One of the most critical aspects of either founding or managing a company is the Financial Plan. While financial statements describe how your business is doing financially, financial plans include your goals for the future. To create the perfect financial plan, it is important to identify your needs, research ways to monitor your finances, and gauge your progress so you can always monitor if you’re on the right track. Below are some steps to create a sound financial plan.
- Create Your Strategic Plan
This is the beginning phase, so you’ll want to ask yourself questions such as, “What are the current needs of the company? Are we in expansion mode? Should we hire additional staff? Do we need runway money, and for how long? Will we need more funding in the future?” Choose answers that can get you through the next 12 months, then move on to the next step.
- Generate Your Financial Projections
List anticipated revenue and expenses for years 1-5. Put together pertinent assumptions. List everything you can think of and overestimate by a safe percentage to ensure you’re covered should anything go wrong. When you reach your total, include a 10% contingency.
- Look Into Financing Options
After you determine how much money you’ll need, you’ll have to determine where you’ll find this money. Traditional financing, such as banks and financial institutions, is always a good way to start to get estimates on rates, terms, etc. Then also look at alternative methods of fundraising. Once you have collected that intel, put those numbers down on paper.
- Always Have a Plan B
The unexpected almost always happens in business, so make sure you account for this and always have a Plan B. This can be difficult, but it is a critical point in creating a safe financial plan. It might also take a while, but you’ll need to have this section completed before going any further.
- Monitor What’s Going On
Naturally, you’ll have to monitor everything that’s going on in the business once you get to this point to make sure you’re on track to achieve your goals. The results of the monitoring should always be documented so it’s easier to keep up with your progress and your goals.
- Consider Hiring an Expert
A professional consultant or expert can be a true miracle worker when it comes to building and executing your financial plan. They can help you right from the start and increase the odds of creating a thorough financial plan that works for your business.