| The financial plan of a startup business plan is not only | | | | company has, as well as the type of assets in the |
| necessary to complete the plan, but a place where | | | | company. This will be of interest to both lenders and |
| you can either win points with funders or make | | | | investors when they consider potential worst-case |
| mistakes from which you cannot recover. The pro | | | | scenarios for the company. If the company fails, they |
| forma financial statements each have something to | | | | know they will probably be able to recover at least |
| say to funders. | | | | some of the market value of sellable assets that the |
| Income Statement | | | | company owns, such as equipment, intellectual |
| The income statement (also called the profit and loss | | | | property, and inventory. This prevents the failure from |
| statement or P & L) is the most explicit statement | | | | being a complete loss for funders. |
| in terms of a telling a funder if the business is sound. | | | | Cash Flow Statement |
| The business can be called successful if it manages to | | | | The cash flow statement shows the cash needs of |
| create a profit and show continued growth year after | | | | the company, which relates to the startup capital |
| year. Some small businesses, such as sole | | | | required. It also shows how cash reserves will keep |
| proprietorships, may show only modest growth if they | | | | the company's bank balance positive over the first |
| are tied to the work of one individual, and this may be | | | | difficult years. The effects of being granted credit by |
| enough for some lenders. Investors, however, are | | | | suppliers (accounts payable) and collecting payments |
| interested in a business which can grow as this will be | | | | for customer purchases after the fact (accounts |
| the most valuable in a sale or other "liquidity event" | | | | receivable) are shown on the cash flow statement, |
| eventually. While the first year may show a loss or | | | | changing the requirements for cash reserves. Ideally, |
| very small profit, it is expected that the company will | | | | payments on expenses are delayed as much as |
| become profitable soon after that point. | | | | possible and payments by customers are collected as |
| Balance Sheet | | | | early as possible (even ahead of the date of service |
| The balance sheet shows the balance of assets with | | | | or product delivery). This advantageous situation can |
| liabilities and owner's equity in the business. This | | | | mean the difference between bankruptcy and |
| statement illustrates the amount of leverage (debt) the | | | | success for a business. |