Financial plan for starting a small business

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Financial plan for starting a small business

Small businesses can benefit greatly from taking the time to do a financial plan at least annually.

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The plan helps a small business owner to better manage cash flow by preparing for situations that could result in cash shortages, such as seasonal fluctuations in revenues.

The financial plan is normally prepared as part of an overall business planning process, during which goals are set and strategies are chosen to help the business grow in the upcoming year.

Convert marketing strategies into expenditures. Strategies depict the course of action you want to take. A strategy might be to advertise in local newspapers or sponsor charity events to increase customer awareness.

Do a cost estimate for each strategy. Create a revenue model. Determine the assumptions you want to use for key variables such as unit sales, number of customers, and prices for your products or services.

Calculate month-by-month revenue projections using the assumptions.

How to Write a Business Plan for a Small Business: 14 Steps

Forecast costs of goods sold. Use your historical cost of goods sold percentage as a guide and modify it based on any changes you anticipate in the cost of materials, finished goods, or production costs.

Forecast general and administrative expense. Project your expected facilities costs, such as rent, utilities, insurance, or recurring legal expenses. Again use prior year numbers as guide but make sure you allow for increases that typically occur. Prepare a personnel expense forecast. Include additions to personnel that will be needed to carry out the strategies you devised for the upcoming year.

A strategy of improving response time to customer inquiries could require adding customer service personnel, which would raise the amount forecast.

financial plan for starting a small business

Be sure to estimate the costs of any improvements you want to make to the business. These could include equipment purchases and facilities expansion or renovation.

Review and finalize the financial plan. Look at the month-by-month projected results. If cash balances appear low for certain months, shift discretionary expenditures like advertising out of those months and into months where revenues are higher. Tip Preparing the financial plan gives you the opportunity to review all expenditures you made last year and determine if there are any potential savings that could be achieved through greater operational efficiency or switching to lower cost suppliers.

Warning Be sure to review actual financial results each month against the numbers in the forecast. This analysis will give you vital information about changes you could consider making such as cutting costs if revenues are substantially below forecast.

References 1 Small Business Administration:Running your own small farm is demanding enough, but making it profitable presents a host of further challenges.

In this business-savvy guide to farming on a small scale, Sarah Aubrey covers everything from financial plans and advertising budgets to web design and food service wholesalers. The business financial plan commonly appears in the overall business plan for a small business. However, the financial plan is a self-supporting document intended to support and direct the actions.

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How to Write a Business Plan for a Small Business. In this Article: Article Summary Preparing To Write Your Business Plan Writing Your Business Plan Finalizing Your Business Plan Community Q&A A business plan refers to a written document that comprehensively outlines what your business is, where it is going, and how it will get there.

We Write Your Custom Business Plan Butler Consultants writes three main levels of business plans: Level 2, Level 3, and Specialty Plans. Our Level 2 Plan is designed for Small Business Association (SBA), Bank, or Grant Level 3 Plan is designed to attract Angel Investors, Private Investors, or Venture Capitalists.

Our Specialty Plans meet additional needs that may not be covered in. The 5 Steps to Starting a Business. Move closer to being a business owner with the five start-up steps.

Each step includes guides, tools, templates and resources to help you implement.

Starting Your Own Small Business | Online Course