P
robably, this is the best part of the book. We are about to arrive at the bottom line.
How much money is going to be spent? How much funding is required? For com-
mercial ventures, how much profit will be made? We also see how mischievous planners
sometimes massage the figures and hide away the bad news.
I promise a gentle start. We will take a look at the numbers that you need and discuss
the way that they build up into the financial statements. Along the way you will have to
put up with some of the terminology that accountants use. But then, it is just as well to be
able to speak their language. I will also warn you about some of their preconceptions and
unique way of thinking – and how these affect your business planning.
We will also take a preliminary look at how you produce your summaries and forecasts.
In Chapter 8, the focus shifts mainly to forecasts rather than historical data. This is because
summarising the past is very easy once you have worked through a forecasting exercise.
Chapter 8 looks at forecasting sales and the cost of sales to arrive at gross profit.
Chapter 9 takes you through forecasting capital and current spending to arrive at
net income/net profit.
Chapter 10 describes a mechanical restatement of the figures from Chapters 8 and
9 – into balance sheet and cash flow forecast. It then discusses how you can fund a
deficit and how you should use a surplus.
Chapter 11 reviews the risks and threats that affect your business activities and
(sorry about this) that will probably cause you to revise your forecasts.
Finally, Chapter 12 looks at the way that others will interpret your financials –
which is rather important.
‘The time has come,’ the walrus said, ‘to speak
of other things’
The time has arrived to work through the financials in the business plan. This is not dif-
ficult. It requires a little careful thought and some sensible estimating. It can be time
consuming. But if you approach it in the right frame of mind, it is straightforward and,
dare I say, enjoyable. Moreover, with the correct approach on the first pass, you have a
framework to simplify all future financial analysis and forecasting. Always aim to automate
or mechanise repetitive activities.
The financial analysis is the easiest part if you are numerate. If you shrink from dealing
with numbers, do not be alarmed. Just work through these chapters step by step and it
will fall into place. You will be surprised how easy it is.
‘THE TIME HAS COME,’ THE WALRUS SAID, ‘TO SPEAK OF OTHER THINGS’ 139
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