chapter 7

The Financial Plan

"Money is to my social existence what health is to my body."

― Mason Cooley

One thing we all have to come to terms with is that no matter how great a business idea might be, a business lives and dies based on its financial feasibility and most importantly its profitability. Regardless of how hard you work, how much of your own time and money you’ve put in, at the end of the day people want to support something that has the ability to return their investments and then some.

So what exactly do you have to include in this section? You’ll need to include three statements:

  • Income Statement

  • Balance Sheet

  • Cash-Flow Statement

Sounds exciting right? We’ll let’s get started then and break each of those down into digestible components. Hopefully by the end of it, you’ll have something to chew on.

Income Statement

This beautiful composition of numbers is what tells someone reading it exactly what your sources of revenue are and which expenses you spent your money on to arrive at, you guessed it, the bottom line. Essentially, for a given time period, the income statement states the profit or loss (revenue-expenses) that you made.

  • Income Statement Template
Sales ___________
Direct Cost of Sales ___________
Other Production Expenses ___________
Total Cost of Sales ___________
Gross Margin ___________
Gross Margin % ___________
Expenses ___________
Payroll ___________
Marketing & Other Expenses ___________
Depreciation ___________
Leased Equipment ___________
Utilities ___________
Insurance ___________
Rent ___________
Payroll Taxes ___________
Other ___________
Total Operating Expenses ___________
Profit Before Interest & Taxes ___________
EBITDA ___________
Interest Expense ___________
Taxes Incurred ___________
Net Profit ___________
Net Profit/Sales ___________

Balance Sheet

The key word here is “balance,” but you’re probably wondering what exactly needs to be weighed? On one side you should list all your assets (what you own) and on the other side, all your liabilities (what you owe), thereby giving a snapshot of your net worth (assets - liabilities = equity).

  • Balance Sheet Template

Assets ___________
Current Assets ___________
Cash ___________
Inventory ___________
Other Current Assets ___________
Total Current Assets ___________
Long-term Assets ___________
Long-term Assets ___________
Accumulated Depreciation ___________
Total Long-term Assets ___________
Total Assets ___________
Liabilities and Capital ___________
Current Liabilities ___________
Accounts Payable ___________
Current Borrowing ___________
Other Current Liabilities ___________
Subtotal Current Liabilities ___________
Long-term Liabilities ___________
Total Liabilities ___________
Paid-in Capital ___________
Retained Earnings ___________
Earnings ___________
Total Capital ___________
Total Liabilities and Capital ___________
Net Worth ___________

Cash Flow Statement

This statement is similar to your income statement with one important difference, it takes into account just when revenues are actually collected and when expenses are paid. When the cash you have coming in (collected revenue) is greater than the cash you have going out (disbursements), your cash flow is said to be positive. And when the opposite scenario is true, your cash flow is, well negative. Ideally, your cash flow statement will allow you to recognize where cash is low, when you might have a surplus, and how to be on top of your game when operating in an uncertain environment.

  • Cash Flow Statement Template
Cash Received ___________
Cash from Operations ___________
Cash Sales ___________
Subtotal Cash from Operations ___________
Additional Cash Received ___________
Sales Tax, VAT, HST/GST Received ___________
New Current Borrowing ___________
New Other Liabilities (interest-free) ___________
New Long-term Liabilities ___________
Sales of Other Current Assets ___________
Sales of Long-term Assets ___________
New Investment Received ___________
Subtotal Cash Received ___________
Expenditures ___________
Expenditures from Operations ___________
Cash Spending ___________
Bill Payments ___________
Subtotal Spent on Operations ___________
Additional Cash Spent ___________
Sales Tax, VAT, HST/GST Paid Out ___________
Principal Repayment of Current Borrowing ___________
Other Liabilities Principal Repayment ___________
Long-term Liabilities Principal Repayment ___________
Purchase Other Current Assets ___________
Purchase Long-term Assets ___________
Dividends ___________
Subtotal Cash Spent ___________
Net Cash Flow ___________
Cash Balance ___________

Conclusion

Writing a business plan for your online store is no easy task but I hope after going through the guide you can see that it's well worth the effort. Not only does it better prepare you to deal with some of the shortfalls any new business owner will experience but it gives you a leg up on your competition through better research and insights gained from the process. If you have any feedback or would like to share your success story about how this guide helped you write a better business plan, please be sure to send me an email at humayun@shopify.com.

Next chapter

8. Sample Business Plan

14 min

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