Financial Statements
The business plan should include 5-year projections of:
- Balance sheet
- Income statement
- Statement of Cash Flow
Financial Projection Spreadsheet
Brian Goncher of Deloitte and Touche has created an excellent spreadsheet that allows you to "fill in the blanks" to create 5-year projected financial statements. It makes the job much easier! Plus, the spreadsheet reminds you of the various categories you need to include in a budget. Get Brian's spreadsheet here.
Keep in mind that the smart VC will not believe your projections out five years, but they will want to be convinced that you thought it through. And they will want to understand the assumptions you made. So...
Assumptions
Include clear documentation of your assumptions that drive the financial projections. I'm tempted to include a laundry-list of categories to "not forget". But the reality is that you need a team member with the right background to do this (and to know what items need to go into it) which leads to the next section ...
Finance Team Member
You'll need a finance person on your team to do the financial projections (and to answer the VC questions that will come). That might be a part-time CFO, or an advisor, or a part-time Controller, or some finance outsourcing firm -- but unless you're a CPA, you probably don't want to do the financial projections yourself. (Even if you are a CPA, if you're also CEO, you have higher leverage things to do than create financial pro-formas... So find someone to do it.)