Financial Planning for Success in Your Business
What is a financial growth plan?
A financial growth plan is a roadmap that will help you achieve your goals. It is a process that will help you get to where you want to be.
A financial growth plan is the process of creating, implementing and monitoring a strategy for growing your business. It’s the glue that holds together all of the elements of how you generate revenue and manage expenses; it provides direction for improving cash flow; it allows for prioritizing activities in order to maximize results; and it helps ensure that everything from marketing programs through profit and loss statements are aligned with each other so as not to waste time or money on unnecessary efforts.
How do you create an effective financial plan for a business?
Creating an effective financial plan for your business begins with having an understanding of the following areas:
Your business and its goals. As a small business owner, you need to have a clear vision of where you want your company to go and how much money it will take to get there.
Your current financial position. Does your business have enough cash on hand for emergencies or unexpected expenses? How much debt do you owe, including personal loans and credit cards? Do other people own part of your company in exchange for capital, such as angel investors or venture capitalists who want partial equity in return for funding? These questions can help determine if it's time to raise more funds (and why).
The market that you are in—specifically who is doing well right now within this market (competitors), what products/services they offer that sets them apart from competitors and how many customers are buying from each one (revenue stream analysis).
What are the eight components of a successful financial plan?
Cash flow forecast: 13-week cash flow projection
Income Tax Management
Statement of Financial Position (Balance Sheet)
Resource Allocation and Management
This section should also include a break-even analysis, which determines how much business volume must be generated to meet all of your costs and expenses. The break-even point is usually expressed as either total units sold or total sales value. This information helps you determine whether you can produce enough revenue to stay in business, as well as what sales growth would be required for your company to grow at projected rates. It's important that these numbers are realistic so they don't discourage an investor who may see the plan as too risky or unproven.
The Operations Plan includes allocating resources needed for operations—including facilities, equipment and labor—and explains how those resources will be used efficiently within each department of the company during each month covered by the plan (usually 12 months).
Financial plans develop and revise during the course of year. What is most important is having a plan in place to begin the year, track budget vs. actual, and revise plans to improve results. Continuous improvement is a common theme as each step forward helps accomplish tax goals for business owners.
A financial growth plan is central to business success.
A financial growth plan is a strategic business planning tool for growing a business. It is not a budget but rather a plan for the future. The goal of creating and implementing your financial growth plan is to reach the goals you have set out for the company over time.
Whether you’re just starting out or trying to take your business to the next level, a financial growth plan is an essential tool. With careful planning and consistent execution, you can create a realistic roadmap for achieving your goals and getting the most out of your business.