What exactly is a financial plan?
When you start a business, you often prepare a business plan. The financial plan is an important part of it. As mentioned, it’s a means of mapping out the investments, financial resources, expected expenditures and revenues of the first few years. This way, you can see:
- whether your company is viable
- whether it’s profitable
- what financial risks you might run
Your financial plan is based on various elements, such as your objectives, the market data, your chosen products and/or services and your expected staffing requirements. Think of it as a GPS for your business: a financial plan allows you to monitor whether you are still on track.
You may well find, as you draw up your plans, that you will have to adjust your idea or else it won't be viable. That's not fun, but you better find out before you start up or during the start-up phase, so that you can still correct it.
Tip: Looking for start-up capital? With a sound financial plan, you are in a much better position to negotiate with the bank or with potential investors.