By the time you have your financial forecast complete, you have numbers available to do some standard business ratios. I can’t say that I’m a big fan of ratios, but they can look good in a full and formal business plan, even though they are projected ratios. Here’s an example.

The real use of ratios, in my opinion, is watching them as they change over time. In the best of the plan-as-you-go business planning idea, you have some key ratios that are important to you. They are in your objectives and you review them in meetings.

Notice in this case that I’ve also added a reference to standard business ratios. This is a good touch in a business plan. They come from available industry data, which I discuss in the next section. Don’t expect your company projections to ever be an exact match. Be prepared to explain why they are different. And they are always different.

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Tim BerryTim Berry
Tim Berry

Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry.