I’m going to break the Financial Section of the business plan up into component parts (I don’t know about all writers, but many of us are numberphobes!).

The Cash Flow Projection was both terrifying and confusing for me. There’s only one word in it that I really understand — flow. I get in the writing flow every day. Cash? Projection? I’m an in one hand and out the other kind of person with cash. I have always wanted astral projection to be proven real, though.

I uncovered a well-kept secret in my business class. The majority of small, sole-proprietor businesses do not expect to make a profit for 3 years. Yes. Really. That new hairdresser down the street? She planned to keep her business open for 3 years before she made a profit (or maybe she opened her shop without a business plan and is either going to be lucky or go out of business within a year). Of course, she had to put a lot more into start up costs, because she needed a place of business, a license, and to meet all the requirements for state approval. So she’s actually operating way in the red — either she got a bank loan, a family loan, or she’s put her own money down on her dream business.

Writers don’t get loans. But we aren’t licensed either. And our start up costs can be the lowest of low — paper, toner, electricity and time (I’m assuming most people have home computers and printers — but even those who don’t can go to the local library for free, or buy an inexpensive netbook). When I began, I used the correcting Selectric at work, on my lunch hour (yes, I am *old*). Then my Commodore 64 (yes, I was an early adopter, and I’ve never looked back). I now have a Mac desktop, a Mac laptop, and a PC laptop (and I know how to expense them).

Ready to cry, numberphobes? Never fear. If I can understand it, so can you. Most of all, remember: plan for three years before you make a profit on your business (profit is when the income is greater than the expenses). If you focus on non-fiction and are willing to set a weekly query goal, plus look to see how to get corporate writing gigs, you can be profitable, even self-supporting, within a year. If you are aiming primarily for a novelist’s career, you may need to count on other income streams to make you profitable, and you will have to research your genre before you know whether you have any chance of being self-supporting from your novels (most of the writers I know are not self-supporting on just their novel writing — first, advances are lowering in the industry, and second, it can take years for royalties to kick in and provide a steadier income). And those statements are all predicated on you being a good writer. If you have to study craft intensively before you are ready to submit, you are still in trade school (and maybe you can take a college class and get a student loan!).

The cash flow projection sheet gives the month-by-month project for your business for 1 year. And here’s the best part — projection really means “guess” or “hope” or “in my wildest dreams.” Whatever. Reality hits the cash flow projection sheet each month, when you fill in the “Actual” column and see how it differed from the “Projected” column.

I’ve created a hypothetical Cash Flow Projection sheet for a start up, making a few assumptions along the way. I’ve trended toward the CFP for a primarily fiction writer, as that is what I know best. I projected the writer would put 500 into her own start up costs, and knowing that it can take several years to sell a novel (and more time to get paid for it), would look for other income streams to pay for office supplies and a conference in the second year. Other income streams would be teaching (I hypothesized she would offer a class for beginning writers (or a class based on other profession that would be of interest to writers — say PR, time management, etc.) in June and December, asking $10 per student and getting 10 students. Obviously this is very conservative. I also projected the writer would sell (and be paid for, which is not the same as sell) several small non-fiction or short story pieces to lower paying markets that would result in income in three months of the year.

Projecting income is actually an important thing to do, even for a new writer. For example, I know many writers who don’t realize they have expertise to offer others, so would never offer a workshop or class for pay. If you put teaching into your business plan, that makes you think about what you can do, and gives you some goals to aim for as you get more successful and thus can increase your fee. It also prevents you from doing too much for free (free is community service, which is useful, but a balance between paid and volunteer gigs is critical from day one). The same is true for novelists who can make money from non-fiction or short fiction while waiting for the advances and royalties from novel sales. For a writer who is more non-fiction oriented and willing to begin with the plentiful low-hanging fruit (the $5 web content jobs), income can start rolling in right away.

You can download a Cash Flow Project file from Microsoft, or from your local SBA. There are a lot of columns that aren’t relevant to the brand new business that will become relevant, so I don’t recommend deleting the columns you don’t need (legal, employees, etc.) because you want to remind yourself that there may come a day when you need to project costs for these things (when you get an agent, when you hire a web designer or PR firm, when you hire an assistant, when you need legal advice or an accountant because your business is booming and you need to protect it).