Financials Intro

Financials Intro

Module 6: Financials Intro

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🎯 Our goal in this module is to introduce you to the four main financial tools that you’ll use to create Financial Projections for your business.
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Good News: You’re already familiar with the core structure of these tools (especially the Profit & Loss Statement) from our work earlier in Phase 1 with Napkin Math.

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Before we start, I recommend that you download and open our Financial Projections Google Sheets template to reference throughout our discussions.

Okay, so what are your Financials all about?

Your Financials are where you will forecast:

  • How much money it will take to launch your business.
  • How much time and money you will need to operate your business until you actually start making a profit.
  • How much profit you expect to have each month and year.
  • How much cash you will need to run your business and pay your bills.
  • And, how much money your business is worth (your valuation).

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If you are going to be an entrepreneur and a successful business owner, you will need to understand your financials.

You don’t have to actually do the accounting, payroll, or taxes for your business—you can hire or contract professionals to perform these tasks for you when you launch—but you must understand and be able to use the basic financial tools for planning, managing, and measuring your performance in business.

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Good News: There are four essential tools that you’ll need here, and they are pretty easy to learn and use. 

Here are the basic financial tools you’ll need to get your business up and running:

Cash Flow: Do you have enough “cash” to pay your bills and grow your business?

Profit & Loss Statement (a.k.a. Income Statement): Is your business making a profit (month-by-month, year-by-year)?

Balance Sheet: How is your business doing over time—is your net worth increasing or decreasing?

Break-Even: At what point will you start making money (profit)?

Later, after you are in business and operating, you can add Ratio Analysis to this list to compare your performance over time to others in your industry.

Now would be a good time to take a few minutes and click through the individual sheets inside our Financial Projections Google Sheets template to get an idea of what each of these four tools looks like. We’ll go over each tool together in the upcoming Modules.

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Note: Keep in mind that all your projections will be estimates or “guesstimates.” You are predicting the future using the best information that you have gleaned from your research and interviews with industry insiders and potential customers (and possibly from your competitors). 

However, since there is no certainty about what will actually happen in the future, your financial projections will be your best guesses.

After you have been operating your business for a while, you will have much more experience and real data to help you tighten up your financial projections, hopefully improving their accuracy. 

But even then, your projections will be “guesswork” to a considerable degree.

If it’s any comfort, you should know that your competitors are doing their projections the same way that you are doing yours—they are also guessing to a significant extent.

Do the best you can.

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Note: You will need to have the Operations section of your Business Plan in front of you as you work on your Financial Projections. 

Basically, you will be identifying the costs for everything covered in your Marketing, Operations, and Management sections, and then plugging those numbers into our Financial Projections template.

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Note:  During the process of completing your financial projections, you will most likely discover that you need more detail for certain things, or that you are missing some startup costs or operating expenses.  When you reach these points, take the time right away to do some more secondary (or primary) research to get whatever information you need in order to complete your projections as accurately as possible.

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Important: Be as precise and specific as you can when identifying your costs of doing business.

  • If you are hiring people, then find the competitive rate of pay for the job that you are hiring for.
  • If you plan to purchase computers, decide exactly what you need and find the price of the computer with those particular hardware and software features.
  • If you are planning to rent an office, determine the size and location and then contact a realtor to get quotes on rent.
    • You can also ask the realtor or the utilities company for past monthly costs of heating and electric in order to get an even more accurate estimate for your projections.
  • Search online to get actual prices of the furnishings and equipment that you will need.
  • Get a quote for the internet service that you will need.
  • Contact an insurance company and ask if they provide business insurance—they will be happy to explain what you might need and to give you a quote of the cost.
  • Call a couple of attorneys and accounting firms to see what it would cost for their services—just tell them that you are planning to open a business and they will give you a realistic estimate.
  • And so on.
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Important: You should do this work yourself, so that you’ll learn about these financial tools now. 

It’s okay to get help—maybe you have a friend who is an accountant, a finance person, a banker, or someone who knows how to do financial projections with spreadsheets. 

That’s fine, these people can help you, but you need to do the actual work yourself.  Don’t let them “show” you—if you get their help at all, have them stand over your shoulder and “guide” you through doing the work yourself.

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Understanding your financials will provide you with an extraordinary advantage in every aspect of launching, operating, and growing a successful, profitable business.

One More Thing Before We Begin:  If you are not already familiar with business financial statements, you may feel a bit overwhelmed, stressed out, or confused as you read through the explanations provided in the next several modules.

Don’t worry. 

It will be easy and fun, and you will become proficient with these financial tools in no time at all.

Okay, One Last Thing Before We Get Started…I Promise:

If you are among the 1% of people who are naturally skilled with spreadsheets, then feel free to build your own financial template using Microsoft Excel, Google Sheets, or any other spreadsheet software of your choice.

Otherwise, we have created a basic Financial Projections template in Google Sheets, which you can customize and use for your own projections. 

We will be using this template to walk you through every step of creating your financial projections in our webinars and video “lectures”.

Additionally, you can find many free or reasonably priced templates online. The U.S. Small Business Administration has an excellent financial projections template that is fully integrated and pretty easy to use. 

You can find it here:

Click the box above to visit website.

You can even do these projections with a calculator using accounting forms from an office supply store—that’s how it was done back in the day—but it takes a lot of time and you’ll need more than a few erasers.  Trust me, electronic is better.

The best, and easiest way is to have all of your financial tools linked to each other and fully integrated.

What does this mean?

When anything is added or changed within one of the financial templates, all of the other templates will be automatically updated to reflect that change. 

This saves you time and dramatically reduces the possibility of error.

These fully integrated templates will also have the various formulas you’ll need embedded directly within them—that way you won’t have to perform any calculations. 

You’ll just be entering numbers, and then the calculations will be done automatically and sent to where they belong inside your templates.

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Again, this is actually much easier to do than it sounds, as you will see in our video tutorials.

Now, let’s take a closer look at each of the four financial tools that you will be using.

🗂️ Resources

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Scroll left-to-right across the table below to view all columns. Click on any item in the leftmost column to open that specific resource page.

ItemTagsURLPriceDescription
Financial Projections
FinancialsCash FlowProfit & LossBalance SheetBreak-EvenBizActually
Free
A Google Sheet to organize and calculate your financial projections. (Created by our Team)

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