Use pro formas to plot your route to success
Use pro formas to plot your route to success
Running a business is like going on a road trip — and a detailed business plan that includes a set of pro forma financials can serve as a road map or GPS app that improves your odds of arriving on time and on budget. If your plan doesn’t cover the prospective quantitative details in pro formas, expect to hit some bumps along the road to achieving your strategic goals.
What to include
Investors and lenders may require business plans from companies that are starting up, seeking additional funding, or restructuring to avoid bankruptcy. Beyond all of the verbiage in the executive summary, business description and market analysis, comprehensive business plans include at least three years of pro forma:
- Balance sheets (projecting assets, liabilities and equity),
- Income statements (projecting expected revenue, expenses, gains, losses and net profits), and
- Cash flow statements (highlighting sources and uses of cash from operating, financing and investing activities).