When someone gives me a business plan to review, I do what almost every other recipient of such a document does: I flip to the numbers.

Yes, it’s important to understand a little history about the company. I want to know the bios of the founders and management team. I’m interested in the products and the vision. And assuming the owner wants financing — I want to know how much money is needed and why.

In the end, a business plan is just a request for financing, and no one is going to finance a company without looking at the numbers.

By numbers, I don’t mean the past. I mean the future. I mean a spreadsheet that shows me a sound, reasonable and rational forecast of where the owners and managers expect the company to be in the next three years (anything after that is really just a guess and not worth the effort).

Business is about math. It’s about buying low and selling high. It’s about managing expenses, figuring out margins and pricing correctly. Show me profits, and I can figure out whether or not an investment is worth it or not.

So, I look at the numbers, and I expect to see a reasonable, rational forecast on a spreadsheet. How can you do this? Follow these general steps.

1. Format your spreadsheet in a way that financial people are used to seeing.

Down the side, you list your revenue and expense accounts. Across the top, your columns should be Year 1, Year 2 and Year 3. Your forecast should be based on cash in and cash out. You should include a “notes” column which cross-references your assumptions behind each number. These assumptions should be detailed and based on research. It’s OK not to include these details on the sheet as long as you’ve got supporting documentation and schedules that back up your assumptions. The people reading your plan want a forecast built on the best facts available. It will look like this to start:

What Is a Business Plan

2. Forecast your revenue.

In this example, Alyssa’s Crafts and Art store is setting up shop on a street in a village where a handful of shops and restaurants are also located. This is good, because there’s data here. To forecast the next three years of revenue, Alyssa needs to get familiar with the data and do some feet-on-the-ground investigating. She should be talking to other stores in the area to find out what normal foot traffic is. She should talk to other craft stores elsewhere to better understand how much the average customer would purchase on a visit. She might delve into industry figures and ask some experts in the retail world about what kind of traffic and spend she can absorb. She should then assume a reasonable growth rate given positive word of mouth and a little advertising. When she’s done, her revenue forecast would look like this:

Business Plan Example

Every product has a direct cost, and in retail, it’s usually the cost of materials. Alyssa should make a list of all the products she will be selling along with their purchase cost. Along this list, she should be detailing her selling price for each item. When complete, she should add all this up and determine what her average markup is. From this, she should estimate her margin. Here’s a good explanation of her margin for an investor to read. Notice how she’s referencing a separate document that supports her calculations that can be accessed if needed.

Business Plan Definition

3. Dig deep into expenses.

All of the expenses that Alyssa’s forecasting must have actual, tangible documentation behind them. And — very important — Alyssa must include her own compensation in this forecast at some point. See the below example:

Example Business Plan

4. Add it up.

After you’ve done all the work, sum up the revenues and expenses and show expected profits for the next three years and then take a few extra minutes to pretty up your spreadsheet because people appreciate details. Your finalized spreadsheet should look like this: