Business Plan Writer for Companies Raising Capital

7 Financial Questions You Must Answer in your Business Plan

7 Financial Questions You Must Answer in your Business Plan

Whether you’re requesting funding or just growing your business, a great business plan has a strong financial section. It includes the Profit & Loss Statement, Break Even Analysis, and much more. Although you may not be a math whiz, that doesn’t mean you shouldn’t know your numbers. Understanding a few simple pieces of information can make your investment pitch stronger or help you grow a bigger enterprise.

 

Here are 7 financial questions that your business plan should address (and you should be able to answer):

 

QUESTION 1: How much money do you need?

If you’re seeking funding, then it’s logical to understand why you should know the answer to this. However, you should also know the answer to this if you’re creating a business plan for strategic purposes. When creating a strategic business plan, you should ask yourself, “How much money will we need to reach our next business milestone?” Or “what’s our budget in order to grow this business?”

QUESTION 2: How will the money be used?

Within any company, money is used to pay for marketing, team members, professional services, equipment, etc. It’s important for you to know how funds will be used to grow your business.

QUESTION 3: What’s your break-even point and how long will it take you to get there?

A break-even point is simply the amount of money you need to keep the lights on, make payroll, and provide services to your customers. Startups generally take 2-3 years to break even.

“When I calculate the break-even point for clients, I typically like to note how many customers must be served on a daily or weekly basis to be successful. For example, we’ll state that a restaurant must serve 165 meals per day at a price point of $14 per person to break even. As the foodpreneur operates the location, he or she only has to ask 2 questions. 1) Did we serve 165 meals today? and 2) Did the average person spend $14? That’s it.”

QUESTION 4: What’s your customer acquisition cost? How much does it take for you to market your service and convert a customer?

If you watch Shark Tank, you will always hear the panel ask this question. It’s important for all of us to know the information. When I calculate the customer acquisition cost, I include social advertising, networking fees (memberships, meals) sponsorships, trade show entrance fees/exhibitor fees, constant contact or email marketing subscription, and all marketing/customer service/sales staff salaries.

QUESTION 5: What’s the lifetime value of the customer or how much does each customer spend with your company?

That’s the Marketing Return on Investment. If you spend $8 to get a customer (see Question 4) and you make $114 over a 2 year period, then you have a 1,325% return on your marketing dollars. In addition, you may say that you’re willing to spend up to $50 in order to get a customer – depending on your business. Understanding the lifetime value of a customer gives you a lot of marketing options.

QUESTION 6: What are your revenue goals?

Every member of your company should know your revenue goals. Sometimes, you’ll think about daily revenue goals (for example – daily goals are great for restaurants or retail stores). At other times, the goals may be monthly (for example – subscription services). However, it’s important for you to discuss your revenue goals and when you should be able to hit them.

QUESTION 7: What’s your targeted net profit margin?

How much money are you bringing to the bottom line? Traditionally, service businesses should have a 30% net profit margin. Product based companies may have smaller net profit margins but a larger sales volume. Tell the investor how your projected net profit margin compares to the industry. (Hopefully you’ll do better than industry competitors).

 

If you need a business plan or if you need added support in figuring out how to jumpstart your goal of getting financed, you can BOOK A CONSULTATION with me through this link: https://calendly.com/cheree_warrick/business-plan-intro-prospect