Financial Plan For Your FIRST Small Business – Low Budget Plan

12 September 2024

One of the common reasons why small businesses fail is the lack of working capital. Poor financial decision-making can be detrimental to your small business.

This will not scare you or put you off the idea of starting your very first business. However, it is to convince you how important it is to draft a financial plan for your small business.

The importance of predicting your financial health is not just to maintain a steady cash flow but also…

Understand how lucrative your business is in the long run.

How long will your business be at break-even (no profit, no loss)?

When can your business start making a profit?

Most importantly, what is the contingency plan of any financial hurdle?

In this blog post below, we will be discussing the following:

Importance of a financial plan for your small business.
Elements of a financial plan for your small business.
A template to create a small business plan (for any business).

Importance Of A Financial Plan

Here is why you should begin creating your very first-ever financial plan for your small business.

1. A Business GPS?

Imagine yourself driving to a new destination without knowing where you are or in which direction you should proceed.

This is what it is like to open a business without having a financial plan.

A financial plan will give you a clear roadmap to your business journey, and determine how much to spend on each destination.

2. Where Is The Goal Post?

We all have a vague idea of what a startup goal should be. However, getting overwhelmed is common without a clear picture.

A financial plan will provide you with a clear goalpost. I am talking about tangible, measurable, and achievable goals.

Whether you want to expand your business, increase profits, or reduce costs, a financial plan gives you a clear path.

3. What Ifs & Risks!

It is given that your business won’t be smooth sailing forever!

Businesses often face unexpected expenses. It could be something as simple as equipment breakdowns or sudden major market changes!

As a business owner, being financially ready is a crucial step!

A financial plan can help you set aside emergency funds, so you’re prepared for these surprises.

4. A Long-Lasting Impression

Want investors early on for your business? Then, it would help if you offered them a steady financial plan.

Remember, lenders and investors want to see a well-thought-out financial plan before they commit their money.

Therefore, having a solid plan shows them that you understand your business’s financial health, its cash flow, and the potential profit opportunity. Hence, we are serious about making your business a success.

5. Improves Financial Decision-Making

With a financial plan, you better understand your cash flow, revenue, and expenses.

This knowledge helps you make informed decisions, like when to invest in new equipment or whether to cut costs.

Important Elements Of The Financial Plan Of A Small Business

Before you begin your financial planning, you should be aware of the different financial jargon for a business.

1. Cash Flow Projection

This includes predicting the market, what effect your product will have on the market, and how much you can earn from it.

Now, taking the potential amount you create capital expenditure for each month. The function of a cash flow projection is to ensure you have enough (at the end of the month) in terms of expansion.

It is common for a business to live month by month with no profit for the first six to eight months of the business. Essentially you are establishing your business.

However, if it crosses the one-year mark with just a break-evens, the following could be the reason:

Your business is not making money because of the lack of demand.
The expenditure is way over your income. You must start some cost-cutting methods.
There is a lack of marketing, and your small business is not reaching the target audience.
You do not have enough investment for the small business you are starting.

Keep these points in mind when starting your cash flow!

2. Balance Sheet

A balance sheet is a financial estimation of your small business’s current state. Here are some of the important items your balance sheet will have:

Income & Expenditure
Total owning & total owing (personal debts or small business loans).
Assets that are currently under collateral.

Upon reading it might sound simple. However, when it comes to a balanced business sheet, you will require a finance professional to craft one.

3. Personnel Expense

This brings us to the next point in any financial plan for a small business. The personnel expense, or the amount you are spending on hired personnel.

It doesn’t always have to be your employees. In fact, the number of employees for a small business will hardly reach 15 in the very first year.

A personnel expense includes individuals working as consultants for the business, and the different professionals you hire to help with the internal work (e.g. Finance officer to create the balance sheet).

Some of the common elements of a personnel expense are:

Cost is based on the positions each professional is holding.
Personal insurance plans for your workers (at least medical insurance).
Expenses are spared for other professionals working externally with the business.

4. Assets

The tangible assets that your small business owns:

Current Assets: What the business currently owns. These include inventories, machinery & tech devices, prepaid expenses (for example, digital tools), and other office supplies.

Tangible Assets: The one that physically exists under the name of your small business. Real estate (This will not include rented warehouses or offices. These will go under the expenditure section), land inventory, tangible investment (gold & bonds), and saleable merchandise.

Non-Tangible Assets: These are assets that are not in a physical form. Intellectual property, pre-paid tools, investments (stocks, Cryptocurrency, mutual funds).

Non-Operable Asset: Assets under your small business but from which you are not getting any income. For example, land you have an investment in but not yet open for any business-related functions.

Operable Asset: Assets that your business owns currently, and that are bringing some income. For example: produced goods, factory space, warehouses, and office space.

5. Products & Services

The products and services you are planning to offer will also come into the financial planning for small businesses.

These include the following:

The raw materials are required to create the goods.

Factory costing.
Warehouse costing.
Transport & Drop shipping costing.
Worker’s salary & insurance.
Contingency management funding. (In case of any accident or unpredictable situation).

The summation will give you the total cost of production. With which you can create and understand the market value of your product.

This step is very important to assess the profit and loss of each item.

6. Income Projections

Another crucial part of small business finance planning is prediction. This is how you can predict whether your income will have any substantial income.

Here is how you can protect your business income (before starting it):

Check business income projections of competitors through several data analyses.
Is your small business subject matter trending in the market? What is the current market share of such companies?
Are investors willing to invest in a business venture as such? In fact, check some of the Shark Tank successes, and analyze which business venture seems more profiting by investors themselves.
The inflation rate of the past decade regarding the product or service you are about to sell also matters.

7. Marketing

You cannot spend everything on logistics and not worry about marketing.

One cannot ignore this matter, especially in today’s day and age when small businesses are reaching new milestones by a simple influencer shoutout, or social media virality!

Here are some of the factors in which you will need to spend in marketing:

Social media marketing tools.
Influencer marketing.
Small ad-films over YouTube.
Website building and digital marketing (Website domain and SEO tools).

8. Risk Management

No business is protected from the risks that come to every business in its lifespan. However, the contingency plan is not getting ambushed by a sudden change.

Here are some of the financial risks/uncertainties your new business could face:

Market Risk: The ups and downs of the current & dynamic economy. In fact, after the pandemic, things have become a little less predictable.

Reputation Risk: Social media is indeed bringing customers and businesses closer. However, the downside of such connectivity is the risk of a tampered reputation, especially when audiences jump to conclusions upon hearing anything on the internet.

Competition Risk: This is a common risk every business faces. When your competitors launch something new & exciting, there could be a significant shift in sales numbers for you.

Environmental Risk: One good example of environmental risk that has previously impacted businesses majorly is the pandemic.

Political Risks: The political scenario of your country can have a considerable effect on your business, especially in terms of export-import & business expansion.

This is one of the reasons why having a financial contingency plan for managing sudden risk is one of the crucial components of a business financial plan.

Business Template For A Startup

As promised, we have a business template that will help you take that very first step for your startup.

Financial Plan For Startup (Template)

Table of Contents

1. Financial Overview: A Financial Overview will consist of a financial overview of your business’s current state. Also, please provide the key points and takeaways of the financial data that you will provide.

4. Assumptions – Market Research: This is the step for market research and predicting the business’s profit potential.

5. Break-Even Analysis: A table or graph which provides information on the number of units your business needs, and how much you need to sell to make a profit.

6. Financial Statements: This will include the following charts.

– Profit & Loss (Optional if you have a startup)

– Cash Flow Statement (How the monthly cash flow will look)

– Balance Sheet (Monthly/Quarterly/Yearly Income & Expenditure)

Elements For Your Balance Sheet

The following is what your balance sheets should include based on items required: monthly, quarterly, and yearly income & expenditure.

Operational Financial Plan

Business Location and Facilities
Technology and Equipment
Key Operational Processes
Supply Chain and Inventory Management

Management and Organization Financial Plan

Organizational Structure
Key Management Team
Roles and Responsibilities
Hiring and Training Plan

Financial Plan

Start-up Costs (for new businesses like loans, downpayment; collateral, and personal investments)
Revenue Projections
Expense Projections
Cash Flow Statement
Profit and Loss Statement
Break-even Analysis

Funding Requirements and Strategy

Funding Needed
Purpose of Funds
Potential Funding Sources
Funding Timeline

Key Risks

Risk Mitigation Strategies

Financial Tools to Ease Your Job

In the modern age of technology, you can always lean on tools to automate some of the financial tasks.

So, if you need that digital assistance when

Begin Your Journey!

This is a sign for you to begin your journey as a first-time business owner. Yes, it is overwhelming, and yes it can be intimidating (hence the long procrastinating period!).

Creating a financial plan for even a startup can be intimidating. Here is how you can make this journey a little easier.

Start with defining your business first. The executive plan is a must. You should know what your business is all about.

Then, move through the basic income and expenditures.

Take help from professionals in tax advice and create a detailed balance sheet.

Finally, consider seeing your whole financial plan in a timely manner. It is important to take one step at a time.

Hopefully, we can give you enough answers about a business financial plan. How is your journey going? Please let us know in the comment section below.

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Investments 101: How to Choose a Smart Stock

There are less than 4,000 publicly traded companies in the US today, down from the 1997 high of more than 7,000. Such a limited pool doesn’t make it any easier to pick stocks these days, though. In fact, one of the first questions new investors ask is about how to choose stocks. The stock market is a big gamble, and if you choose right, you can win big time. In this guide, we’ll go over the steps you should follow to pick a good stock. You may not be the next Wolf of Wall Street, but selecting the right stocks will put you on firm financial footing. Assess Your Goals: It’s easy to ask how to find good stocks. The problem is that “good” is relative to what you want from investing. The very first thing you need to do is to take a look at your own goals. Why are you investing? What do you hope to get out of buying stocks? Answering this question will provide the underlying “investment theory” for your stock-picking strategy. If you want to maximize your returns and get out of the market, you’ll need one strategy. If you plan to be in it for the long haul, you’ll likely use a different strategy. Start with Index Funds: Index funds, like mutual funds or exchange-traded funds (ETFs), are a great place to start. First, they make good beginner investments. You can buy into one of these funds to gain exposure to the market. With mutual funds or ETFs, you don’t need to buy every individual stock in the fund. They also have low management fees. For those of you wondering how to pick a stock, they're also a great place to start your research. These funds contain most of the large companies in a given industry. They also collect information on the performance of their holdings. You can then narrow down the list to the individual stocks you’re interested in. The index fund can tell you that industry is on the rise. It can also tell you which companies are outperforming others in the same industry. Evaluating Financial Health: After you’ve picked some individual companies, you’ll want to evaluate their financial health. The next question you should ask is what to look for when buying stock. Information about performance and profits is easy enough to come by. You’ll also want to look at more intangible factors, such as the company’s staff. What makes them unique? A good way to collect some of this information is to look at investor presentations. They often share details that will help you learn how to pick good stocks. Another thing you can do is check forecasts. For example, you can look at the Valeant stock forecast to see how a certain company is recovering from a major scandal. No Magic Formula for How to Choose Stocks: Keep in mind that there’s a human factor involved in the stock market. You can do careful research and invest in what you think is the best stock. Key personnel could then leave the company, and the stock underperforms. The long and short if it is there’s no magic formula for picking good stocks every time. Understanding your goals and doing careful research will help you make better choices. Start Building Your Financial Future: This quick guide should give you some more ideas about how to choose stocks that support your goals. As you continue to invest, you’ll be able to refine your strategy. Interested in diversifying your portfolio? Check out our blog for more informative articles. We have advice that can help you work toward a brighter financial tomorrow. Read Also: Buying Stocks For Beginners: A Guide How Businesses Can Use Stock Trading 5 Awesome Facts About CryptoCurrency Main Factors That Affect Trading Decisions Top 9 Forex Trading Tips For Beginners That Save You Money

5 Credit Card Perks that are Noteworthy

The use of credit cards has tremendously increased in recent years. Apart from providing credit usage to its customers, a credit card is a must to have possession in the financial market due to the ever-increasing prices. Besides providing creditworthiness to your financial profile, it comes with lots of additional perks. If you already have availed a credit card, or on the verge of getting one, it is important to have an understanding of all the benefits that it offers. A credit card can be considered as the most beneficial tool only when you have the capability to pay off the dues. Now make your every purchase through Standard Chartered credit card types that would provide you with better savings. And as you get aware of the key benefits of using credit cards, just pave your way towards making the best use out of it. Most noteworthy benefits of credit cards: Credit card perks drive the users to make significant use of their credit cards in order to maintain a good credit score that would yield a better credit history of the cardholder thus increasing his creditworthiness in the financial market. Also, a credit card can be great assistance to your overall travelling expenses, including stay, food and luggage management. Credit card perks are the benefits obtained by its users using its key features effectively. In order to procure the credit card perks, one must be confined to its terms of usage. A credit card offers a requisite margin of perks to its users. Some of them are as below: 5 Credit Card Perks that are Noteworthy: 1. Interest-free credit: Generally, a specific rate of interest is involved in the credit value of your card. The more the credit value, the higher, is the rate of interest. Thus the interest rates depend on the price of credit. Certain credit cards offer the benefit of availing interest-free credit on the creditworthiness of the users. This implies that the user can enjoy the use of interest-free credit without paying the extra charge in the form of interest on availing whatsoever credit amount for his use. 2. No-cost EMI: This facility enables the user to purchase goods of his choice without the need for paying interest on EMIs. Thus credit card perk offers an undisputed advantage of availing goods on credit without incurring the extra charges on it. Usually, the rate of interest depends upon the price of the goods procured on credit. Thus credit card perks work well towards removing such inconveniences on the purchase based on price, by enabling the users to buy goods irrespective of the price on no-cost EMI. 3. Reward programs: One of the significant perks of credit cards is the application of reward programs on credit cards. Rewards on credit cards work wonder on building credit scores. Reward programs mainly consist of the facility of cashback and other perks as per the type of credit card. It provides its users with the opportunity to earn in thousands through reward points or to spend lavishly using those points. Amongst which the benefit of cashback on credit card is the key highlight of the reward program, which provides an opportunity to make double purchases of the same amount using a single reward point. 4. Fraud protection: Credit card perks act as a shield against various fraudulent incidents that may come across the way of its holders by providing insurance coverage for the loss or damage of the product purchased by using it. Hence providing a carefree usage of the commodity, the credit card perks work efficiently in covering the various losses incurred by the cardholder on the purchases made by using it. This ensures the user a risk-free usage of the credit card by eliminating the fear of risks that may arise in the near future. 5. Warranty extension: The credit card provides the benefit of extending the warranty period of the respective purchases made through it. You can easily extend your warranty period of the goods by making a purchase by the credit card. This may render a free service of your purchases for an extended period in addition to the existing one, thereby eradicating the future expense that may incur on the grounds of malfunctions. So users are free to make purchases enjoying an extended warranty period, thus removing the extra cost involved in repairing or service of the purchased goods. The above-mentioned credit card perks are most suitable for frequent users and those who maintain a regular balance. In order to avail of the above benefits using the credit card, the cardholder must make sure to make regular payments of his monthly dues effectively. Otherwise, it would negatively affect your credit scores. You can make effective use of the credit cards by renewing the credit rewards based on your purchasing scale. The more you use your credit scores, the better the facility it would provide you with. Read Also: 7 TIPS TO REDUCE CREDIT CARD BILLS Credit Card Fraud The Holiday Season: Things To Consider For Next Year Revolving Debt Vs Installment Debt – Which Impacts Your Credit Score The Most?

Benefits Of Long-Term Investment In The Stock Market

Regarding investing, stock market investment is one of the most preferred investment modes for those who can undertake some degree of risk. With a myriad of public stocks listed on the Indian stock exchange, stock market investing has been beneficial for investors for a long time and is a much-publicized affair. A long-term investment strategy is fruitful for investors as it entails holding investments for over a year. Given the rise in the use of share market apps, long-term stock market investment and tracking have become a clutter-free and accessible exercise that individuals with the most limited means can undertake. What Is A Long-Term Investment? While technically, long-term investment refers to holding assets for over a year, most people refer to it as staying invested in the same shares for three years, five years, or greater. The money you invest is locked in the stock market investment vehicles, such as stocks or ETFs. But why should you prefer long-term stock market investment? Listed below are the reasons to do so. Why should you invest for the long term? 1. You do not need to time the market While most of us feel that we are calm and possess the ability to time the market, the truth is the opposite for most of us. Most investors let emotions get the better of them and make financial decisions they could have avoided. It is especially prevalent in the bear market when we experience many rookie investors exiting their positions after bearing heavy losses. These short-term emotional investors pay a lot of heed to the market volatility and diminish their chances of earning by trying to time the market. Instead, a long-term invest-and-hold strategy is often proven more beneficial for investors. 2. It eliminates the volatility factor Many investors succumb to the market volatility and buy high and sell low multiple times, extinguishing their capital. But when you are in the stock market, you will have to acknowledge that your watchlisted stocks can occasionally move by 20% or more in either direction. So, short-term investor often gets caught in the cycle and loses their hard-earned money. In contrast, a long-term investor barely cares about market volatility and has yielded sizable returns in the past. So, while it may not guarantee what takes place in the future, it gives us ample hope that stock market investment can be beneficial in the long run. 3. You do not need to keep on technical frequently Short-term traders depend on market fluctuations to make money. So, you will see them checking the technical now and then to ensure they make meaningful decisions. In contrast, a long-term investor needs to keep a tab on the technology only when they believe that there is a significant change in the critical factors relevant to the company. Related: How to start trading on the stock market and profit? 4. You get more space to rectify your mistakes We all have made faulty decisions, which is a normal human tendency. A trader often loses money because they took some wrong calls and ended up being in the red. While they barely have any chances to rectify their mistakes given the short timespan, long-term investors benefit from getting enough opportunities to correct their errors owing to the longer investment horizon. Wrap up While investment preference can vary from one investor to another, the ultimate goal is to make money, which is what matters. Long-term investors are more likely to keep their capital and make decent returns if they choose the right stocks. It is especially beneficial for those who do not want to spend hours reading stock market news daily. Read Also: How to Boost the Size of Your Stock PortfolioHow To Open A Forex Account and Start Trading Forex StockIntroduction to StockEdge – Overview and important Feature