This preview shows page 1. Sign up to view the full content.
Unformatted text preview: learned about macroeconomics, and how to read ﬁnancial statements, I discovered that the truth
in business is almost always a combination of words and numbers, and can’t be explained with either
one without the other. For example, when a Central American government announced a new federal
budget that it said was going to both develop growth and reduce inﬂation, the numbers said that was
a contradiction. You can’t do both; you can do one or the other. You could only see that by dealing with
both words and numbers.
A business plan is like that, too. You can’t describe a plan without both text and tables, both words and
numbers. The single most important analysis in a business plan is a cash ﬂow plan, because cash is
the most critical element in business. With the way the numbers work, however, you can’t do a cash
ﬂow plan without looking at the income statement and balance sheet as well.
You really can’t do the income statement without looking at sales, cost of sales, personnel expenses
and other expenses, so you need those too. And you’d have trouble doing a sales forecast without
understanding your market, so a market analysis is recommended.
And then you have the break-even as part of the initial assessment, and tables for business ratios,
general assumptions, and other numbers. Step by step, the business plan becomes a collection of
tables and charts around the text. HURDLE: THE BOOK 14.2 ON BUSINESS PLANNING Although cash is critical, people think in terms of proﬁts instead of cash. We all do. When you and
your friends imagine a new business, you think of what it would cost to make the product, what you
could sell it for, and what the proﬁts per unit might be. We are trained to think of business as sales
minus costs and expenses, which results in proﬁts.
Unfortunately, we don’t spend the proﬁts in a business. We spend cash. Proﬁtable companies go
broke because they had all their money tied up in assets and couldn’t pay their expenses. Working
capital is critical to business health. Unfortunately, we don’t see the cas...
View Full Document
This note was uploaded on 01/26/2014 for the course BUINESS 102 taught by Professor Unknown during the Winter '09 term at University of Phoenix.
- Winter '09