When you are just starting out as an entrepreneur, it is easy to imagine just what your business could be and how much money you feel like you could potentially make. However, there is one part of business planning that a lot of entrepreneurs fail to give enough attention to: a financial business plan. In all truth, your business will never meet its full potential if you do not establish a good financial business plan. Here is a look at three of the most critical components of a well-built financial business plan.
Generate a sales forecast for the coming years.
Your sales forecast is a highly detailed report that looks at multiple factors and estimates how much your business will bring in as far as sales over the coming years. Of course, there are a lot of variables that can affect how much in sales you will generate in the future, and your numbers will not be precise. Therefore, it is important to estimate conservatively and utilize all available data to create the report.
Pull together a logical expense budget for your small business.
An expense budget gives you an ideal budget for all the costs that will come along with operating your business. To create an expense budget, you need to have a good understanding of the different costs that you will have both consistently and periodically. Some of the general things to examine while creating an expense budget include:
Even though some expenses will only be estimates when you are looking at future operating costs, these numbers can get you a good idea of what will be spent.
Use your forecast and budget to create a cash flow statement.
Once you have created a sales forecast and an expense budget, it is easy to generate a proposed cash flow statement. A cash flow statement shows how much money you will have remaining as profit once sales have occurred and expenses have been paid. If you are in the process of building a business plan for the purpose of obtaining financing, this cash flow statement can go a long way toward helping a lender understand the value of aiding you to get your small business established.
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13 December 2019
As I see it, one problem with most budgeting programs is that they don't account for the "real life" factor. Anyone can tell you not to spend anything and to save everything, but when it comes to feeding your kids or dealing with a medical emergency, most budgets get thrown out the window. I realized that this was a problem, so I decided to start focusing on budgeting for real life. I decided to forget everything that I knew about budgeting and started working with a clean slate. This blog is all about budgeting for real life and knowing how to spend your money the smart way.