Should a Business Plan Include Financial Projections?

Individuals who review your business plan will expect to see financial projections. They will also understand that you have based your financial projections on assumptions — and they will expect to see explanations for those assumptions.

Include three types of projected financial statements in your business plan:

• an income statement
• a balance sheet
• a cash-flow statement

Refrain from using creative accounting methods. Restrict yourself to generally accepted accounting principles as you work your numbers.

Investors expect your financial projections to err on the optimistic side. To ease their fears, offer several future financial scenarios. Allow investors to know that you understand that there are several potential outcomes for your business. By doing this, you will look more realistic. And, to show that you've done your homework, offer industry averages for your proposed type of business.