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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Investing in Precious Metals

Add precious metals to your investment portfolio for diversification and security, but make sure to select wisely as each type of metal and investment vehicle has its own set of benefits, risks, and drawbacks. Protection From Economic Uncertainty Gold and silver have long been seen as symbols of wealth and currency, providing safe investments during times of economic instability. Furthermore, these precious metals have numerous industrial uses including jewelry production and electronics manufacturing that keeps demand for them at an all-time high. This demand ensures their prices will always remain elevated. Gold and silver investments are also an excellent way to diversify your portfolio, according to many financial advisors. Diversifying includes stocks, bonds, mutual funds, and exchange-traded funds as an overall approach, but adding gold or silver may further lower risk by spreading out your investments across many asset classes. There are various methods of investing in these types of assets, from purchasing physical bullion (gold, silver and platinum coins and bars) to investing in mining companies that produce these products. You can click here to learn more about investing in mining companies. Both options provide tangible investments but some may incur higher storage and insurance costs. Furthermore, physical bullion is subject to higher capital gains tax rates when sold compared with other investments. Alternative purchasing options exist through rare earth elements royalty and streaming companies. These firms own the right to receive set quantities of these assets over time for a fee, offering diversification without incurring additional risks in owning physical bullion. An alternative approach to precious metal investment is investing through your 401(k) or another retirement account, providing diversification with tax-deferred savings benefits. However, before making any decisions related to your retirement plan it is advisable to seek guidance from an independent advisor. Others choose to partner with a well-known company like Goldco for their investments. It is important to do research on any company or advisor you are considering working with. Diversification Diversifying your portfolio is one of the main tenets of investing, as this helps reduce risk when stock markets crash or unexpected market events take place. One way of diversifying is adding precious metals as their price usually follows different market trends from stocks and bonds. You can click the link: https://www.investor.gov/what-diversification for more information. Investors can purchase physical rare earth elements such as gold, silver and palladium or invest in investment products derived from these assets - including mining stocks, streaming companies or royalty companies that generate revenue through sales of rare earth elements, ETFs and mutual funds that specialize in these types of investments, and futures contracts. All these options provide investors with the diversification benefits they seek, yet each presents unique risks and opportunities. Gold bullion, for instance, is one of the direct forms of investments, but requires significant storage space to hold. Furthermore, its initial costs may make entry more challenging. Precious metals-based investment products offer lower barriers to entry, but can still carry risks, including those related to mining companies' share prices falling due to cost overruns, mismanagement or financial issues. Gold and silver tend to increase in value during periods of economic unease as they serve as safe havens. Furthermore, their widespread applications such as jewellery making, electronics production and batteries make them likely safe bets as the world continues its advancement and progresses further. Investors can also use precious metals as a hedge against inflation and to preserve their purchasing power over time. As interest rates and printing of money by the Federal Reserve increase and cause the dollar's value to decline, the price of commodities such as gold and silver are impacted. Exchange Rates Precious metals provide an alternative form of money that's resistant to inflation and economic uncertainty. Due to their intrinsic value and the "safe haven" reputation they enjoy as investments, physical bullion may make for an excellent addition to any portfolio - though investors should carefully consider their financial situation, strategy, and long-term goals before making decisions regarding these types of investments. Precious metals have become an increasingly popular investment choice among investors looking to protect their wealth against economic instability and inflation. Precious metals provide investors with an effective, stable way of diversifying their wealth as they are less volatile than stocks or other investments which may experience sudden drops. Furthermore, precious metals provide tangible assets which can easily be converted to cash. Investing in precious metals is an excellent way to safeguard against inflation and other economic risks; however, it is wise to conduct thorough market research before making decisions and consulting an expert about which options are suitable for your particular situation. Security Even though precious metals can be bought through traditional brokerage accounts, most investors prefer investing directly in physical precious metals by purchasing and storing physical precious metals themselves. While this method may be more costly than trading stocks or bond ETFs or mutual funds, having physical precious metals in your hands provides instantaneous access when economic uncertainty strikes - an invaluable asset during times of economic uncertainty. Physical precious metal investments offer another distinct advantage: They're private assets. You are the only one who knows exactly the details of your portfolio, which makes it more secure than many modern investments. This feature is especially advantageous for families that wish to shield their wealth from outside financial consultants or government agencies. Each metal has different economic sensitivities, technical properties and uses. Gold is often used for ornamental purposes in jewelry design while silver has multiple industrial applications including electrical appliances, medical applications and batteries. Meanwhile, palladium shares many of the characteristics found in platinum but has even greater industrial uses as it's used in automotive catalytic converters, ceramic capacitors in chargeable electronics systems, groundwater treatment processes and manufacturing processes. Though investing in precious metals may provide many advantages, it is also crucial to be aware of any associated risks. Diversifying your portfolio and finding a dependable broker or dealer is crucial when purchasing and selling precious metals. Read Also: Is Investment Bankers/Brokers/Service A Good Career Path In 2021? 5 Reasons Why Bitcoins Are Considered Reliable Investments 5 New Assets To Diversify Your Investments In 2021

Unveiling The Dark Side Of Trading: Exposing Binary Options Scams And Ensuring A Secure Future

It is quite normal to have an extra cushion in life in the form of financial freedom. When you have enough money, your life becomes more comfortable. You have the freedom to buy the things that you desire most. And it is not a crime to dream big. Many seek an alternative source of income to supplement their income. There are several ways one can achieve this, and the stock market is one such place. Many have invested in the stock market and have made substantial profits. Considering the current economic situation, the need for this extra cushion is ever greater. The rising food prices, the Fed's increasing interest rates, and declining job prospects have raised concerns among many Westerners. As more and more people explore the possibilities of making a quick buck, scammers are just around the corner, waiting for them to make a mistake and get scammed in the process. Several scammers will impersonate stock brokers or brokerage firms; there are also some firms whose license to practice trading has expired or been revoked due to some legal issues. Thus, you, as an investor, need to be careful not to fall for such scams. The binary options trading scam is one such financial fraud that has engulfed many victims in its path. Binary Option Trading Before we understand the nature of the scam, let us first understand what binary options trading is. It is a type of contract between the broker and the client where the payouts entirely depend on the outcome, such as "yes" or "no." The price trend of a financial asset like a stock is considered, and a wager exists between the broker and the client that in the next five minutes, the price trend of that particular stock will either increase or decline. The one who loses the wager pays the winning amount to the winner. For example, a $100 wager between the client and broker is that the price of X stock, which is trending at $45 per share, will rise or fall. The one who loses the wager pays off the winner. Such wagers are instantaneous, and unlike other types of options available in the financial market, there is no way the client can avoid paying the losing bet. The contract ends when the stimulated time ends, and the loser pays the winner. Binary Option Scams Well, if binary options trading is so simple, you have a 50% chance of winning the bet, and you might think, "What could go wrong?" Well, for one, the trading platform that scammers offer their clients to download is rigged. The rigging is achieved in two ways: either the entire platform is rigged or there is a delay in the data that is streamed. Generally, the trading platforms offered by brokers or brokerage firms relay real-time data on price fluctuations in the stock market. The trading platform provided by Binary options scammers could cause a delay in the data streamed by the stock market. Thus, scammers know in advance about the price moment and can thus ensure that every bet that is placed is in favor of the scammer. In the second way of scamming the victims, scammers provide their victims with a completely rigged trading platform. In this case, the real-time data is not streamed from the stock market; rather, it is completely controlled by scammers. How do scammers keep their victims enticed? Scammers are smart; they know that if they keep on winning every time, their victims will lose interest and stop playing their "rigged game." Scammers will ensure that their victims initially win, thus promising a false sense of security that they have the "ability to win big." Thus, once these scammers start investing more, they start to lose. They invest more because they are afraid of losing money. The false sense that "this is the last bet, the one bet that will recover all the lost money," makes them invest more while increasing the amount on successive bets. A few genuine brokers and brokerage firms allow binary trading; they are regulated and certified by the regulatory authority, which ensures clients' interests are protected. How to spot bogus brokers or brokerage firms offering binary options services? Among all the complaints that are being received by the SEC, or Securities Exchange Commission, there are three common categories where victims were ripped off. 1. Denying reimbursement or paying off clients Once clients have opened trading accounts with scammers, they will deposit their money into their trading accounts. As and when the clients are falsely encouraged by the scammers to invest more to win more. Once these clients have had enough of the losses or wish to withdraw their winnings from their accounts, these scammers will not allow their clients to withdraw. Since these Binary options scammers are based in another country, there is little that these clients can do apart from calling their customer service center, which will eventually block their contact numbers. 2. Identity Theft Under the guise of providing binary options services, scammers will collect all the sensitive data from their victims. These scammers will collect their social security numbers, bank account numbers, credit card details, passports, driver’s licenses, and so forth. 3. Rigged trading platform Many clients who fall victim to bogus brokers or brokerage firms finally admit that they have fallen for a scam where they suspect that the trading platform was rigged. They also stated that the time left until the expiration of the winnings may be extended arbitrarily until the trade ends in a loss. Final thoughts The United States has legalized binary options trading, and as mentioned earlier, there are a few genuine brokers and brokerage firms regulated by regulatory authorities that are either private or government-owned. Since almost all brokers and brokerage firms advertise and can be contacted online, researching these firms is a must to avoid falling for binary options scams. Use caution if any broker or brokerage firm is offering binary options services at competitive prices. It's possible that they are scammers. Regulatory authorities offer protection against scams and fraud; they protect the interests of clients of a broker or a brokerage firm. So when a broker or brokerage firm goes rogue, these regulatory authorities ensure that the client's interests are protected. Always check that the online broker or brokerage firm is authorized and protected by a renowned private regulatory body or a government-owned entity. The binary option scam has also engulfed the cryptocurrency market; thus, be cautious if a binary option is offered in the crypto market. Read Also: 6 Ways To Make Sure Your Finances Are Seamless The Future Of Digital Currencies: 7 Things We Can Expect In 2022 Crypto Staking: Locking Up Crypto Holdings To Earn Interest

7 Best Tips To Manage Payroll As A Large Business Owner

You can not say enough about how important it is for businesses, especially big ones, to manage their payroll well. As an essential component, a seamless payroll system ensures that employees are compensated accurately and timely, fostering a content and motivated workforce. However, managing payroll for a large business can often be a Herculean task, with numerous complexities and challenges. In this article, you will explore the seven best tips to help business owners streamline this critical process. 1. Put A Payroll Policy In Place To ensure smooth payroll management, establish a clear and comprehensive payroll policy. This document should outline the payment schedule, overtime rules, deductions, and other relevant policies. By doing this, you create consistency and transparency, reducing confusion among employees and promoting compliance. Further down the line, integrating an automated payroll system can significantly bolster these efforts. Such a system streamlines the execution of the established payroll policy by automating the calculation of deductions, taxes, and overtime, ensuring employees are paid accurately and on time. This integration reinforces the principles of consistency and transparency and alleviates the administrative load, allowing your team to dedicate more time to strategic priorities. 2. Set A Payroll Budget Add up all the costs of paying employees, like salaries, benefits, and taxes, to get a realistic payroll budget. This budget serves as a financial guide, helping you allocate resources effectively. To keep your business's finances stable, review and update the budget regularly to account for changes in staffing or pay. 3. Categorize Employees Categorize your employees based on their roles and responsibilities. Classify them as full-time, part-time, or temporary workers. This categorization is crucial for accurately calculating wages, benefits, and taxes. It also helps in compliance with labor laws and ensures that each employee receives the appropriate compensation and benefits based on their employment status. 4. Develop A Payroll Calendar Creating a payroll calendar is like having a roadmap for paying your employees. It helps you stay organized and ensures that everyone gets paid on time. With that in mind, break down the calendar into clear milestones, such as when to collect employee hours, process payroll, and distribute paychecks. This way, you can avoid last-minute rushes and keep your payroll process smooth. 5. Maintain Proper Compliance Compliance with employment laws is crucial, so stay updated on local, state, and federal payroll, taxes, and employee benefits regulations. This includes understanding minimum wage laws, overtime regulations, and tax withholding requirements. However, regularly review and update your payroll processes to align with any changes in legislation, preventing legal issues and fines. 6. Conduct Regular Audits Audits are like check-ups for your payroll system, so regularly review your financial records, tax filings, and payroll transactions to catch any errors or discrepancies. This helps maintain accuracy and ensures your employees receive the correct compensation. Addressing issues promptly can prevent financial discrepancies and maintain trust with your workforce. 7. Invest In An ESS This tool empowers employees to access their payroll information, update personal details, and view pay stubs independently. Aside from that, this reduces administrative burdens, enhances accuracy, and fosters transparency. Investing in ESS technology streamlines communication, saving time for both your HR department and employees. This modern approach can boost efficiency and employee satisfaction. Have An Effective Management In Payroll Indeed, mastering the art of payroll management is pivotal for large businesses seeking sustained success and operational efficiency. By implementing the best practices outlined in these tips, you can confidently navigate the complexities of payroll on a larger scale. For specialized support tailored to the unique needs of large enterprises, explore the benefits of professional payroll services for large business. Take charge of your payroll processes and pave the way for a more efficient and successful future. 5+ practical payroll tips and tricks for businesses In case you are effectively managing payroll, several variables must be considered carefully. Below, I will discuss 5+ helpful payroll tips and tricks for businesses. 1) Get An EIN Any business with employees or plans to hire them must have an employee identification number (EIN). The IRS uses an EIN of the companies, through which you can track payroll tax payments and business income taxes. Furthermore, firms can hope to hire workers at some point with the advantage of obtaining an EIN sooner instead of later. One of the fastest ways to get an EIN is by fax, telephone, or mail. The app procedure is usually straightforward, requiring an applicant with a valid taxpayer identification number. 2) Accurately Classify Workers To expand workers properly and capitulate with IRS and other state requirements, you must categorize them correctly. Workers are complicated as employees or independent contractors and their requirements. That is why businesses must comply with the tax contribution along with withholding laws. But not other contractors. 3) Set A Budget This is important to understand clearly what affects payroll expenses. This will depend on your company’s expenses. Above all, businesses must always have enough cash to pay employees in total and timely. Payroll is one of the significant expenses that is often higher than other employers anticipate. For example, employers are legally required to match with Social Security and Medicare withheld from an employee’s pay. Furthermore, companies that offer benefits like health insurance can consider costs. 4) Create A Payroll Schedule You can set a payroll schedule that works with the cash flow of your business required to help discourage cash flow crunches. But it is also essential to comply with other federal and state laws. The pay period should also be consistent regardless of your choice. 5) Keep Policies Simple And Clear The more complicated the payroll regarding policies surrounding attendance and other benefits, the more complex the payroll procedure becomes. The less this is, the more employees can easily understand your policies. After all, establish guidelines that include exactly how and when employees can get paid and several other things. In this case, creating and maintaining a clear and concise payroll policy document and updating information are also necessary. 6) Be Transparent With Your Employees Employees can harm morale if this is due to miscalculated paychecks or confusion regarding how payroll policies are designed. This is also important in how they feel comfortable, and concerning any payroll-related problems with the manager, it will ensure all issues and other possibilities. Beyond damage control, consider transparent payroll policies that explain the payroll procedure. You should also keep the payroll management standardized across the entire information. 7) Keep Through Payroll Records This is a crucial practice if you want to keep the payroll records accurate. After all, this can help businesses get a better picture of several critical pieces of information, such as payroll costs, productivity levels, and tax payments. But certain payroll records are also required legally. Conversely, violations can also result in cost fines levied by the Labor Department and other state agencies. Read Also: CRMDialer: A Zoho Alternative 6 Top CRM For Small Businesses In 2019 Cold Calling Script For Successful Sales Persons