Question

Mark Lofton is gearing up to write a business plan for a new apparel company he intends to start. He asks you for advice since he heard i am taking a course in entrepreneurship. Describe the relationship with the financial part of the business plan to the rest of the plan sections. What types of financial information does he need to provide? How should he go about obtaining it? Discuss the advantages and disadvantages of using a conservative mindset when developing his proforma statements

Answer 1

A business plan is supposed to provide a structure and proposed action plan of the business operation. The relationship with the financial part of the business plan and the rest of the plan is extremely important. This is because, at the beginning of the business, an entrepreneur needs to be careful and use the funds with consideration. We cannot expect a steady flow of income or large revenue at the early part of the business. However, the impacts made at that period should be significant enough to carry forward the business.

As a result, the available finances should be utilized judicially an in a smart way to achieve certain goals and objectives that will bear good results. For this purpose the action plans of the business will depend on the financial availability.

In addition to this, the financial plan also ties to the overall forecast of the business. It will speak about the projected revenues and how it will be utilized. So these kind of information must be covered in the financial part of the business plan.

The advantages of using a conservative mindset is that it sets a comparatively low expectation and as a result there are chances of disappointment at a later stage is minimal. It also shows that the entrepreneur is careful and is considering various aspects in his/her plan. On the other hand, the disadvantage is that it shows a lack of ambition on the part of entrepreneur.