Creating a solid financial plan is crucial for any business’s success. We gathered insights from seven top executives, including VPs, CEOs, and founders, to provide you with essential steps in building a financial plan. From defining business goals and objectives to establishing a solid budget, these experts share their valuable advice on financial planning for your business.
- Define Business Goals and Objectives
- Embrace Adaptable Financial Strategies
- Create Essential Financial Statements
- Conduct a Detailed Financial Analysis
- Prioritize Financial Projections
- Develop a Realistic View of Expenses
- Establish a Solid Budget
Define Business Goals and Objectives
The first step in creating a financial plan for your business is to define the goals and objectives of your business. This will help you understand the purpose of your financial plan and provide you with clear goals that you can work towards achieving.
For instance, if your business goal is to increase revenue by 20% within the next financial year, then your financial plan should provide a clear roadmap on how you intend to achieve that goal.
Ranee Zhang, VP of Growth, Airgram
Embrace Adaptable Financial Strategies
You have to forecast sales and various expenses as part of your financial plan, but you don’t have to live and die by that strategy. I have seen far too many businesses try to stick to plans that were blown out of the water by unforeseen events.
You’re not doing yourself any favors. Be able to adapt on the fly and adjust these strategies. Strategy is essential, but a rigid strategy in the face of a problem can be detrimental.
Jared Day, Chief Operating Officer and Co-founder, Nuleev
Create Essential Financial Statements
One step in creating a financial plan for your business is to create a cash flow statement, income statement, and balance sheet. These three financial statements will help you track your revenues, expenses, and financial health.
Additionally, you should conduct market research and identify your target audience to help guide your financial decisions. It’s also important to continually monitor and adjust your financial plan as necessary to ensure that it remains relevant and effective.
Brenton Thomas, CEO, Twibi
Conduct a Detailed Financial Analysis
One of the first steps in creating a financial plan for your business is to conduct a comprehensive analysis of your finances. This includes evaluating your current income sources, expenses, and financial obligations.
It’s important to calculate your total revenue, fixed and variable costs, and identify areas where you can cut costs to improve profitability. Additionally, you should review your cash flow to ensure you have enough liquidity to meet your financial obligations and pursue growth opportunities.
By conducting a detailed analysis of your finances, you can create a solid financial plan that aligns with your business goals and helps you achieve long-term success.
Basana Saha, Founder, KidsCareIdeas
Prioritize Financial Projections
Creating financial projections is integral in helping you plan for the financial future of your business. These projections predict your company’s future revenues and expenses, giving you insight into how capable your business is at generating profit, maintaining stable cash flow, fueling growth, and repaying debts.
Financial projections are also useful in establishing the break-even point, the best price points for your offerings, and getting a handle on fixed and variable costs.
Dr. Willy Portier, Co-founder, Concerty
Develop a Realistic View of Expenses
Creating an expense budget is a crucial step in creating a financial plan for your business. This involves estimating the costs associated with running your business, which may include both fixed and variable expenses.
Fixed expenses can be costs like rent or salaries, which don’t change significantly over time. Variable expenses, like the cost of goods sold or advertising costs, can fluctuate depending on your business volume. Your expense budget should be realistic and consider all potential costs.
It’s also essential to regularly review and adjust your budget as necessary. Understanding your expenses will help ensure your business remains financially sustainable and profitable in the long term.
Irina Poddubnaia, CEO, Founder, TrackMage
Establish a Solid Budget
One crucial step in creating a comprehensive financial plan for your business is establishing a clear and realistic budget. This serves as a roadmap, outlining income sources, anticipated expenses, and financial goals.
Begin by thoroughly analyzing your business’s historical financial data, including revenue, expenses, and cash flow patterns. This analysis will provide insights into past performance and identify areas for improvement. Outline projected revenue sources based on market trends and realistic estimates, and consider all expenses, prioritizing based on their impact on business objectives.
With income and expenses determined, create a budget that aligns with your business goals. Divide it into categories and allocate specific amounts, ensuring expenses remain within projected revenue, and regularly review the budget to reflect any changes.
Establishing a solid budget in your financial plan will allow you to make strategic decisions and drive long-term success.
Shane McEvoy, MD, Flycast Media