Writing a business plan is an important early step in starting or expanding a business. A good plan is a road map showing how a business intends to meet its goals. A business plan organizes the information that describes the business, its competitive environment and its goals.
A business plan shows institutional and individual investors how an investment or loan will further the company’s goals. It provides the information that must be presented to a bank or other investor before a credit decision is made. Since most businesses can only start up or expand with some outside investment, the presentation of reliable and complete information in a business plan is essential.
Need help with your business plan? Maine Small Business Development Centers (Maine SBDC) offer business counseling and training for Maine entrepreneurs.
About the Balance Sheet
The balance sheet is a measure of the solvency of the business. The balance sheet summarizes a company’s assets, liabilities and owner’s equity. The balance sheet follows this formula: Assets = Liabilities + Owner’s Equity
These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the owners. Lenders consider the owner’s equity a cushion to protect them if the owners default on debts.
About the Income Statement
The income statement (profit and loss) records all income and expenses of the business during a specified time period, and is the accepted method of determining profits and losses. The Internal Revenue Service requires all businesses to submit this report at the end of each year.