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An income statement shows revenues minus expenses, in order to calculate net income or net loss. Start_ups should project these expected results for the first twelve months of business, then quarterly for the next two years. A list of a company's assets (what you own), liabilities (what you owe), and net worth (assets minus liabilities) is called a balance sheet. The statement of owner's equity shows the owner's initial investment, additional investments, and retained earnings, minus owner withdrawals.

Financial Plan _ The financial plan consists of four sections: Financial Worksheets, Cash Flow Projections, Financial Statements, and Additional Financial Information. All of these components will tell the story of how you plan to start or grow your business from a financial perspective. It is vital that you explain the assumptions under which you have based your projections, for example, "We assume that there are no unforeseen changes in economic policy to make our products and service immediately obsolete." or "We assume interest rates will stay the same over the next three years." (both quotes from Bplans.com sample business plans)

The expected revenues and expenses for at least a year should be projected in the cash flow section of the Financial Plan. It's better to make conservative predictions rather than be too optimistic when it comes to cash flows. As part of this section, a break_even analysis is essential. This is the "amount of units sold or sales dollars necessary to recover all expenses associated with generating these sales." (NxLevel for Entrepreneurs, 2005) The formula for calculating the break_even quantity is Total Fixed Costs/(Price _ Average Variable Costs).

Include details about all of the following that are applicable to your business in the marketing section of your plan: location and distribution, and promotional strategies, such as packaging, public relations, advertising, and customer service. As a result of exploring these areas, you will naturally need to consider how much you will budget for your marketing efforts. This question is closely connected to your sales forecast, which leads us into the next section of the business plan.

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