Financial Plan

When writing your financial plan it is important to be as realistic as possible; try not to let your enthusiasm for your new venture interfere with producing legitimate financial figures. If you are a new startup with few similar competitors, then generating these numbers will be a bit more difficult than if you are entering a market that already has a few competing firms. If firms do exist, try to find numbers they may have used to refer to in your own financial plan to see how you measure up. Additionally, if accounting isn’t in your background, it is highly recommended that you have a professional accounting firm review your financial plan to check for accuracy.


The main components of this section will be your balance sheet, income statement and statement of cash flows, which will be pro forma statements. Based on these, you build your financial section around the numbers. It is also important to point out key financial ratios, break-even analysis, and emphasize the assumptions you are making in providing your financial expectations. In this segment you will also want to address how much money you personally have invested, as well as other financial backing you may have procured to this point. Investors want to see that you have “skin in the game” (your own money invested, to show you have something to lose as well) and if you have piqued the interest of other investors, it sends a positive signal to other investors.


Visit the following to see examples of each pro forma statement:

Pro Forma Balance Sheet
Pro Forma Income Statement



In 2010, SI Co is projected to do 5 jobs, which includes putting up solar panels.  The process includes everything an individual would need in order to obtain the use of solar power.  This includes the battery, converters, and solar panels. SI Co estimated a cost of $45,000 for a 4,000-watt solar system.  It costs an average of $9 per watt to have a company put up solar panels; where as it would cost an individual $7 per watt to put it up independently (solar-electric.com Nov. 3, 2008). 

The net sales for the first year will be $225,000.  This includes the $9 per watt, which is what SI Co will charge per watt to put up solar panels. On average, the size of the solar systems will be about 4,000 watts per job. Then SI Co will be taking $9 times 4,000 watts, which equals $36,000.  Another fee that will be added to the total cost of the job will be $9,000, which is $36,000 times 25 percent (solar-electric.com Nov. 3, 2008).  This added fee includes the battery pack system for a total of $45,000 per job on average. The costs of sales for the fist year will be $175,000.  This includes the 5 solar panels jobs, which is $7 per watt, which is what SI Co will pay for the solar panel system.  Taking $7 multiplied by 4,000; which equals $28,000.  SI Co then takes 25% multiplied by $28,000, which is $7,000.  The 25 % comes from the charge of having the battery-based system (solar-electric.com Nov. 3, 2008).  The total cost of sales for SI Co will be $35,000 times 5 jobs, which is $175,000. 

The operating expense of the first year of operation is $51,600.  This includes a labor expense of $30,000 for the 5 solar panel jobs.  This is at a rate of $50 per hour at an average rate of 120 labor hours per job. SI Co will also have a gas expense of $5,000 and an insurance expense of $6,000. SI Co will have to hire a lawyer, which will cost an average of $1,000 per year. SI Co will have to hire a part time accountant to do their books.  A CPA will charge about $100 per hour and work on the business about 10 hour per month.  This will be $9,600 in accountant fees for SI Co (Brad Reed Nov. 11, 2008). SI Co will also have to pay a $10,000 bond to the union hall to be able to hire workers out of the union hall. 

SI Co will have a 5 year straight-line depreciation expense of $18,000 in the first year.  This comes from the $100,000 worth of assets, like vehicles, a shed, and equipment.   There will be an interest expense of $5,000 for a 20 year $100,000 loan at 5%.  This will bring the income before taxes at a loss of $24,600.  Since there is a loss, SI Co will receive a tax credit of $9,594.  This is at a tax rate of 39% times $24,600.  The $9,594 will carry over into the next year or, until SI Co becomes profitable (Brad Reed Nov. 11, 2008). 

In 2011, SI Co plans to complete 8 solar panel jobs.  This will increase the net sales up to $360,000, and have a cost of sales of $280,000.  The cost of the solar panels will remain the same for this year. The operating expense will increase to $70,100; this is because the increase in the labor costs of doing 3 more jobs in 2011.  Depreciation will also stay the same because of the straight-line method, which is $18,000.  SI Co will only have a net loss of $8,100 of operating income.  The interest expense will decrease to $4,500.  There will be a tax credit again for this year, which is $4,914.  T3E will have a net loss of $12,600 after the taxes.

In 2012, SI Co will finally have a profit of $1,900. SI Co will increase the net sales to $540,000, by doing 12 solar panel jobs.  The costs of sales will be $420,000.  Again this is using the rate of $9 per watt to have a company put up solar panels; where as it would cost an individual $7 per watt to put it up independently (solar-electric.com Nov. 3, 2008). 

SI Co will have a gross profit $120,000. The operating expense will be $96,100, which again is the increase in labor.  There will also be a slight increase in gas to $6,500, and an increase in insurance to $7,000.   The operating income is $5,900, and the interest expense will be $4,000 this year.  The income before taxes is $1,900. SI Co will not have to pay taxes in the third year because of their tax credit. SI Co will have a net income of $1,900.  (See appendix 7 for the pro forma income statement)

The pro forma balance sheet for SI Co will have a $100,000 in total assets to start with and it will be decreasing each year by $18,000.  By the year 2012 SI Co will have $46,000 in total assets.  The total liabilities will decrease by $5,000 each year. SI Co will start out with $100,000 and end up with $85,000 in 2012.  The owners’ equity in 2010 will be only $6,400, but by the year 2012 SI Co will have $58,900 in owners’ equity.  (See appendix 8 for the pro forma balance sheet)

The projected cash flow for the first year of operating is $87,400.  In the year 2011 the ending cash flow for SI Co is $97,300.  By the time 2012 come around the ending cash flow for SI Co is $121,200.  The total amount of cash sales for the first three years of operation is about $1.125 million.  The total amount of expenses for the first three years of operation is about $1.092 million.  (See appendix 9 for the pro forma projected cash flow statements)

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