The business plan of a business plan is a synthesis “technique” of all the information that has been indicated in the descriptive part of the same business plan. It ‘also the most difficult to write, because it is the numerical verification of the consistency of all the data that has been exposed: investment , financing , revenues , costs , revenue and outgoing cash flows , and more, must be synthesized within the forecasts , which are the projections future of the business.

The predictions usually are made ​​on a time horizon of five years, even if you have to specify that a horizon so wide loses credibility because for some variables it becomes practically impossible to make exact predictions. For example, for a company that produces plastic materials (oil) is essential to assume fluctuations in crude oil prices over the next five years, but due to fluctuations in the price of crude oil, it becomes quite difficult to make predictions in a year . Let alone five. For this reason, more often than the budget estimates are made over a period of three years.

finance-position

Accordingly, the financial plan serves two very important things:

1) to verify the economic and financial viability of a business idea. In this sense, verify the economic and financial viability of a business, is to study whether the business is profitable or not in the long term (over the next three to five years). This is a test performed on the estimates of revenues and costs, as well as on the financial structure of the company, and serves to control the mechanism of creation of the costs following the achievement of revenue, and is used to identify the most suitable financial means to achieve the economic objectives that have been laid. In practical terms what this means? A simple example may help to better understand: I have to buy a machine (which costs 100,000 euro) I need to produce 1,000 units of product X, which sell for 1,500 euro per piece.

This means that I have to face a double financial aspect : the first has to do with the retrieval of € 100,000 that I need for the machine. The second is that I have to face just beginning to produce 1,000 units of my product “X”, as I will argue to produce fixed and variable costs of various kinds. Check the economic and financial viability of a business idea means just make sure that the amount of revenue (sales) that will achieve (1, 5 ml of the euro, data from 1,000 units multiplied € 1,500 per unit), will pay all costs I incur to produce and sell 1,000 units of the product. In addition, the turnover must be such as to get a refund even loans that I took at a bank or other institution financial.

2) maintain control of the business as a whole. In this respect, the business plan is usually referred to as an instrument of “guide” for the entrepreneur to write the company’s goals, strategies you want to use to achieve them, make strategic plans, prepare the budgets, analyze financial structure and revenue performance in the medium to long term, is intended to guide the activities of the entrepreneur . This is the reason why the business plan should be a tool always available to the contractor or the company’s management, rather than being seen as a tool to use, “one-off”, perhaps in view of the request of some public funding (or private) necessary for the development activity business.

From the point of view of the trend of cash flows, the financial plan allows you to check whether the assumptions made ​​(forecasts) are observed as they held the company’s management. If during the course of management events that occur in some way away goals set by the management company, then that’s the business plan expresses its effectiveness: the comparison between preliminary and final data needed to understand in which direction it is going the company. And if the company is going in the opposite direction to that planned, it is time to take the appropriate measures to correct the shot!