As you begin the process of developing a business plan for your business, it is important to know that the most critical section of your plan is the financial section. You might have some idea of how you want the financial section of your business plan to go, but may experience a little difficulty when it comes to actually developing it.
Since the financial portion of your plan plays a significant role in the overall blueprint as a whole, there are several tips that you can follow to make this part of the process much easier than you might think.
Identify the Realistic Size of Your Market
Before you even think of income projections or even using an income statement template, you need to identify the realistic size of your market as well as the proportionate market share you expect to receive as a result of your hard work.
There are quite a few organizations and groups that can help you to gain a clear and concise understanding of your market; these include your local chamber of commerce, media organizations, and even your local city planning departments. The best course of action to take would be to explore as many of these resources as possible to gather an abundance of information, according to the National Federation of Independent Business (NFIB).
Understand the Basic Elements Required
There are quite a few basic elements required in the financial section that each need to be addressed and developed accordingly. For instance, you need to start things off by developing an accurate sales forecast that will project your sales for at least the next three years.
Creating a strict budget for your expenses is the next step, because you’ll need to understand exactly what expenses your business will need to pay in order to reach your sales goals. Developing a cash flow statement and income projections are the next two steps to complete, which is exactly when an income statement template will come in handy. Make sure that you also deal firsthand with liabilities as well as assets and work on developing a break-even analysis to accurately identify your break-even point.
Do Not Hesitate to Reach Out for Assistance
One of the worst things that you can do is to make the mistake of thinking that you have to do this all alone. There are many different industry experts and specialists that are readily available to assist you in developing a solid financial plan and strategy for your company.
Take advantage of the resources that are available to you. If you can afford to do so, hiring a professional accountant to join your staff and focus primarily on managing the financial aspect of your business completely would be the most advantageous route to take in this regard.
Doing so would allow you to have an expert on-hand at all times to handle all of your financial needs from creating an income statement template like those offered by Shopify to managing your annual tax returns.
Overestimation Is better than Underestimation
When it comes to your financial expenses, costs and overall reporting, overestimation is always the most preferred course of action to take instead of underestimation. Underestimating costs and expenses will only set you up for inevitable failure and the possible closing of your business in the near future. Keep in mind that there are so many different expenses that will need to be paid just to get your business up and running.
While you might be able to estimate the vast majority of the expenses needed to get your business off the ground, quite a few may slip through the cracks or become unexpected surprises that seem to come out of nowhere. Oftentimes, these unexpected expenses can sink a business before it even has a chance to open its doors.
When developing your financial plan, therefore, make sure that you leave enough breathing room to have a sufficient amount of leverage in this regard. Overestimation will allow you to actually save money and add more to your bottom line in the long run, which can greatly benefit your company.
Developing the financial plan for your business is an extremely important step that requires detailed attention. A strong financial plan will allow you to secure loans for your business as well as keep you on target as you get your business underway and keep you focused throughout your journey.
Once your business is up and running, you want to be sure to revisit your financial plan. This will give you the opportunity to see what you can learn from it. Take the opportunity to re-asses your projections and see if you may need to readjust your yearly figures. Use this as an opportunity to keep your business on track for financial success.