A Template for Financial Section of a Business Plan Plus Monte Carlo Analysis

The most important part of a business plan is to prepare the financial section and the most crucial part of the financial section is, to predict assumptions because you should prove that your business plan is feasible or not.

The purpose of this article is to make a template of financial section on excel spreadsheets in which all excel files are connected together and also assumptions. In this case, you will be able to track 
rapidly your analysis by changing the assumptions.

Good news is to apply Monte Carlo analysis on this template in which you can control the risks of the assumptions and see the impact of them on your performance by using the method mentioned in below article: 

"Discounted Cash Flow Analysis plus Monte Carlo Method to Analyze Share Price of a Company" 

http://emfps.blogspot.com/2012/01/monte-carlo-analysis-on-case-of-nike.html

A sample for financial section of a business plan in service industry has been practiced on this 
template.

Financial Section of a Business Plan

A financial section of business plan is started by the assumptions. You can always change your assumptions and show to your client that this business plan is feasible or vice versa. Therefore, the assumptions play the most important role in your business plan. Traditionally, the people forecast the assumptions derived from financial data previous years of company or economic indicators. Definitely this method is not true due to high speed changes in the world. We have not still an accurate method to find out true assumptions. In fact, if we had a precise model to guess the assumptions, we could anticipate some share prices or the performances in stock markets. As I stated in my article of "External Real Forces and Pseudo-Forces to Design a Strategic Plan: Fuzzy logic Vs. Classic Logic" posted on link: http://emfps.blogspot.com/2013/12/external-real-forces-and-pseudo-forces.html, maybe the mathematics will give us an optimized model to forecast the 
assumptions in the near future.

What are the assumptions? They can be as follows:

- Initial investment

- The growth rate of the sales per year

-The growth rate of variable costs per year (COGS)

- The growth rate of fixed costs per year

- Terminal value growth rate

- The cost of capital (discounted rate) in each year

- Taxes

-Interest rates

When we obtain the assumptions, we should develop a cash flow statement for 12 months per year and predict it for 3 or 5 years in accordance with our initial investment and costs budgeting and also our assumptions. This is the statement that shows the money how is moving in and out of our business. Making a cash flow statement is very important for our business plan because it is the basic of profit – loss projection, balance sheet and finally our analysis.

After developing a cash flow statement, we will be able to prepare an Income statement projection (3 or 5 years) and by using data generated in profit – loss statement, we can make the Balance sheet projection for 3 or 5 years.

When we finish to create the cash flow statement, Income statement and Balance sheet, we will be ready to go our analytic process included in below steps:

- To calculate Key Ratios (Viability analysis) by using of Income statement and Balance sheet

- Break – Even Analysis by using of the Sales, Variable costs and Fixed costs

- Discounted Cash Flow Analysis

In my opinion, the most important part of our analytic process is, to go to the discounted cash flow analysis which is included three below steps:

- Pay Back analysis

- IRR analysis

- NPV analysis

Finally, we will have six excel files connected together and our assumptions as financial section of 
our business plan as follows:

- Cash flow statement

- Income statement

- Balance sheet

- Key Ratios (Viability analysis)

- Break – Even Analysis

- Discounted Cash Flow Analysis

A Sample of Financial Section for Business Plan in Service Industry

I have made a sample of a financial section for a business plan in the tourism industry. You can practice and also utilize this sample for commercial purposes. This sample can be used for many service industries, such as food service, boarding houses, restaurants, transportation, and so on

Firstly, we have assumptions as follows:

Then we develop a cash flow statement:

After that, we prepare an Income statement projection:

According to above mentioned, we can make Balance sheet:

Now, we can start the discount cash flow analysis as follows:

Then, we use from Pay back method:

Next analysis is, IRR and NPV method:

In this case, if we change some variables of our assumptions, we can see that all discounted cash flow analysis simultaneously change so that our business plan will not be feasible:

In fact, this is a goal for our analysis. In the near future, I will show you, how we can use from this method to reach the optimized variables? For instance, how can we obtain the bottom line for unit price of the goods?

Finally, we have Key ratios and Break – Even Analysis as follows: