]
in [years/months], [years/months], [years/months] and
[years/months] respectively, to enable us to increase our
production capacities to meet market demand.

[]   Describe the operating requirements for the five years
     that have been projected in your financial statements.
     Your operating working capital is defined as your
     accounts receivable plus your inventory minus your
     accounts payable; this can be calculated for each of
     the five years from the values on your Balance Sheet
     for years 1 - 5. See the Working Capital and "Operating
     Working Capital" discussion in Chapter 9 of the
     BizPlanBuilder Reference Guide for more information on
     estimating working capital.

After analyzing our working capital, we estimate our
operating working capital requirements as $[x], $[x], $[x],
$[x] and $[x] for years one through five, respectively. We
will need to borrow $[x] to finance working capital for a
period of [months/years], the remainder to be financed
through cash from operations.

[]   Recap the total short term and long term loan
     requirements for the five-year period, and for each of
     the five years.

In order to purchase [additional
facilities/equipment/inventory], an estimated total of $[x]
loan financing is required for the five-year period. The
annual requirements for each year are estimated as $[x],
$[x], $[x], $[x] and $[x] respectively.

 []  Discuss the level of safety for this loan or
     investment.

The level of safety is [normal/low/high] for this
[industry/type of investment]. Our confidence in achieving
the attached financial projections within [x]% is
[high/average/90%]. In addition to the operation of the
business, additional protection is provided by [x] as
collateral. In a [worst case/liquidation/unforeseen]
situation, the realizable value of the collateral would be
$[x], reducing the amount "at risk" to $[x]. With a
projected return of $[x], this represents a return of [x]%
of the amount 'at risk'.

How Funds Will Be Used

[]   Describe specifically how the loan and/or investment
     funds will be used.
The [loan/equity investment] proceeds will be used to
[purchase/buy/build/develop/gain/acquire/finance]
[equipment/facilities/working capital].


Exit/Payback Strategy

[]   Define how much time you will require before you can
     pay back the loan or investors can convert their
     equity; in other words, when will 'exit' be possible.

[]   Describe how repayment will be done, or the strategy
     for how investors' equity will be converted to cash
     (i.e. a public stock offering, sale of the business,
     etc.).

[]   Your financial projections should indicate that the
     loan/investment funds will help generate the profits
     and cash required for payback and exit. Discuss any
     significant increases in profits/cash flows that are
     expected as a direct result of financing, and how these
     increases help to pay back the funds.

The financial projections indicate that exit of [investor]
will be achievable in [x] years. The exit settlement will be
in the form of [x].

The increase in profits generated by [x] will allow us to
have the funds to repay the loan in [months/years].


Conclusion

[]   This is the time and the place to ask for the cash. Be
     concise, be direct, be professional, be sincere, and
     ask for either a signature or a list of additional
     items to be provided or steps to be completed to get a
     signature. DO NOT BE VAGUE.

Based on the attached financial projections, we believe that
this venture represents a sound business investment.

In order to [start/continue/proceed] we are requesting a
[loan/investment] of $[x] by [date], 19[xx].
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