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A FINANCIAL PLAN VERSUS A BUSINESS PLAN

Updated: Feb 8, 2023

A financial plan versus business plan


Be sure when you engage someone to write your business plan that you will receive a complete business plan, not just a financial one. A financial plan is critical to the overall business plan. Still, it is not something that accurately can be developed until due diligence on your overall business has been accomplished, which includes: market analysis, company direction and history, having an understanding of your products/services, product strategy, pricing strategy, promotional strategy, sales strategy, operational strategy, and an overview of your management and personnel. The business plan outlines how you intend to generate and spend cash; the financial plan focuses just on the results.

Accountants and Business Plans

Many clients approach their external accountants and ask for a business plan. A professional accountant can provide you with the financials for your plan, but in most cases, they usually only focus on the financials that are associated with your business as they are external to your business. They will, in fact, need all the information from all of the other pieces of your business to provide you with the best and most accurate financial outlook.


Before going out on my own, I was used to working with the CFO in small businesses on a business plan, and I assumed that most external accountants wrote full business plans as well. I believed this until contacted by a professional accountant looking to write a business plan for a company that was looking to acquire another business. He asked if I would work with him on the business plan to provide him with an understanding of what would be required from a sales and marketing perspective. The company would need new channels to market developed and a separate business model from their current environment. He needed this information first to develop the financial piece. In working with him and several other professionals, I understand they are approached by many of their clients wanting someone to develop the financials for their business without them having all the pieces of the puzzle.

Complete Business Plan for Financing

A complete business plan, including the financial plan, will be required if you are applying for grants/loans for a new business, are looking for investors, are looking to acquire a business, or are looking to be purchased. The financials are there to support your business plan and are the final section of the business plan. You need more than just the financials to accurately assess your go-forward outlook. Lenders and investors will need to understand all of the parameters of the business that affect the financials.

If you are a current business with a relationship with a financial institution or lender where your business is known or understood and require a low sum of financing, a financial plan may suffice. For example, if you are looking to expand your building or you are asking for funds that are not tied to your business's success, you may not need a business plan.

Summary

A business plan is a living document that you should update. It is a road map of how you plan to operate your business. Hopefully, this will help people who are confused about when they require a business plan or need a financial one.

If you are looking for a complete business plan, make sure the person helping you is spending time with you to assess and understand the pieces of your business and is asking you the right questions before they put pen to paper. Make sure they are not just asking you for your financial statements and providing you with the required documents for a financial plan.


We develop the full business plan with the financial plan and a 5-year proforma financial model of your business for those looking for investment or financing. If you want to do this yourself, we provide a 150-page ebook to help business owners who wish to write the plan themselves.

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