Posts Tagged ‘financial plan’

The mere mention of a financial plan can send business owners into a tailspin. It doesn’t have to be this way, it can be as simplistic or as complicated as you make it. A financial plan will help you determine what revenues you can, will and/or need to achieve based on the expenses you will incur. They can be in the form of budgets, forecasts or cashflow forecasts depending on what you’re most comfortable with.

Perhaps one of your goals is to increase your client base by five clients a month. If this is achieved, this will increase your revenue figure for each month by say the average client monthly figure. However in order to achieve this, there would be certain expenses incurred, such as marketing campaigns, mailouts, advertising, prospect entertainment etc.

Therefore an estimate (budget) of these associated expenses would need to be taken into account as well. Will extra staff be required when these clients are onboard? Or are there other expenses such as extra travel costs to be incurred? You can see how looking at your goals and breaking them down will help you determine both the revenue and expenses they may generate and the impact they will have on your business. This brings us to the budget.

A budget can allow you to estimate what your revenues and expenses will be. Usually this requires quite a bit of detail, like a profit and loss statement. Often your existing profit and loss (say from the previous financial year) can be used as the basis of your budget. You’d need to adjust it for likely expenses to occur as well as any changes to revenue based on the goals you have set. Once you have determined your budget you can then track your budget to actual profit and loss, on a monthly basis.

Most accounting programs allow for budget figures to be input on a monthly basis to allow for this reporting to occur. These figures (or differences in budget vs actual) can really show you how you are tracking on the goals that you set for your business.

You need to be prepared for unexpected events such as losing a major client, which would have a substantial impact on your profit and loss and thus the budget vs actual report. I recommend that your budget is revolving so that you can alter the figure to take into account any unexpected events. I’m not saying you need to change everything but it is logical to adjust for major impacts.

Forecasts are useful for determining figures for your budget as well as sales projections. They are often a more detailed report that focuses on specifics such as sale per product or sales per program.

For instance you may have 100 products for sale in your business and historically you have sold a certain number of units over a certain period of time. It would be easy to determine your generated revenue based on historical figures.

However, if you’re introducing five new product lines, you need to account for the impact they will have on revenue and cost of goods sold. Perhaps one product is an update on an existing item? Once introduced, the obsolete items would need to be reduced in price to sell all stock. You could forecast sales of the new products while adjusting the existing products for the new lines if applicable. This is where forecasts by item are useful for determining the whole business sales figure for inclusion in the budget.

Cashflow forecasts are fantastic in assisting with managing that ever elusive beast, but they require a lot of work to maintain. Some accounting programs can do this for you but unless you utilise all aspects of the program the reports are not complete. Often Excel or specialised cashflow programs are best for this type of reporting, but again it requires maintenance and a complete picture on what is happening in your business financially. These can be tricky so I recommend working with a professional for these, but you need to make sure you stay involved as you know your business best.

Keep your goals in mind when creating these reports. They will provide the useful information you are looking for while keeping you on track and accountable.

Organisational Chart based on current and future requirements

How do you know when it’s time to hire more people or outsource tasks? That’s where your resources plan comes into action.

For most start-ups, when you first begin business you have to wear many different hats. You are the sales person, chief marketer, bookkeeper and even the cleaner!

Of course your hope is not to continue with all of these roles in the future. If you determine your organisational chart, you can in fact see where your “many hats” exist and map them out for your business.

Task Analysis

One of the best things to do is look at the tasks you are handling now or are still on your to-do list. If you refer to your marketing plan and financial plan, what tasks are required to move your business forward, to reach your goals, to implement those plans and achieve your financial objectives?

There are probably tasks that you procrastinate on continually because you hate doing them! If there’s a way to plan for additional resources to complete those tasks, make it happen. You will be a much happier business owner.

Maybe your marketing plan is overly ambitious for your skill set? What skill set do you require to make it happen? Make sure it’s budgeted for in your financial plan and you’re partly on your way to achieving your marketing plan.

Once you’ve collated all necessary tasks, analyse them carefully and see if you can identify a batch of tasks that are similar and thus suited to a particular skill set. From those identified skills, what experience, qualifications, personality and attitude are required to fulfil the roles and responsibilities of that position?

With this information, you have the making of job descriptions and then you can decide on employment type (i.e. subcontractor, full time or casual employee).

Organise departmentally

If you think about large organisations, they consist of many departments, but they all started off small at some stage. It may have been a long time ago, but many roles were conducted by just a few people. Rather than waiting until you are big enough to departmentalise, set the roles and departments in place now to clearly identify what positions you will require in the future.

Depending on the stage of your business there are a few departments you can start planning for:

• Operations
• Sales/marketing
• Finance
• Customer Service
• Product Development

As I mentioned earlier, you’re probably handling the above functions yourself, however sooner or later you’ll need to outsource if you want to achieve your goals and objectives.

Financial, marketing and resources plan intrinsically linked

It’s great to plan but if you don’t have the resources required to execute your plan, there’s not much point. So, based on your marketing plan and your financial objectives, what resources will you actually require to achieve your objectives?

It could be as simple as requiring some admin assistance to allow you to concentrate on money-making tasks.

Perhaps you’ll need some sales staff (or distributors depending on your model) or maybe it’s time to engage the services of a fulfilment house?

The beauty of resource planning is that it literally ties into your financial planning as well. If a new staff member is required, what will their salary be? Remember you need to budget for this. If you need a fulfilment house, what are your options? Even with commission-based sales staff or distributors, what will their rate be and how will that fit into your financial plan?

You can see how your financial plan, marketing plan and resources plan are all interrelated. You need the marketing and resources to achieve the financial plan, and vice versa.

Map your resources based on your marketing calendar

In my article about achieving goals with a marketing plan I showed you how to create a marketing calendar to schedule and keep track of your marketing activities. You can also use your marketing calendar to map out when you’ll require extra resources to achieve the goals set out in your marketing plan. Your marketing calendar will show you when major promotions are being held and what resources you will require to implement these promotions.

There are many things you should plan, but what should you plan for your business? Planning comes in many forms, and combined can provide you with a blueprint to keep your business moving forward.

I consider there to be a few areas within your business that can benefit greatly from planning including a financial plan, marketing plan and a resources plan.

Before you start creating these plans, whether you’re a new business or existing, it pays to revisit your vision, mission and values for your business. These can sometimes be tricky to define. My mentor gave the simplest definition I have ever come across:

• Vision - what are you and what are you becoming?
• Mission – what do you do? What business are you in?
• Values - what words encompass your business values?

If you haven’t worked this out yet, it can take time and a few attempts. Sometimes your business evolves in a different direction and when revisiting these, you find that they are not congruent with where you’re at now.

Therefore it’s a good idea to revisit your vision, mission and values at least once a year.

There are many and varied techniques for goal setting and planning for a new year. Let’s look at a few of my favourites:

The first method (I learnt this from Chris Brogan (http://www NULL.chrisbrogan NULL.com/)) relates to selecting three keywords that encompass what you want to achieve for the year. You then take your three words and map out how they can be achieved including strategies to achieve them, any distractions that may impede you, the projects to achieve the strategies, what the achieved goal (or partially achieved goal) looks like and the next step required to continue on the goals path. You can read more about this here (http://www NULL.chrisbrogan NULL.com/wiring-yourself-for-success).

The second method involves a one page document which includes summaries of your goals. You put this single page somewhere so you can see it every day, to make sure you are working on tasks that relate to achieving your goals. This will ensure you aren’t getting distracted and working on non-goal related items.

New opportunities can arise that perhaps don’t fit within your existing goals (otherwise known as bright shiny objects!) but could be awesome opportunities. So how do you determine whether they should be pursued?

Simply refer back to your mission and vision. Is the opportunity in line with these? Just by looking at this can take the shininess off an opportunity and put it back into perspective.

Once you have determined your three keywords or goals, what else needs to tie in with these?

A financial plan can entail:

• Budgets
• Forecast
• Cashflow forecasts

Depending on your needs (and what you’re actually going to use) will determine which reports you require. All of these reports can assist you in maintaining your goals and keeping yourself on track. You’ll also discover what other requirements you may need to achieve them.

A marketing plan can entail:

• Your target market
• Marketing strategies
• Marketing tools to utilise
• Marketing calendar to map out all promotions etc

A resources plan can entail:

• Business organisational chart (even if it’s just you in most positions)
• Resources required based on marketing plan
• Resources required to achieve your goals
• Resources calendar to map out when resources are required

Once you have these plans in place, you can map out the tasks that would be required on a monthly, weekly and daily basis. Your calendars will help to focus you on deadlines to achieve tasks by. If you start monthly and then break it down to weekly and then daily tasks, not only will your goals feel more achievable but you’ll actually be making daily progress. This will give you a big buzz enabling you to maintain your focus and momentum.

All three of the plans above require greater explanation. I will explain these in greater detail in further newsletters!

So start today, start planning, it can take some time if you really do get into the nitty gritty but if it gives you a year’s worth of focus, wouldn’t it be worth it?