Startup company business plans. Once the strategic, technical and organizational elements of your business plan are in place, it’s a good idea to include estimated financials in your business plan. Which key numbers should you forecast? How do the key metrics in a business plan relate to each other? Get started with this short video on business plan financials, going from revenue to profit to free cash flow.

Let’s take a look at Nick’s business plan. He has a startup company idea that will take a few years to fully mature once he puts his idea into action. Year 1 will be the year of heavy investment and the start of operations. Year 2 scaling up. Year 3 rapid growth and expansion. Year 4 stabilization and fine-tuning. Year 5 fully maturing with operational excellence. Nick has done some pro-forma financial projections, based on market data, technical data and financial data that he has gathered so far.

Free Cash Flow is that part of the total cash flow that is not required for operations or reinvestment. If Free Cash Flow is positive, then you can take cash out of the business. If Free Cash Flow is negative, then additional cash needs to be invested into the business. Hopefully, Nick can achieve a positive Free Cash Flow in years 4, 5 and onward, in order for his startup idea to generate value. How? More revenue, lower costs, managing working capital, and planning the capital expenditures carefully!

Philip de Vroe (The Finance Storyteller) aims to make strategy, #finance and leadership enjoyable and easier to understand. Learn the business and accounting vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better #investing decisions. Philip delivers #financetraining in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!