Historical Financial Information

April 13, 2006

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An existing business can bolster the credibility of its business plan by documenting the results of its ongoing operations. A proven track record is very persuasive evidence of your chances for continued success. Hopefully, you've been creating and maintaining financial records since the inception of your business. If so, most of your work is done. The following list describes the types of information that you would ordinarily include in a business plan. As always, the relative importance of each type of document will vary with the characteristics of your particular business.

If you're assembling a business plan for an existing business, you're going to want to make sure that you include the following historical financial information for the last three to five years (or from the inception of the business if less than three years old):

A balance sheet, which lists the type and value of your business's assets, liabilities, and ownership interest.
An income statement, which lists the revenues, expenses, and net income of your business for a stated period of time, usually a year.
Your business's tax returns for the three most recent years.
A cash flow budget, which lists by month the cash you took in, the cash you spent, and whether you had a cash surplus or deficit at the end of a month.

For existing businesses, these financial statements are the most objective pieces of evidence that lenders will look at to either support or contradict your forecasts for future performance. With that in mind, you're going to want to make sure that you present them in a format that is accurate, concise, and easy to follow. Most lending institutions and venture capitalists will give a long critical look at your historical financial information. If you have thrown together the data in such a way that they have to hunt around and piece together information that was suppose to be in one place, you can bet that they won't look favorably upon the rest of your operation as a whole.

For this reason, we suggest you follow the format provided in the balance sheet, income statement, and cash flow budget worksheet included in Business Tools. In developing these financial statements, we have included most of those financial categories that are likely to apply to your business and that will be of the greatest interest to your audience.