Many small businesses lack a full financial plan. Evidence shows that complete financial plans are essential to the long-term success and growth of your business: A Palo Alto Software survey found that entrepreneurs with completed business plans were more than twice as likely to successfully grow their business as those who had no plan or an incomplete financial plan. Here’s a guide to the six key elements of a successful small business financial plan. You can find templates for these financial plan components via the SBA or SCORE.
1. Sales forecasting
You should have an estimate of your sales revenue for every month, quarter and year. Identifying any patterns in your sales cycles will help you better understand your business as well as plan out marketing initiatives and growth strategies. A seasonal business can aim to improve sales in the former offseason to become a year-round venture, while another business might become better prepared by understanding correlation in upticks and downturns in business due to factors such as the weather or economy.
Sales forecasting is also the foundation for setting company growth goals. For instance, aim to improve your sales 10 percent over each previous period.
2. Expense outlay
A full expense plan includes regular expenses, expected future expenses and associated expenses.
Regular expenses are the current ongoing costs of your business, including operational costs like rent, utilities and payroll. Regular expenses relate to standard business activities that occur each year, such as conference attendance, advertising and marketing spend, or the office Christmas party. A full list of regular expenses will make it easier to distinguish essential expenses from expenses that can be reduced or eliminated if needed.
Expected future expenses are known future costs, such as tax rate increases, increased minimum wage or maintenance needs. Generally, budget should also be allocated for Read More Here