Learn the Art of Budgeting and Forecasting
Financial Statements to Start Your Business

By: Jerry Chautin, SCORE volunteer, business columnist
SCOREing small-business success

Workshop: The ABC's of Budgeting and Projections for the Startup Business
When: October 13, 9:30 a.m. to 12:30 p.m.
Where: SCORE Atlanta, 233 Peachtree Street, Ste. 1900
Registration & Price: Online at tinyurl.com/cydufq or call, (404) 331-0121

"Budgeting has a bad rap," says John Coleman, president of Fiscal Control and SCORE's workshop leader for The ABC's of Budgeting and Projections for the Startup Business. As a freelance chief financial officer and previous owner of several small businesses, his goal is "to reduce that anxiety and eliminate those misunderstandings" that many business owners have about making financial statements a useful business tool.

Importantly, wrapping your arms around the income and expenses of starting your business will assure your success. Not doing it will forebode your failure. More specifically, most businesses that fail do so because they do not budget correctly and run out of cash. Consequently, it is imperative to forecast when you will break even and start turning a profit. That means knowing how to research your operating expenses and forecasting sales. You can also download an article with a list of typical startup expenses at www.bbb.org/us/article/558.

"We'll walk through an example of an actual budget while discussing basic budgeting concepts and how all the pieces fit together and become an income statement, balance sheet and cash flow," Coleman says. Budgeting and forecasting also means being able to demonstrate the reasonableness of your projections to lenders if you plan on getting a small-business loan. "In addition, the attendees will pick up the words and phrases they need to communicate their financial information to lenders and investors," Coleman says.

Sandy Perkowitz, a volunteer SCORE business counselor adds that lenders will scrutinize your financial statements. So you must tell the banker what he or she needs to know. "The main thing the loan officer wants to see is how are you going to repay the loan," Perkowitz says. Accordingly they want your financials to be unique to your business plan and not just a pretty template that was developed by a software company to help you sidestep doing your market research. "(Borrowers) need to understand that a bank loan officer is going to pay far more attention to their budget projections than to all the boilerplate," she says.

Bankers will compare your projections to industry standards from Risk Management Association Annual Statement Studies, trade association data and even franchises in a similar industry. These benchmarks are available to you online and in the research departments of most libraries. What is more, you should defend your projections with footnotes citing your sources and calculations.

But keep in mind that every business is unique and industry averages are only guidelines. You may be able to charge more for your product or service because of added value. Or your costs might be lower because you were able to negotiate a favorable lease during the economic downturn. These are explainable reasons to deviate from the averages. But you should start with industry benchmarks that the lender understands and support the deviations with footnotes to make them believable.

To look at Risk Management Association Annual Statement Studies online, go to www.rmahq.org. Most trade associations are listed in the Encyclopedia of Associations and a comprehensive list of franchises is listed at www.franchiseregistry.com.

In his freelancing role as a chief financial officer, your workshop leader Coleman can cover topics that will help you plan strategically to emerge from the recession. Because without a game plan going forward, your competition will leave you behind.

You can see Coleman's web site at www.fiscalcontrol.com, and contact him with your questions about the workshop.

About SCORE:
Since 1964, SCORE "Counselors to America's Small Business" has helped more than 8 million aspiring entrepreneurs and small business owners through counseling and business workshops. It is a nonprofit resource partner with the U.S. Small Business Administration. More than 11,200 volunteer business counselors in 370 chapters serve their communities through entrepreneur education dedicated to the formation, growth and success of small businesses. The Atlanta chapter has 100 volunteers in conveniently located branch offices.

Note to media: Photos of the SCORE counselors quoted and interviews are available upon request. For interviews with SCORE business counselors or SCORE small-business clients, contact SCORE's chairman, Jeff Mesquita: e-mail, scoremarketing@joimail.com, cell: (770) 713-1702. You may use this article in part or in its entirety and distribute copies with credit to SCORE Atlanta www.scoreatlanta.org. The columnist's CV is online at tenonline.org/sref/jc1bio.html Follow Jerry on Twitter, www.twitter.com/JerryChautin