Creating a Pro Forma Business Plan

Pro Forma Financial Statements and
Business Plan Budgets

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A pro forma financial statement is a hypothetical financial statement based on assumptions. With your business plan, these assumptions will deal with your revenue and expenses.

Your business plan should include three basic financial statements: a pro forma income statement, balance sheet, and statement of cash flows. Without these financial projections it would be difficult for a bank or any investor to justify lending you money because it isn’t possible to tell whether or not your business is viable and sustainable.

An income statement is basically an outline of your company’s revenue and expenses. It shows the total sales, cost of goods sold, earnings before interest and taxes, and net margin. This statement will show the “bottom line” and lets investors see whether or not your company will be profitable.

A pro forma balance sheet is used to determine whether or not your company will be economically efficient and financially strong. This compares your assets with your liabilities and shows the “balance” between the two.

The third financial statement you’ll want to include in your business plan is the statement of cash flows. This statement shows the flow of cash into and out of a company. It also shows the source of this cash and how it is being used.

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