Every business needs a financial plan, especially a startup business. Your financial plan allows you to make projections for the coming months and forecast your income. These projections can be early warning signs that help you plan for financing needs and plan for your marketing and overall business projects. Here is a quick guide to help you build a financial plan for your startup.
Review Your Strategic Plan
Your strategic plan will help you start on your financial plan because it gives you a clear view of your business’ future. Your plan may have also mentioned your financing, how much you’ll need, and how you’ll get it, including the cost of employees. You should determine the financial impact of all of the strategies outlined in your plan, from which productivity tools you’ll use in the office to the overall cost of your employees.
Determine Your Costs
There are two types of costs you’ll need to consider: fixed and variable. Also known as your overhead costs, your fixed costs are expenses that are typically the same every month. These can include rent, payroll and employee benefits, website hosting, SEO tools, professional services, and more.
Your variable costs are expenses that increase or decrease depending on your sales, so there is no typical monthly cost for your business. As your business grows, these costs typically go up. Examples of variable expenses are advertising spend, equipment, shipping costs, freelance services, travel and events, and business taxes.
Develop Your Projections
When it comes to developing projections, proper bookkeeping and accounting are crucial.
Monthly financial projects are created by recording your anticipated sales forecasts and anticipated expenses for labor, supplies, overhead, and more.
Your monthly expenses should be so precise that you know exactly what you’re spending on everything from office supplies to marketing tools and all of the fixed and variable costs mentioned above. If your business has tight cash flow, you may even consider doing this weekly instead so that you can make more accurate projections.
Once you’ve done that, it’s time to factor in the projects identified in the strategic plan. You can gain insights by using your accounting software and factor in large projects that require funding, like the release of a new brand or product development.
It’s also a good idea to prepare a profit and loss statement with a balance sheet projection so that you can consider various scenarios and anticipate their impacts.
Your projections will help you determine your financing needs. A professional broker dealer can help you achieve your financing goals by securing the capital that you need to put your business on the map. If you already have financial partners, you can meet with them to discuss your options. Here your projections will help reassure your partners or loan providers that you’ll be able to pay them back and manage your finances in order to do so.
Always Review and Adjust
And finally, it’s important to always review and adjust. Whether you’re examining your projections monthly or weekly, it’s crucial to adjust based on your findings. In the first few months of your business, assume some deficit spending and build in some padding for overspending and emergency funds.
Each month, go back through your expenses and label which ones are necessary and which you can take a second look at. You mind finding that your ROI for some software or services you’re using isn’t worth the monthly expense.
It’s always a good idea to take a look at which costs can be eliminated or reduced so that you can have more to spend on necessary expenses. For example, you may find that it’s more cost-effective to actually hire a person to do your social media in-house than adding it on as a service that your PR company provides.
You may also find that your productivity tools can be switched to free plans. While this may seem like a minor expense, it can add up and provide your business with a better budget that allows it to scale over the months.