Financing Plan: will my company be profitable?
The financing plan is the key document before starting your business. It will allow you to estimate the amount of funds needed before opening your company (financial plan), how much you will have to sell to be able to cover your costs (balance sheet and break even) and if you have enough cash to pay your bills on time.
We explain you below how to create these financial tables. However, microlux can also help you to achieve these forecasts with a volunteer.
The financing plan can be divided into 4 tables:
- The financing plan
- The balance sheet
- The Break-even analysis
- The liquidity plan
In order to put these calculations and tables into perspective, we will follow the example of Chloé who wants to open a restaurant.
We also provide an Excel file that you can download here to work on your own project.
The Financing Plan
Why creating a financing plan?
It allows you to see if you have the necessary financial resources to finance all your assets. The 2 totals should be equal.
The assets cover everything that will be necessary to start your new activity. Depending on the activity, these needs vary but usually include: the initial investments, the production material, the furniture, a vehicle...
The liabilities are the resources you have access to to finance your needs. They can be personal (personal funds, investors, subsidies) or borrowed (microcredits, bank loans…).
"For my restaurant, I must think of listing all the necessary equipment (cooking plates, material, fridges,...). For a financing request, I must, if possible, provide me with a price estimation"
Balance Sheet (Profit and Loss)
The Balance sheet (or Profit and Loss) is a table assessing your profit or loss at the end of a period of time. The table is divided into 2 columns: In the first one, the expenses generated by the business and in the second one, the revenues of the company.
The expenses cover all the costs associated to the business over a month or a year. We can classify the expenses in two categories:
- Fixed costs: These are expenses that you will have to pay independently on how much you sell. Typically the rent, the salaires, social contribution, the accountant, the repayment of the loans are fix costs.
- Variable costs: These are expenses that vary according on how much you will sell. Mainly it will be the purchase of your goods. The more you will sell, the more you will have to buy.
The revenue is calculated by the sales revenue (quantity sold x selling price of each item x number of open days).
"For my restaurant I calculate the turnover by estimating that I will have 30 customers per day who spend on average 20€ and that my restaurant will be open 25 days/month."
The most important fixed costs items are salaries with social security contributions and rent. To calculate the variable loads I take 1/3 of the turnover (see restaurant/bar sheet)
Break-even analysis
The Break-Even analysis is the level of revenues you need to make in order to cover all the costs and therefore start making some profit.
Here is the formula to calculate the break-even: Break-even = Fixed costs/margin on variable costs margin.
In the Excel file that you downloaded you'll find a sheet where the break-even is calculated automatically if you entered all the data of the balance sheet.
"I have to sell at least for 13,500€ per month to pay all my expenses. If I do more, my restaurant will start making a profit."
The liquidity Plan
The liquidity plan is a table tracing all the inflow and outflow of money expected in the company. The liquidity plan is built on a 12 month basis. Each inflow and outflow can be found in the month when it was made effective.
For instance, a purchase made in March but paid only in June will appear in the column « June ».
Why is it important to trace cash movements?
The table allows you to verify if your business has enough cash to pay all the bills. This table is very important, since many companies go bankrupt at the end of their first year because of cash issues !
If you need help with your liquidity plan please contact us!
Expenses and revenues are not linear throughout the year ! This is especially the case for seasonal activities which know booms and slowdowns of their activity. The liquidity plan highlights these peaks and declines and helps you anticipate these variations.
To create your own Liquidity plan, use the excel file that you downloaded on the top of the page.
For more information please contact us: +352 45 68 68 76
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