The Executive Suite: Developing A Financial Plan For Your Small Business

Wednesday, July 4, 2018

Developing A Financial Plan For Your Small Business

Your financial plan is last, but it may very well be the most important of these three plans. Without the funds to launch and maintain your business, it will very likely sputter and die when it runs out of financial fuel. Keep in mind that it takes most new businesses months or even years to begin to make a profit. This is why you have to make sure you have your financial bases covered until you're able to create a healthy cash flow.

Start your financial plan by figuring out how much capital you'll require to start your business and where that capital will come from. Create a spreadsheet of all of the expenses you anticipate in launching your business. Some items on your list may include:

Equipment
Furniture
Software
Office space/store location
Remodeling work
Starting inventory
Public utility deposits
Legal and other professional fees
Licenses and permits
Insurance
Employee training
Website and other digital properties
Marketing collateral
Grand opening event
Advertising for grand opening

Include the cost — or estimated cost — of each expense and total them to get an idea of the initial capital you'll need to get your doors opened.

Now do the same exercise focusing on anticipated ongoing monthly expenses. Your list may include some of the following:

Your salary
Staff salaries
Rent
Utilities
Advertising and promotion
Shipping and handling
Supplies
Telephone
High-speed Internet
Website maintenance
IT services
Bookkeeping or accounting services
Insurance
Taxes

Total up the estimated cost of each of these items to get an idea of your monthly expenses. Multiply that number by 12 to get an estimate of what it will cost to keep your business afloat for one year.

The last piece of your financial plan is estimating what your business will bring in, immediately and as it grows. You can't see into the future so you won't know with 100-percent certainty how successful your business will be or how long it will take before it generates income. Be conservative in this step. Use the information on your projected income from your business plan as a starting point, then add in more details to fine tune your estimates.

With your completed spreadsheet, you should have a very clear idea of how much you'll need to start your business. You can begin exploring small business funding options.

You may realize you need to do some additional research to gather information about the market as you begin working on your three plans. You may need more information to develop pricing strategies or reach cost projections. Take the time to get all the information you'll need so your plans are comprehensive and accurate. If you get stuck, consider enlisting the help of an expert — a business consultant, marketing expert or accountant — to help you through. You can also reach out to your local SCORE chapter to get free business advice and mentoring.