A "pro forma" P&L is an estimated profit and loss statement for a future year that is often based on the same information as an historical company P&L statement reflecting actual results for the current or prior years.

When using an operating/holding company business structure, liens can be used to secure extensions of credit from the owner or holding company to the operating company.

If you're considering an investment in new equipment, a new business facility, or any other type of asset, you'll probably want to quantify the benefits you expect to receive. In some cases, you'll want to compare the expected returns of several possible investments.

Unearned revenue is money you've received in advance of providing a service to a customer. It's also called prepaid income. Unearned revenue is actually a liability because the business still owes the service to the customer. An example would be an advance payment for consulting services to be performed in the future.

An important factor in selecting a location is that you keep a long-term perspective. Site selection can be a big investment. Choosing the right site now can avoid the costs of relocation in the future.

All things being equal, a business facility that can accommodate potential future growth would be more attractive than one that does not. However, realistically, all things are rarely equal. If one facility offers more room, you can expect to pay for it some way: in price, location, or other terms or features. If this is true, does it make sense to pay now for the benefit of easy expansion later? It may, but only if you reasonably believe (not just hope) that you will need the extra space in the not-too-distant future and that any additional costs that go along with this extra space will not be an undue drag on current business growth.

Theoretically, anyone purchasing a small business is interested only in the business's future. Therefore, a valuation based on the company's expected earnings, discounted back to arrive at their net present value (NPV), should come the closest to answering the buyer's questions about how much the business is really worth today.

Preparing for the future is what a business plan is all about. So why is it listed here as a separate reason for having a business plan? Simply because a business plan positions you to continue your planning habit beyond the period covered by your first plan. You've already paid the up front cost in time and effort to assemble a plan. Refining it, revising it, and extending your projections beyond the original planning window will consume far less of your time in the future.

It's a rare buyer who won't want you to show him or her the ropes, by remaining involved with the business for a while after the sale. Often the deal won't fly unless you agree to this. At a minimum, the buyer wants to be sure that the business is indeed a going concern. But beyond that, buyers realize that most of the real business knowledge has never been written down, and when you leave, it will go with you unless the new owner takes steps to learn it from you. Often a significant part of the total cash you receive will be tied to your future involvement in the business.

Asset is the term used to describe everything of value held by your business. For an asset to be of value, it must have some future usefulness to the continued success of your business. Examples of assets include cash, checking accounts, savings accounts, accounts receivable, inventory, manufacturing equipment, office equipment and furniture, land, buildings, stocks, and bonds.