Steps To Creating A Business Financial Plan

If you wish to apply for a loan or certain local or federal assistance programs, often what is required is a business financial plan. But even if you’re bootstrapping or starting small, having a solid outline of your goals is more likely to result in a successful start of operations. Consider some of the steps you can take to refine your ideas so that they can be put into works.

Build Your Basic Budget

Detail all of your expenses, and separate them categorically if possible. The main separations you want to make are capital vs. ongoing expenses. A simple spreadsheet with summation formulas and formatted for currency make for a simple yet effective plan. Don’t forget to account for debts and other obligations.

Alternate Budgets

Your business financial plan should project future changes in the marketplace. For example, when prices for raw materials change, you need to see how that will affect your operations and ultimately the bottom line. Or say you are considering adding a line of business. How will new expenses and hopefully new profits affect the business’ earnings? Or say you are considering adding something optional like a type of insurance that isn’t necessarily required but would be good to keep in case of the unexpected. These types of alternatives and their financial impacts can be analyzed in additional spreadsheets so that when the time comes to make decisions, you can quickly calculate the financial pros and cons.

Put Your Goals on Paper

Businesses succeed when they are headed somewhere. Think about how much you’d like to grow year-over-year, and what you need to do to achieve that. Some proprietors are surprised that when they shoot for a goal, their hard work often results in exceeding their hoped-for numbers.

Ask for Feedback

Go to a trusted friend, family member or financial planner to get a new perspective on your plans. You may find that an important detail was overlooked. Sometimes new ideas spur from such conversations. Other times a fresh set of eyes can produce in you the confidence you need to use your business financial plan to carry out your dreams.

Don’t Forget About Cash

Your plan should include projections about accounts receivable and payable so that you know what liquid assets should be available at various times. Especially when you’re using credit, you’ll need to have enough cash to keep things going.

Your business financial plan is your key to a chance at success. When effectively written, you’ll have documents to reference and change as you navigate an ever-changing marketplace.

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