How To Create A Financial Plan
Are you ready to take your business to the next level?
Last week we discussed creating a business plan using Design Thinking. This plan should include key goals that you want to achieve, such as launching a new product or improving operations.
Now it’s time to create a road map. For each of the goals you set out last week, consider the financial side of things.
Consider the following example:
Let’s say you own a coffee shop, and you want to start a premium coffee subscription service. You’ve done your research, and already have 20 customers who have pre-ordered. You have also done the costing for the coffee as well as marketing and sales costs.
In the first year, you may only break even, but you plan on marketing the experience through the coffee shop with events such as coffee tastings and book launches.
The next step is to write out all the steps you need to take to get there, assign costs to them, and estimate your sales.
Assigning costs to each step is where things can get tricky as you would need to do some research. There are different kinds of costs that needs to be considered: product costs (product costs) and overhead costs (marketing and sales).
Estimating sales can also be difficult as it depends on a variety of factors. In this scenario we are starting off with 20 committed sales.
This is a very simple example, just to show how a financial plan is put together. There are other factors that can be taken into account which is out of scope for this newsletter.
Obviously, the financial plan is just an estimation of how things fit together, it is not exactly how things will turn out.
As the year progresses, the changing environment will mean that the financial plan will need to be updated to reflect the new reality.
Creating a business and financial plan will give you a clear direction for your business and specific targets to work towards. It will improve your confidence in making decisions.
Ok, we’re done with planning. Next week we’ll talk about how to execute your plans and achieve those goals.
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- A short guide to financial statements and analysis for small business owners https://bit.ly/3oSfpEw
- 5 Easy tips to never run out of cash in your business https://bit.ly/3pLgVbM