You’ve heard it before: the importance of having a solid business plan, from the beginning, in order to 'hit the ground running'.
While you’re probably aware of the benefits of taking the time to sit down and think through your goals, your restrictions, your resources, and what you ultimately want to make of your company, the impact of a good business plan are likely further reaching than you might first realise.
Plan vs. model
A business plan outlines the essential aspects of how you will handle your work, including your business model - how your business will make you money.
While a business model is the basic premise for your business (a webshop, freelance graphic design, a franchise, etc.), your business plan forms how you handle the financial side as well.
Perhaps not the most exciting and creative part of developing your business plan, but ensuring the finance section is up to scratch will ultimately bring your goals closer.
Here are a few things to keep in mind concerning your company’s finances when you’re considering writing or revising the financial section of your business plan and maybe need a little extra motivation:
- Your business plan can help you get a loan. In fact, most banks require a thorough business plan in addition to financial information before they will even consider providing funding. While this might be obvious, it’s a reminder that your business plan can literally impact whether you have the resources to pursue the goals you’ve detailed.
- Your business plan can improve the cash flow of your business. By clearly setting a budget and being realistic about possible funding, investments, and the costs of running a business, you improve your grasp on your company’s financial situation and a clearer view of where cash is flowing in and out of your business.
- Your business plan can help you track your progress. By creating a detailed budget, as well as reasonable deadlines and goals, you will be able to see your progress as the year goes along. Setting these types of benchmarks will enable you to track your budget and reevaluate if and when necessary.
- Your business plan can attract investors. An impressive, carefully thought out business plan is a massive stepping stone to generating interest with potential investors. However, impressive shouldn’t translate to overly ambitious. The financial section should be realistic instead of overly optimistic.
- Your business plan can tell you how much your business is worth. By gathering the financial documents you are handling when creating a business plan, a valuation expert has an easier time at estimating the overall value of your business.
- Your business plan can help with investment decisions. Does your company really need the brand new, latest technology or can you create just as great a product or service with what you already have? Do you need to rent a new space or can you work out of your home? Questions like this can help with the acquisition of certain assets and the money invested for a return on investment.
- Your financial plan can improve your marketing, mission statement, customer communication, and more. While finances may seem distinctly separate from the branding side of your business, for example, your understanding of your finances will provide a stronger grasp of your overall concept, what you’re capable of, and even create a certain amount of determination and confidence in approaching your target audience.
The other parts of your business plan allow you to clarify your concept, your unique selling point, and your goals. The financial section of your plan allow you to put your money where your dreams are (and to first secure the money from the bank, if necessary).
A good business plan is constantly updated and amended so don’t forget that as your business develops and your goals change, you can and should revisit your plan, especially the financial section which has an impact across all parts of your company.
Managing the financial side has never been easier than it is today with cloud-based accounting software, letting you keep track of your business from anywhere.
Generate and access reports including your balance sheet and profit & loss reports - both important for developing and maintaining the financial side of your business plan.