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When you’re ready to enlist the help of venture capital, angel investors or even your local banker to secure funding for your company, preparing a solid and effective business plan is essential. While the business concept and information on key leadership is certainly important, investors and lenders are always going to want to get down to the nitty-gritty financial details of your firm. They want to know how your business shakes out by the numbers – how much your company is worth and what is it likely to be able to earn in the future.

There are at least three critical pieces of information investors and lenders need: your income statement, your balance sheet and your cash-flow statement. This article examines the ins and outs of the first of those three.

The income statement is a summation of all your revenue sources minus all of your costs. It is sometimes called an earnings statement or a profit and loss statement (P&L). It shows investors your ‘bottom line.’ From this data they can see if your firm is making money and worth the investment.

To get started you will need an Excel spreadsheet or some similar tool from other software. You will need to determine and enter the following information:

Gross revenue

  • sales
  • interest earnings
  • asset sales profits

Net Costs

  • Administrative expenses
  • Dividends paid to shareholders
  • Rent or building operation costs
  • Taxes
  • Insurance

Your specific business may have more details to be included. These represent the minimum amount of data required.

Your income statement will be scrutinized by investors, so make sure you can explain every line on the sheet. It is also a good idea to know how your profits stand up to other companies in your field. That will help you defend how and what your business is doing. If your income statement can be easily read and understood, you are on your way to preparing the next document, the balance sheet.

 


Search for Small Business Loan Sources and receive your matched lender list
AND received FOUR free Business eBooks worth $39.95!
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