Business Plan Pro

Business Plan Pro tip: “Goodwill” as an accounting concept

GoodwillWhen a company purchases another company for more than the value of its assets – which is quite common – the difference is recorded as an asset named “Goodwill.”  This is not a general term for the value of a brand, for example, but a very specific accounting term.

For example, if one business buys another business for $1 million, then it needs to show the $1 million spent as an asset. If there are only $500 thousand in real assets, the accounting result should be $500,000 in real assets purchased and another $500,000 in “Goodwill.”

Goodwill is normally amortised over 5 to 40 years, depending on variables determined by the accountants.

In Business Plan Pro, you would include this goodwill value as part of your Long-term Assets. You can then record the amortization of goodwill as Depreciation. Remember to explain this asset in the Balance Sheet topic.

Business Plan Pro tip: Handling loans

If your business plan includes receiving loans, you will need to enter the loan amounts in the Start-up Funding or Past Performance table (for loans received before the plan’s starting date), or in the Cash Flow table (for loans received after the plan’s starting date).

You will also need to enter the planned repayment amounts in the Cash Flow table, and projected Current and Long-term interest rates in the General Assumptions table. The Profit and Loss table will automatically calculate the tax-deductible interest on the loans from these numbers.

About current vs. long-term loans

While the distinction between current and long-term assets has to do with depreciation, standard accounting makes an arbitrary division between current and long-term liabilities. The idea behind this division is about establishing a difference on how long such liabilities last. The division between long-term and current liabilities might be three, five, or ten years.

Each company makes its own decision, usually in agreement with financial management and accountants. You can make that decision yourself or ask an accountant. If you are just starting a new business, and have no idea, then make the division five years: liabilities that last longer than five years are long term.

About interest rates

The General Assumptions table contains default interest rates for your loans – simply type over the existing number for Current or Long-term Interest rate to change this to your projected interest rate.

You do not have to include the General Assumptions table in the printed document. The financials need these numbers, but your readers might not. Although interest rate and tax rate assumptions are standard, not every reader relates to them in detail. If you want to include this table in your printed plan: 

  1. Open your plan Outline
  2. Click on the Important Assumptions topic (in the Financials section)
  3. Click Table on the Insert menu
  4. Choose the General Assumptions table from the existing tables list
  5. Click OK

You can search your Business Plan Pro Help on “loans” or any other term related to this kind of funding to find much more information.

Email Center Pro Tip: Click to Sort

SortYou can click on the column headers in any message listing to sort conversations by subject or date.

  1. Open any mailbox or Saved Search
  2. Click the Subject or Date column
  3. You can click again to reverse the sort order
  4. Scroll through the list to find a specific message
  5. Click the message to open that conversation

Business and Marketing Plan Pro: Add detail with new rows

Need more detail in a Sales Forecast? Want to track a number of different Milestones? No problem. Most tables with data-entry areas allow you to insert new rows, which you can name and format.

  1. Click on a data-entry row in the table
  2. On the Edit menu, click Insert row
  3. Label your new row, and then fill in your projections

Business Plan Pro tip: Seeking Investment

Right now, investors are holding things very close to the vest. if you’re writing a business plan seeking investment funding, you must make your case well, with a solid pitch backed by a full understanding of the business’ prospects, financials, and cash projections.

First, all investors want to see right away how much money you need, how it will be used, what return on investment they will receive, and when they will get it.

Professional investors (venture capitalists) will also want to see an exit strategy, when their shares are bought out or the company goes public.

If you are seeking investment from friends and family (which we don’t necessarily recommend), remember that spelling out who owns how much of the business, who has the final say on all business decisions, and what happens if the business fails, are crucial to maintaining good relations with your investors. Investment is always a risk.

Your Start-up Funding (for start-ups) and Cash Flow tables show where new investment comes into the business. The Cash Flow table has a line for after-tax Dividends that will be paid to investors.

Long Term table can show projected growth and equity for up to 10 years, although forecasts, of course, become less reliable as you get further out.

Essentials of the investment offering — how much money for how much ownership — should show up in the Executive Summary.  Additional topics should cover the Exit Strategy, Valuation, and Shares of Stock. Many plans will include a section on Risks and Contingencies. Put this in your Financial topics, or click Topic on the Insert menu to add as many new topics to the plan Outline as necessary to spell out the details. Users with the Premier Edition can put this information in the topics surrounding their investment tables.

Remember, however, that investors don’t invest in plans – they invest in people. Make sure you understand the numbers, and can back them up with real research. Your plan should reflect the commitment, energy, and hard work behind your entrepreneurial drive.

Business Plan Pro tip: Calculation Rounding

roundingSome calculations in Business Plan Pro may produce results that appear to be incorrect by very small amounts. This apparent discrepancy occurs when the software rounds numbers up or down to fit the cell formatting (decimals) chosen for each cell. In some cases, this can even trigger a Plan Review warning for a table that appears to be fine.

In Business Plan Software 11.0, you can prevent rounding from affecting your printed plan by using the Precision as Displayed option. This option forces the value of each number in the worksheet to match the displayed value. To turn on this option, follow these steps:

  1. (Recommended) Save a copy of your plan with a different name
  2. On the Tools menu, point to Options and click Tables
  3. On the General tab, check the box for Precision as displayed
  4. Click OK to apply this setting to all tables in your plan

NOTE: This setting permanently changes the values in your tables to match the decimal settings in your table cells.

Business Plan Pro tip: Starting Dates

The Starting Date for your business plan is somewhat arbitrary, especially if you’re a start-up. It could be the day you first start writing your business plan, the day you open for business (or begin a planned expansion), or anytime in between.

calendarIn general, a new business should set the starting date on or before the day they first pay employees a regular salary or generate sales. So, if today is January 10th, and you plan a Grand Opening for March 1st, you could set the starting date for January, February or March. This means you may have some time in your plan where you have to pay expenses, but have no income, as when you train new employees. This is typical for a start-up, and should be budgeted for ahead of time when you think about the cash needed at start-up.

For a new business, the starting date may help you separate the “start-up period,” in which you plan, obtain funding, buy any necessary inventory, and interview potential employees, from the “opening of the business,” when you have to start paying your employees, and begin receiving sales income.

For an ongoing business, try setting the starting date to match your current fiscal year cycle; this will help with your accounting, later. Alternatively, you could set the plan starting date for the launch of a new product, an expansion, or a major business milestone, like handing the family business down to the next generation.

Business Plan Pro tip: Don’t forget to pay yourself!

money jarWhile it’s tempting to improve the projected profits in your business plan by listing the owner’s payment as dividends in the Cash Flow table, it also means that these payments may exist only as that – numbers in a business plan, not money in the bank to pay your mortgage, buy groceries, etc.

Would you accept a job offer that listed your pay as “to be determined”?

If you’re serious about your business, and about your own efforts, don’t forget to pay yourself for your work. Put your expected salary in the Personnel table, and see what this does to your profits and, more importantly, your cash balance. If you are counting on that income to support yourself so you can keep running this new business, it needs to be in the financials, just like a regular employee’s would be.

Note also that doing this feeds into the automatic calculation of “Payroll taxes” in the Profit and Loss. As a sole proprietor you will end up paying something similar to employer payroll taxes at the end of the year when you do your taxes, because you will have to pay a self-employment tax, so it’s a good idea to take that into account in your plan.

Your accountant may have you listing these items differently for tax purposes; that’s okay. Remember that this is planning, not accounting, and we’re thinking in broad terms, trying to estimate the future. Shouldn’t getting paid be part of your business future?

Iconophiles Unite!

Want to quickly find that message from yesterday that came in with an attachment? How about the one where you wrote a note?

Email Center Pro lists this information in visual format, right next to each message in a list. Just scan down the message listing to find the icon you’re looking for:

ECP Message Icons

  1. The Note icon indicates that an internal note has been added to the conversation.
  2. A red pencil lets you know someone else is reading this message and you won’t be able to make any changes.
  3. A yellow pencil indicates that a draft has been saved for this conversation.
  4. A paper clip indicates that a file is attached to the email.
  5. A green arrow indicates that an outgoing message has been sent (usually a reply).
  6. All conversations in the Archive folder show the archive box, instead of the envelope, as their main icon.
  7. All conversations in the Spam folder show the spam shield, instead of the envelope, as their main icon.
  8. All conversations which contain only a Draft, in the Drafts folder, show the Draft icon, instead of the envelope, as their main icon.
  9. All conversations in the Trash folder show the trash can, instead of the envelope, as their main icon.

Business Plan Pro Tip: Archive and Roll Forward for a new planning year

Rolling FinancialsHappy New Year! As an entrepreneur, one of your resolutions should be to revisit and renew your business plan for a new year. The Premier Edition of Business Plan Pro includes a great little feature to get you started.

On the File menu, click Archive and Roll Forward

What this changes

A copy of your old plan is now Archived for safekeeping, and the financial data has rolled forward one year. This means:

  1. Start-up plans become Ongoing plans: instead of a Start-up and Start-up Funding table, you will now have a Past Performance table which summarizes previous years of financial data.
  2. First Year becomes Previous Year: The first year of planned data from your original plan becomes the most recent year of the Past Performance table.
  3. Annual Data moves back: Third Year annual forecasts move back a year, to become Second Year annuals.* Standard term plans then have a new, blank third year column to forecast, while those set for long-term planning see their new year as year five. 

* NOTE: If your original plan was set for two years of detailed monthly forecasts, the second year monthlies retain their original value, for you to manually type over.

Review Past Performance

Before you go forward, take a look at the data in the Past Performance table. Is it accurate? The planned tables include only your original forecasts, not actual results from your real business operations. Where your plan differs from accounting data for the previous year, type in your correct past results.

Now, update your plan

You’re now ready to start planning your new business milestones and budgets, based on the insights you’ve gained over the past year. You probably don’t need to review every section of your plan – has the business moved, or changed owners? – but make sure to walk through all of the financial tables and, of course, the Milestones. And don’t forget to distribute your plan! You may not need to send it to investors, but your managers and anyone else who is affected by changes in the next year’s budgets, goals, marketing strategy, etc., need to know that your business plan is an ongoing process, and that their active participation is required.

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