A financial plan is an essential tool for small business success.
Photo provided by Flickr
Financial Planning and Your Small Business - PlannerSearch
John: Together they are the co-founders of Integrity Capital, an independent firm which focuses on serving families and individuals, and especially small business owners. Today we're talking about managing a small business owner’s personal financial plan. What financial information should a small business owner most regularly stay informed of?
FINANCIAL PLANNING AND YOUR SMALL BUSINESS
John Maher: Welcome to Small Business Big Plans with Tyler Lang and Jim Owens. Tyler has over 10 years of experience in the financial services industry, and he's a chartered financial analyst. Welcome, Tyler.
Photo provided by Flickr
Many small-scale entrepreneurs do not see the need for a business plan, and if they do, they are usually intimidated by the idea of compiling such a detailed document. Many are mistaken to believe that only large businesses require planning. On the contrary, it is a crucial document for all kinds of businesses as it not only helps in financing but also in the decision-making process.Your financial plan helps you manage your cash flow. Most businesses have income that varies from season to season. A good financial plan takes these vicissitudes into account so that there aren’t shortages in the long term. Having a cash cushion helps ensure that your business can take a poor season and still come out on top. Planning your taxes, prudishly spending your cash flow, and budgeting carefully can result from careful financial planning.
When someone is in the thick of running his/her business, he /she can lose sight of the long term goals that ensure proper growth of your small business. A solid financial plan can be a reminder of all the necessary expenditures to keep your small business growing so as to stay ahead of the competitors in your market.
The decisions of the small business owner takes can have positive or negative consequences. A good financial plan can spot positive and negative trends where they may have become lost in a sea of numbers. This will help you better allocate funds to the areas that are making your business money, and avoid expenditures that didn’t yield enough results.
Financial planning can also help you prioritize expenditures. In small businesses, conserving financial resources is a must. A well thought out financial plan can help you prioritize what areas need to be funded immediately, and where your expenses can wait until you have a better season. Even the world’s largest corporations go through a process of prioritization of expenditures resulting from careful cost/benefit analysis.
Overall, the financial plan is there to help you measure your progress. How did your season go? What steps have been made in achieving your goals? When a small business owner is knee-deep in the day-to-day operations of running their business, they can often lose sight of what strides they have made to grow their small business. The financial plan helps the small business owner see precisely what is occurring through reviewing and analyzing the hard data.
In short, every small business owner must have a methodical business plan that is updated regularly if they want to operate successfully for years to come.