Starting a small business is not for the weak. Undoubtedly, you’ll be put through the wringer – especially in the first few years after launching. The tough times ahead will no doubt be harrowing – and you might find yourself struggling to stay afloat, especially money-wise.
But, if you set up your small business with a solid financial plan right from the start – a plan that outlines your business goals and the fiscal initiatives you will implement to support them – your business can succeed.
Here’s how.
Small Business Financial Plan: What Does this Entail, Exactly?
So, you need to set up a financial plan for your small business. But what does this mean, exactly?
If you’re in the dark about how to create a financial plan, there are – fortunately – an abundance of financial planning courses online, which can assist immensely with enlightening you on the process of how to make the best possible – and most effective – financial plan for your small business. Alternatively, just stay with us as we elaborate on the concept further.
A small business financial plan, also commonly referred to as a business proforma, is intended to outline information both regarding your present monetary situation, as well as your small business’s upcoming goals. A good financial plan should highlight your business’s future projections – that is to say, your expected revenue, sales, and profit margins. Creating a financial plan for your small business will also help to identify areas where you think your business will be successful, as well as aspects of the business that may need improvement in the future.
So, How Do I Do It? Creating a Financial Plan for Your Small Business
When you need to create a small business financial plan, there are some important steps you should follow:
Step 1. Be Strategic About Your Goals: What Do You Want to Achieve, Business Wise?
Needless to say, as a small business owner, your ultimate goal is to make money. No one enters into business to run it at a loss, and as such, you need to be fiscally-minded with your business decisions.
Apart from this, though, what else do you want to achieve? Perhaps you have a goal to break even at first, before starting to make a profit. Undoubtedly, as many small business owners would attest, the first year after launching a small business is the hardest. Just imagine – you’ve invested a great deal of money into your start-up, and your business expenses are piling up. To be brutally honest, it may be a while before you even start to make money.
But, that is why you need to keep your sights set on your end goals and let these drive you through the trying times you will no doubt experience as a new small business owner.
Step 2. Future Proof Your Financial Objectives: Make Educated Guesstimates About Your Small Business Projections
When it comes to your financial objectives, you need to be realistic. There’s no point assuming you’ll become a millionaire within a matter of months! Don’t believe the social media stories about overnight entrepreneurial sensations. Even if they are true, these examples are the exception.
Instead, ensure that your business’s future projections are achievable. That doesn’t mean to say that you can’t aim high! Shoot for the stars, as they say, and you will land on the moon. But while having lofty ambitions can be a motivator for many, overestimation of your business projections can lead to disappointment. So, make sure your estimates are as accurate as possible, and based on factual financial data.
Step 3. Fail to Plan, Plan to Fail: Make Contingencies to Combat Unexpected Challenges
Yes, the road to success will be bumpy. But, you’re not alone. Many small business start-up entrepreneurs have taken this path before you (and if they can do it, so can you).
Make sure to learn from their mistakes. Do your research, and inform yourself of the risks. That way, you can make contingency plans to take on the obstacles that get thrown your way.
Step 4. Keep it Going: Monitoring and Managing Your Goals Long-term
So, what’s next?
Now that you’ve established your financial plan, you’ll need to continue to manage it into the future. Most important? Make sure to always revert to your initial plan. If nothing else, it will remind you why you started.
