financial planning tips for business owners

• Creating a Small Business Financial Plan

Written by True Tamplin, BSc, CEPF®

Reviewed by subject matter experts.

Updated on September 02, 2023

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Table of contents, financial plan overview.

A financial plan is a comprehensive document that charts a business's monetary objectives and the strategies to achieve them. It encapsulates everything from budgeting and forecasting to investments and resource allocation.

For small businesses, a solid financial plan provides direction, helping them navigate economic challenges, capitalize on opportunities, and ensure sustainable growth.

The strength of a financial plan lies in its ability to offer a clear roadmap for businesses.

Especially for small businesses that may not have a vast reserve of resources, prioritizing financial goals and understanding where every dollar goes can be the difference between growth and stagnation.

It lends clarity, ensures informed decision-making, and sets the stage for profitability and success.

Understanding the Basics of Financial Planning for Small Businesses

Role of financial planning in business success.

Financial planning is the backbone of any successful business endeavor. It serves as a compass, guiding businesses toward profitability, stability, and growth.

With proper financial planning, businesses can anticipate potential cash shortfalls, make informed investment decisions, and ensure they have the capital needed to seize new opportunities.

For small businesses, in particular, tight financial planning can mean the difference between thriving and shuttering. Given the limited resources, it's vital to maximize every dollar and anticipate financial challenges.

Through diligent planning, small businesses can position themselves competitively, adapt to market changes, and drive consistent growth.

Core Components of a Financial Plan for Small Businesses

Every financial plan comprises several core components that, together, provide a holistic view of a business's financial health and direction. These include setting clear objectives, estimating costs , preparing financial statements , and considering sources of financing.

Each component plays a pivotal role in ensuring a thorough and actionable financial strategy .

For small businesses, these components often need a more granular approach. Given the scale of operations, even minor financial missteps can have significant repercussions.

As such, it's essential to tailor each component, ensuring they address specific challenges and opportunities that small businesses face, from initial startup costs to revenue forecasting and budgetary constraints.

Setting Clear Small Business Financial Objectives

Identifying business's short-term and long-term financial goals.

Every business venture starts with a vision. Translating this vision into actionable financial goals is the essence of effective planning.

Short-term goals could range from securing initial funding and achieving a set monthly revenue to covering startup costs. These targets, usually spanning a year or less, set the immediate direction for the business.

On the other hand, long-term financial goals delve into the broader horizon. They might encompass aspirations like expanding to new locations, diversifying product lines, or achieving a specific market share within a decade.

By segmenting goals into short-term and long-term, businesses can craft a step-by-step strategy, making the larger vision more attainable and manageable.

Understanding the Difference Between Profitability and Cash Flow

Profitability and cash flow, while closely linked, are distinct concepts in the financial realm. Profitability pertains to the ability of a business to generate a surplus after deducting all expenses.

It's a metric of success and indicates the viability of a business model . Simply put, it answers whether a business is making more than it spends.

In contrast, cash flow represents the inflow and outflow of cash within a business. A company might be profitable on paper yet struggle with cash flow if, for instance, clients delay payments or unexpected expenses arise.

For small businesses, maintaining positive cash flow is paramount. It ensures that they can cover operational costs, pay employees, and reinvest in growth, even if they're awaiting payments or navigating financial hiccups.

Estimating Small Business Startup Costs (for New Businesses)

Fixed vs variable costs.

When embarking on a new business venture, understanding costs is paramount. Fixed costs remain consistent regardless of production levels. They include expenses like rent, salaries, and insurance . These are predictable outlays that don't fluctuate with business performance.

Variable costs , conversely, change in direct proportion to production or business activity. Think of costs associated with materials for manufacturing or commission for sales .

For a startup, delineating between fixed and variable costs aids in crafting a more dynamic budget, allowing for adaptability as the business scales and evolves.

One-Time Expenditures vs Ongoing Expenses

Startups often grapple with numerous upfront costs. From purchasing equipment and setting up a workspace to initial marketing campaigns, these one-time expenditures lay the foundation for business operations.

They differ from ongoing expenses like utility bills, raw materials, or employee wages that recur monthly or annually.

For a small business owner, distinguishing between these costs is critical. One-time expenditures often demand a larger chunk of initial capital, while ongoing expenses shape the monthly and annual budget.

By categorizing them separately, businesses can strategize funding needs more effectively, ensuring they're equipped to meet both immediate and recurrent financial obligations.

Funding Sources for Small Businesses

Personal savings.

This is often the most straightforward way to fund a startup. Entrepreneurs tap into their personal savings accounts to jumpstart their business.

While this method has the benefit of not incurring debt or diluting company ownership, it intertwines the individual's personal financial security with the business's fate.

The entrepreneur must be prepared for potential losses, and there's the evident psychological strain of putting one's hard-earned money on the line.

Loans can be sourced from various institutions, from traditional banks to credit unions . They offer a substantial sum of money that can be paid back over time, usually with interest .

The main advantage of taking a loan is that the entrepreneur retains full ownership and control of the business.

However, there's the obligation of monthly repayments, which can strain a business's cash flow, especially in its early days. Additionally, securing a loan often requires collateral and a sound credit history.

Investors, including angel investors and venture capitalists , offer capital in exchange for equity or a stake in the company.

Angel investors are typically high-net-worth individuals who provide funding in the initial stages, while venture capitalists come in when there's proven business potential, often injecting larger sums. The advantage is substantial funding without the immediate pressure of repayments.

However, in exchange for their investment, they often seek a say in business decisions, which might mean compromising on some aspects of the original business vision.

Grants are essentially 'free money' often provided by government programs, non-profit organizations, or corporations to promote innovation and support businesses in specific sectors.

The primary advantage of grants is that they don't need to be repaid, nor do they dilute company ownership. However, they can be highly competitive and might come with stipulations on how the funds should be used.

Moreover, the application process can be lengthy and requires showcasing the business's potential or alignment with the specific goals or missions of the granting institution.

Preparing Key Financial Statements for Small Businesses

Income statement (profit & loss).

An Income Statement , often termed as the Profit & Loss statement , showcases a business's financial performance over a specific time frame. It details revenues , expenses, and ultimately, profits or losses.

By analyzing this statement, business owners can pinpoint revenue drivers, identify exorbitant costs, and understand the net result of their operations.

For small businesses, this document is instrumental in making informed decisions. For instance, if a certain product line is consistently unprofitable, it might be prudent to discontinue it. Conversely, if another segment is thriving, it might warrant further investment.

The Income Statement, thus, serves as a financial mirror, reflecting the outcomes of business strategies and decisions.

Balance Sheet

The Balance Sheet offers a snapshot of a company's assets , liabilities , and equity at a specific point in time.

Assets include everything the business owns, from physical items like equipment to intangible assets like patents .

Liabilities, on the other hand, encompass what the company owes, be it bank loans or unpaid bills.

Equity represents the owner's stake in the business, calculated as assets minus liabilities.

This statement is crucial for small businesses as it offers insights into their financial health. A robust asset base, minimal liabilities, and growing equity signify a thriving enterprise.

In contrast, mounting liabilities or dwindling assets could be red flags, signaling the need for intervention and strategy recalibration.

Cash Flow Statement

While the Income Statement reveals profitability, the Cash Flow Statement tracks the actual movement of money.

It categorizes cash flows into operating (day-to-day business), investing (buying/selling assets), and financing (loans or equity transactions) activities. This statement unveils the liquidity of a business, indicating whether it has sufficient cash to meet immediate obligations.

For small businesses, maintaining positive cash flow is often more vital than showcasing profitability.

After all, a business might be profitable on paper yet struggle if clients delay payments or unforeseen expenses emerge.

By regularly reviewing the Cash Flow Statement, small business owners can anticipate cash crunches and strategize accordingly, ensuring seamless operations irrespective of revenue cycles.

Small Business Budgeting and Expense Management

Importance of budgeting for a small business.

Budgeting is the financial blueprint for any business, detailing anticipated revenues and expenses for a forthcoming period. It's a proactive approach, enabling businesses to allocate resources efficiently, plan for investments, and prepare for potential financial challenges.

For small businesses, a meticulous budget is often the linchpin of stability, ensuring they operate within their means and avoid financial pitfalls.

Having a well-defined budget also fosters discipline. It curtails frivolous spending, emphasizes cost-efficiency, and sets clear financial boundaries.

For small businesses, where every dollar counts, a stringent budget is the gateway to financial prudence, ensuring that funds are utilized judiciously, fostering growth, and minimizing wastage.

Strategies for Reducing Costs and Optimizing Expenses

Bulk purchasing.

When businesses buy supplies in large quantities, they often benefit from discounts due to economies of scale . This can significantly reduce per-unit costs.

However, while bulk purchasing leads to immediate savings, businesses must ensure they have adequate storage and that the products won't expire or become obsolete before they're used.

Renegotiating Vendor Contracts

Regularly reviewing and renegotiating contracts with suppliers or service providers can lead to better terms and lower costs. This might involve exploring volume discounts, longer payment terms, or even bartering services.

Building strong relationships with vendors often paves the way for such negotiations.

Adopting Energy-Saving Measures

Simple changes, like switching to LED lighting or investing in energy-efficient appliances, can lead to long-term savings in utility bills. Moreover, energy conservation not only reduces costs but also minimizes the environmental footprint, which can enhance the business's reputation.

Embracing Technology

Modern software and technology can streamline business processes. Automation tools can handle repetitive tasks, reducing labor costs.

Meanwhile, data analytics tools can provide insights into customer preferences and behavior, ensuring that marketing budgets are used effectively and target the right audience.

Streamlining Operations

Regularly reviewing and refining business processes can eliminate redundancies and improve efficiency. This might mean merging roles, cutting down on unnecessary meetings, or simplifying supply chains. A leaner operation often translates to reduced expenses.

Outsourcing Non-core Tasks

Instead of maintaining an in-house team for every function, businesses can outsource tasks that aren't central to their operations.

For instance, functions like accounting , IT support, or digital marketing can be outsourced to specialized agencies, often leading to cost savings and access to expert skills.

Cultivating a Culture of Frugality

Encouraging employees to adopt a cost-conscious mindset can lead to collective savings. This can be fostered through incentives, regular training, or even simple practices like recycling and reusing office supplies.

When everyone in the organization is attuned to the importance of cost savings, the cumulative effect can be substantial.

Forecasting Small Business Revenue and Cash Flow

Techniques for predicting future sales in a small business, past sales data analysis.

Historical sales data is a foundational element in any forecasting effort. By reviewing previous sales figures, businesses can identify patterns, understand seasonal fluctuations, and recognize the effects of past initiatives.

This information offers a baseline upon which to build future projections, accounting for known recurring variables in the business cycle .

Market Research

Understanding the larger market dynamics is crucial for accurate forecasting. This involves tracking industry trends, monitoring shifts in consumer behavior, and being aware of potential market disruptions.

For instance, a sudden technological advancement can change consumer preferences or regulatory changes might impact an industry.

Local Trend Analysis

For small businesses, localized insights can be especially impactful. Observing local competitors, understanding regional consumer preferences, or noting shifts in the local economy can offer precise data points.

These granular details, when integrated into a larger forecasting model, can enhance prediction accuracy.

Customer Feedback

Direct feedback from customers is an invaluable source of insights. Surveys, focus groups, or even informal chats can reveal customer sentiments, preferences, and potential future purchasing behavior.

For instance, if a majority of loyal customers express interest in a new product or service, it can be indicative of future sales potential.

Moving Averages

This technique involves analyzing a series of data points (like monthly sales) by creating averages from different subsets of the full data set.

For yearly forecasting, a 12-month moving average can be used to smooth out short-term fluctuations and highlight longer-term trends or cycles.

Regression Analysis

Regression analysis is a statistical tool used to identify relationships between variables. In sales forecasting, it can help understand how different factors (like marketing spend, seasonal variations, or competitor actions) relate to sales figures.

Once these relationships are understood, businesses can predict future sales based on planned actions or expected external events.

Understanding the Cash Cycle of Business

The cash cycle encompasses the time it takes for a business to convert resource investments, often in the form of inventory, back into cash.

This involves the processes of purchasing inventory, selling it, and subsequently collecting payment. A shorter cycle implies quicker cash turnarounds, which are vital for liquidity.

For small businesses, a firm grasp of the cash cycle can aid in managing cash flow more effectively.

By identifying bottlenecks or delays, businesses can strategize to expedite processes. This might involve renegotiating payment terms with suppliers, offering discounts for prompt customer payments, or optimizing inventory levels to prevent overstocking.

Ultimately, understanding and optimizing the cash cycle ensures that a business remains liquid and agile.

Preparing for Seasonality and Unexpected Changes

Seasonality affects many businesses, from the ice cream vendor witnessing summer surges to the retailer bracing for holiday shopping frenzies.

By analyzing historical data and market trends, businesses can prepare for these cyclical shifts, ensuring they stock up, staff appropriately, and market effectively.

Small businesses, often operating on tighter margins , need to be especially vigilant. Beyond seasonality, they must also brace for unexpected changes – a local construction project obstructing store access, a sudden competitor emergence, or unforeseen regulatory changes.

Building a financial buffer, diversifying product or service lines, and maintaining flexible operational strategies can equip small businesses to weather these unforeseen challenges with resilience.

Securing Small Business Financing and Capital

Role of debt and equity financing.

When businesses seek external funding, they often grapple with the debt vs. equity conundrum. Debt financing involves borrowing money, typically via loans. While it doesn't dilute ownership, it necessitates regular interest payments, potentially impacting cash flow.

Equity financing, on the other hand, entails selling a stake in the business to investors. It might not demand regular repayments, but it dilutes ownership and might influence business decisions.

Small businesses must weigh these options carefully. While loans offer a structured repayment plan and retained control, they might strain finances if the business hits a rough patch.

Equity financing, although relinquishing some control, might bring aboard strategic partners, offering expertise and networks in addition to funds.

The optimal choice hinges on the business's financial health, growth aspirations, and the founder's comfort with sharing control.

Choosing Between Different Types of Loans

A staple in the lending arena, term loans offer businesses a fixed amount of capital that is paid back over a specified period with interest. They're often used for significant one-time expenses, such as purchasing machinery, real estate , or even business expansion.

With predictable monthly payments, businesses can plan their budgets accordingly. However, they might require collateral and a robust credit history for approval.

Lines of Credit

Unlike term loans that provide funds in a lump sum, a line of credit grants businesses access to a pool of funds up to a certain limit.

Businesses can draw from this line as needed, only paying interest on the amount they use. This makes it a versatile tool, especially for managing cash flow fluctuations or unexpected expenses. It serves as a financial safety net, ready for use whenever required.

As the name suggests, microloans are smaller loans designed to cater to businesses that might not need substantial amounts of capital. They're particularly beneficial for startups, businesses with limited credit histories, or those in need of a quick, small financial boost.

Since they are of a smaller denomination, the approval process might be more lenient than traditional loans.

Peer-To-Peer Lending

A contemporary twist to the traditional lending model, peer-to-peer (P2P) platforms connect borrowers directly with individual lenders or investor groups.

This direct model often translates to quicker approvals and competitive interest rates as the overheads of traditional banking structures are removed. With technology at its core, P2P lending can offer a more user-friendly, streamlined process.

However, creditworthiness still plays a pivotal role in determining interest rates and loan amounts.

Crowdfunding and Alternative Financing Options

In an increasingly digital age, crowdfunding platforms like Kickstarter or Indiegogo have emerged as viable financing avenues.

These platforms enable businesses to raise small amounts from a large number of people, often in exchange for product discounts, early access, or other perks. This not only secures funds but also validates the business idea and fosters a community of supporters.

Other alternatives include invoice financing, where businesses get an advance on pending invoices, or merchant cash advances tailored for businesses with significant credit card sales.

Each financing mode offers unique advantages and constraints. Small businesses must meticulously evaluate their financial landscape, growth trajectories, and risk appetite to harness the most suitable option.

Small Business Tax Planning and Management

Basic tax obligations for small businesses.

Navigating the maze of taxation can be daunting, especially for small businesses. Yet, understanding and fulfilling tax obligations is crucial.

Depending on the business structure—whether sole proprietorship , partnership , LLC , or corporation—different tax rules apply. For instance, while corporations are taxed on their earnings, sole proprietors report business income and expenses on their personal tax returns.

In addition to income taxes, small businesses may also be responsible for employment taxes if they have employees. This covers Social Security , Medicare , federal unemployment, and sometimes state-specific taxes.

There might also be sales taxes, property taxes, or special state-specific levies to consider.

Consistently maintaining accurate financial records, being aware of filing deadlines, and setting aside funds for tax obligations are essential practices to avoid penalties and ensure compliance.

Advantages of Tax Planning and Potential Deductions

Tax planning is the strategic approach to minimizing tax liability through the best use of available allowances, deductions, exclusions, and breaks.

For small businesses, effective tax planning can lead to significant savings.

This might involve strategies like deferring income to a later tax year, choosing the optimal time to purchase equipment, or taking advantage of specific credits available to businesses in certain sectors or regions.

Several potential deductions can reduce taxable income for small businesses. These include expenses like rent, utilities, business travel, employee wages, and even certain meals.

By keeping abreast of tax law changes and actively seeking out eligible deductions, small businesses can optimize their financial landscape, ensuring they're not paying more in taxes than necessary.

Importance of Hiring a Tax Professional or Accountant

While it's feasible for small business owners to manage their taxes, the intricate nuances of tax laws make it beneficial to consult professionals.

An experienced accountant or tax consultant can not only ensure compliance but can proactively recommend strategies to reduce tax liability.

They can guide businesses on issues like whether to classify someone as an employee or a contractor, how to structure the business for optimal taxation, or when to make certain capital investments.

Beyond just annual tax filing, these professionals offer year-round counsel, helping businesses maintain clean financial records, stay updated on tax law changes, and plan for future financial moves.

The investment in professional advice often pays dividends , saving businesses from costly mistakes, penalties, or missed financial opportunities.

Regularly Reviewing and Adjusting the Small Business Financial Plan

Setting checkpoints and milestones.

Like any strategic blueprint, a financial plan isn't static. It serves as a guiding framework but should be flexible enough to adapt to evolving business realities.

Setting regular checkpoints— quarterly , half-yearly, or annually—can help businesses assess whether they're on track to meet their financial objectives.

Milestones, such as reaching a specific sales target, launching a new product, or expanding into a new market, offer tangible markers of progress. Celebrating these victories can bolster morale, while any shortfalls can serve as lessons, prompting strategy tweaks. F

or small businesses, where agility is an asset, regularly revisiting the financial plan ensures that the business remains aligned with its overarching financial goals while being responsive to the dynamic marketplace.

Using Financial Ratios to Monitor Business Health

Financial ratios offer a distilled snapshot of a business's health. Ratios like the current ratio ( current assets divided by current liabilities ) can shed light on liquidity, indicating whether a business can meet short-term obligations.

The debt-to-equity ratio , contrasting borrowed funds with owner's equity, offers insights into the business's leverage and potential financial risk.

Profit margin , depicting profitability relative to sales, can highlight operational efficiency. By consistently monitoring these and other pertinent ratios, small businesses can glean actionable insights, understanding their financial strengths and areas needing attention.

In a realm where early intervention can stave off major financial setbacks, these ratios serve as vital diagnostic tools, guiding informed decision-making.

Pivoting Strategies Based on Financial Performance

In the ever-evolving world of business, flexibility is paramount. If financial reviews indicate that certain strategies aren't yielding anticipated results, it might be time to pivot.

This could involve tweaking product offerings, revising pricing strategies, targeting a different customer segment, or even overhauling the business model.

For small businesses, the ability to pivot can be a lifeline. It allows them to respond swiftly to market changes, customer feedback, or internal challenges.

A robust financial plan, while offering direction, should also be pliable, accommodating shifts in strategy based on real-world performance. After all, in the business arena, adaptability often spells the difference between stagnation and growth.

Bottom Line

Financial foresight is integral for the stability and growth of small businesses. Effective revenue and cash flow forecasting, anchored by historical sales data and enhanced by market research, local trends, and customer feedback, ensures businesses are prepared for future demands.

With the unpredictability of the business environment, understanding the cash cycle and preparing for unforeseen challenges is essential.

As businesses contemplate external financing, the decision between debt and equity and the myriad of loan types, should be made judiciously, keeping in mind the business's health, growth aspirations, and risk appetite.

Furthermore, diligent tax planning, with professional guidance, can lead to significant financial benefits. Regular reviews using financial ratios allow businesses to gauge their performance, adapt strategies, and pivot when necessary.

Ultimately, the agility to adapt, guided by a well-structured financial plan, is pivotal for businesses to thrive in a dynamic marketplace.

Creating a Small Business Financial Plan FAQs

What is the importance of a financial plan for small businesses.

A financial plan offers a structured roadmap, guiding businesses in making informed decisions, ensuring growth, and navigating financial challenges.

How do forecasting revenue and understanding cash cycles aid in financial planning?

Forecasting provides insights into expected income, aiding in budget allocation, while understanding cash cycles ensures effective liquidity management.

What are the core components of a financial plan for small businesses?

Core components include setting objectives, estimating startup costs, preparing financial statements, budgeting, forecasting, securing financing, and tax management.

Why is tax planning vital for small businesses?

Tax planning ensures compliance, optimizes tax liabilities through available deductions, and helps businesses save money and avoid penalties.

How often should a small business review its financial plan?

Regular reviews, ideally quarterly or half-yearly, ensure alignment with business goals and allow for strategy adjustments based on real-world performance.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon , Nasdaq and Forbes .

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How to Conduct Small Business Financial Planning Effectively

September 14, 2023

by Joanne Camarce

In this post

• Why is financial planning important for a small business?

How to craft a strong financial plan for your small business

• Financial planning considerations small businesses make
• Financial planning tips for small businesses

As a small business owner, financial planning can feel overwhelming.

But financial planning is crucial for small businesses. Not only does it provide you with an entire overview of your financial health, but it helps you figure out how to grow and develop your business as efficiently as possible. 

There are many budgeting and forecasting software for small businesses that can estimate future revenue and expenses by planning the financial resources you need. 

What is small business financial planning?

Small business financial planning is the process of reviewing revenue, turnover, assets, capital, inventory, and anything else concerning a business's financial affairs. It summarizes the financial health of a business and outlines its financial goals for the future. 

Whether it's a long-term investment plan or a short-term plan for revenue growth, your financial plan will be clear as to what your goals are and how you can plan to achieve them. 

In this article, we’ll discuss everything you need to know about financial planning as a small business . We’ll cover what financial planning is, whether you need a financial advisor, and how to create a solid financial plan for your business.

We’ve also got some valuable tips for financial planning as a small business and an overview of a few essential things to bear in mind when creating a financial plan. 

Why is financial planning important for a small business? 

You just finished registering your business through a qualified registered agent . Now, you’ve got a lot on your plate running the actual business, and finance is a complex subject. Here are a few reasons to plan your finances: 

• Understanding your financial situation: As a small-to-mid-size business, it’s important to have clear oversight of your financial health. With oversight of your finances, you’ll know what resources you have available, what areas of your business are doing well, and what areas need improvement. 
• Identifying areas of growth: Financial planning is a great way to identify areas of growth. It shows you where you can improve your business and how to spend your money. And as a small business owner, you need to make sure you’re spending your money as efficiently as possible. 
• Thinking about the long term: Financial planning is the perfect opportunity to think about the long-term growth of your small business. You can create a step-by-step plan to get from where you are now to where you want to be. 

Do you need a financial advisor as a small business owner? 

A financial advisor helps you make informed decisions about what to do with your money and other assets. 

But the question is: do you need one?  In short, no. You don’t need a financial advisor. But there are benefits to using one if you’re running a small business.

These include:

• Saving time: With a financial advisor taking care of your money, you can spend less time managing your finances and more time running your business.
• Evaluating market trends: Financial advisors know the industry inside and out. They’re on top of all the latest economic trends that influence the way you run your business. 
• Saving money: Using a financial advisor isn’t cheap, but it can help you save money in the long run. With such a wide range of industry knowledge, they’ll find ways you can cut costs that you might not have considered.

Even though a financial advisor isn’t a necessity, there are certainly reasons you should think about using one as a small business owner. It might seem like a lot of money to spend, but it’ll save you both time and money. 

Unfortunately, there isn't a one-track system to create a successful financial plan. Every company is different, which means financial plans change from business to business.  But there are some best practices you can follow to make sure your financial plan is as strong and stable as possible. 

Identify any capital required 

First things first, you must identify the capital you need to help your business grow.  Knowing what capital you need helps you plan your finances more efficiently and maximize your resources. 

Not to mention, it allows small business owners to figure out how much they have (in terms of money, resources, and assets) in comparison with what they need. 

So how can you identify the capital you need? First, you need to figure out what capital you already have. This will give you a solid starting point to find the capital you need to get to where you want to be. 

Spend some time reviewing what your business already has, and go from there. Once you know what resources you have available, you can think about what capital you need. 

Create a balance sheet 

A balance sheet reveals your company’s assets, liabilities, and equity. It adds your liabilities (any debt or losses) to your equity (what your business is worth) to determine the value of your assets. 

Here’s an example of a balance sheet in action: 

When combined with other documents, such as an income statement or cash flow statement , small business owners get a pretty clear picture of their financial health.

How can you create a balance sheet? Follow these steps to create your own: 

• List all your assets along with their current market value
• Outline all your debts and liabilities
• Subtract the value of your liabilities from the total value of all your assets

What you’re left with is the equity ( net worth ) of the business. 

To keep things simple, the free balance sheet template is also available.

Produce a cash flow statement 

As a small business owner, it’s important to keep on top of your operating cash flow . 

Having a healthy cash flow is an important part of running a successful business. It gives you a buffer for emergencies, allows you to pay your employees on time, and provides you with the funds you need to run your business. 

To keep track of your cash flow, you need to create a cash flow statement. A cash flow statement is a financial document that summarizes all the cash going in and out of your company. It shows how the company's operations are running, where money is coming from, and how it’s being spent.

Here’s an example: 

With a cash flow statement in place, you can easily measure how well your company manages its cash position. 

Project your future earnings 

Part of the financial planning process involves projecting your future earnings. The most efficient way to do this is to create an earnings forecast. Based on how your company has performed in the past, you make predictions about future earnings over a specific period. 

In other words, you use past data to predict your future earnings.

But how is this useful for a small business? There are a few ways: 

• Find your future goals: Forecasting helps you figure out where you want your company to be further down the road and map out the journey to get there. 
• Align your team: When you conduct an earnings forecast, you create a goal for everyone to work toward. By doing this, you align your company to hit certain targets. 
• Show investors your roadmap: As a small business, you might be thinking about getting investors involved . An earnings forecast outlines the course of your business development, which investors will certainly want to see. 

Financial planning considerations small businesses make 

For your outline, you only need bullet point descriptions of content you plan to write. When it comes to financial planning, there are certain considerations small businesses need to keep in mind that large companies won’t. 

Or if a large corporation needs to take the same consideration, they’ll probably review it from an entirely different perspective. Let’s take a look at some of the financial planning considerations you need to be aware of as a small business owner. 

1. Retirement planning 

We know what you’re thinking. Isn’t retirement planning important for every business, not just small businesses? You’re right. Every business owner should think about retirement planning. But small business owners need to do it sooner rather than later. 

Large corporations have retirement planning and processes in place for employees. But as a small business owner, this job is up to you. 

Here are a couple of things to think about when it comes to retirement planning: 

• Distribute your finances: Preparing for retirement involves saving, distributing, and investing your money. The most common investments are usually retirement accounts, which allow you to grow your money with tax benefits and interest. If you’re giving away any assets to friends or family, be sure to check whether they are tax deductible . 
• Create a will or trust: Retirement planning takes life expectancy into account. Having a living will or trust in place will protect your assets in the event of an accident or incapacitation. 

Get your ducks in a row as soon as possible to make sure you can enjoy a long and happy retirement. The sooner you factor it into your financial plan, the more chance you will reach your goal. 

2. Risk management

Every business faces risk. Whether that’s losing market share to a new competitor or taking a hit in product sales, there’s always a possibility things won’t go to plan. 

But the potential loss for a small business can be detrimental if you don’t have a risk management plan. A risk management plan outlines the possible financial issues your business might face and how to mitigate them. This will ensure that you’re prepared for the worst-case scenario. 

And if you’re thinking about getting an investor on board, they’ll be pleased to know you have a plan to tackle any challenges that come your way.

So when it comes to your financial planning, make sure you think about integrating a risk management plan, too. It might seem like a lot of effort, but if things don’t go your way, you’ll be glad to have a plan of action in place. 

3. Tax planning 

No one wants unexpected fines and charges, especially if you’re a small business. A large fine from the authorities could be the difference between a successful year or cutting costs across the company. 

Fortunately, this is where tax planning can help. 

Tax planning involves organizing your finances in the most tax-efficient way. It identifies areas where you can save money and claim money back. It also reduces your likelihood of getting unwanted fines. As a result, you can put more money back into your business. And as a small business, the more money you can invest in your growth, the better. 

If you’re not sure where to start with tax planning, don’t worry. There’s a lot of tax software out there that can help you out. 

Financial planning tips for small businesses 

We’ve covered a lot of ground so far, so let’s wrap things up by looking at four of our most useful financial planning tips for small businesses. 

1. Review your operating expenses 

Operating expenses are costs incurred from your core business operations. For example, the rent you pay for your workspace or your inventory costs.

Taking stock of your operating expenses allows you to identify the cost of running your business, which is vital for financial planning. With this information, you can work out your net profit. This means you can figure out how much money you have leftover after all your expenses are settled. 

And as a small business, keeping on top of your net profit is the key to success. Without an SMB accounting system, you won’t know what money you have available, which could result in overspending. 

If you’re not sure where to start, there are plenty of expense management platforms out there to make the job easier. 

2. Outline your business goals 

Clearly outlining your business goals gives your financial planning direction. When you have company goals in place, you can tailor your financial plan to achieve those goals. 

Imagine your business goal is to increase your annual turnover by 10% within the next year. As a result, your financial plan outlines how you can cut costs on production to offer a lower price to consumers. 

Take a look at the pricing page from ActiveCampaign . This software is entirely online, meaning it can offer services for a very reasonable price. 

Offering a lower price has a higher chance of increasing your conversions and getting a higher annual turnover. 

Make sure you’re clear on what your company goals are before you create a financial plan. By aligning business goals with the financial planning process, you have a higher chance of achieving them. 

3. Consider your funding options 

If you haven’t already, make sure you explore the loans and grants that are available  to small businesses. 

Securing funding can help you reinvest your capital, grow your company, and improve your financial health. The good news is that there’s a variety of funding options out there for small businesses.

Organizations such as the U.S. Small Business Association and the U.S. Government (among others) offer funding options for small businesses. You’ve got nothing to lose by applying, so take a look at what’s out there. 

4. Build your credit score 

If you consider funding or investment, you don’t want poor business credit to be a problem. Investors and shareholders aren’t going to invest in a business with a bad credit score. It could also cause problems with acquisitions and other business transactions further down the road. 

So what can you do to improve your credit score and keep it strong? Pay your bills on time. Don't miss credit card payments. Don't accept any loans with interest rates you can't afford. This will make sure your credit rating stays above the line.

When cents make sense

You’ve now got a pretty solid understanding of small business financial planning and some best practices to follow when creating a financial plan. 

Now it’s time to put all this knowledge into practice.

If you’re worried about taking on this arduous task, don’t be. There are ways to make the process easier to manage. With the right platform, you can streamline the planning process and keep everything stored in one location.

Take a look at the best financial analysis software for small businesses to monitor your financial performance efficiently.

Money talks. What's yours saying?

Use the right budgeting and forecasting software for your small business to plan your finances accurately.

Joanne Camarce grows and strategizes B2B marketing and PR efforts. She loves slaying outreach campaigns and connecting with brands like G2, Wordstream, Process Street, and others. When she's not wearing her marketing hat, you'll find Joanne admiring Japanese music and art or just being a dog mom.

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10 Effective Financial Planning Tips for Small Business Owners

Christopher K. Winn

In the United States, small businesses aren’t merely numbers on a chart; they’re the heartbeat of our economy. With an astounding 30 million of them, they command a dominant 99.9% of all firms. Yet, amidst this vast landscape, many entrepreneurs dive in without a deep grasp of business finance. Financial planning, however, isn’t just another task—it’s the bedrock of enduring success in a bustling market.

Being a small business owner often means wearing multiple hats, from CEO to Sales Manager. Perfecting every role is a tall order, but with financial planning as your compass, you’re equipped to make sound decisions. It’s not about mastering everything but mastering what matters.

This article will simplify the core principles, providing a user-friendly guide. Our mission? To arm you with the necessary insights and tools, ensure your business flourishes and stands tall in the face of challenges. Let’s begin.

What is Financial Planning for Small Businesses?

Financial planning for a small business is a strategic process of outlining a company’s financial future, integral to planning a business strategy. By setting clear financial goals and devising plans to achieve them, businesses ensure they navigate economic challenges with agility. A comprehensive financial plan evaluates risks and offers measures to counter potential financial pitfalls in the ever-changing economic landscape.

The importance of financial planning is especially paramount for small businesses. With limited resources, unlike large corporations with vast reserves, they must be judicious in resource allocation. Take IKEA as an example: evolving from a modest mail-order venture in 1947 to a global furniture leader, their journey highlights the role of astute financial planning and its emphasis on efficiency.

Small businesses risk financial missteps without a robust financial plan, potentially leading to challenges or poor investment decisions, undermining their long-term stability.

Why Financial Planning is Crucial for Businesses?

The U.S. Chamber of Commerce recently revealed that 51% of small business owners grapple with securing funding. This statistic underscores small businesses’ difficulty obtaining the capital they need to flourish.

Financial planning emerges as the cornerstone solution to this issue. A meticulously crafted financial plan acts as both a guide for a business’s growth trajectory and a persuasive instrument when pursuing funding. It delineates financial objectives, revenue forecasts, expense tracking, and risk mitigation strategies.

To potential investors or lenders, a solid financial plan signals more than just a capital request. It conveys a business’s dedication to prudent financial management, showcasing a clear growth vision and a method for fund allocation to achieve that growth.

Read Also: Key Components of Successful Financial Planning as a Small Business Owner

But the importance of financial planning for businesses isn’t limited to funding pursuits. It’s a strategic instrument for firms to maximize their existing resources for sustained expansion. A staggering 82% of companies collapse due to cash flow issues. Through precise financial goal-setting, cash flow monitoring, and expense evaluation, businesses can pinpoint opportunities for cost reduction or resource redistribution.

Financial planning empowers small businesses to navigate away from debilitating debt and its myriad challenges, from debt-induced risks and inflation to unpredictable market dynamics. A robust financial plan mitigates avoidable hazards and optimizes resource use, setting the stage for success.

The Comprehensive Financial Plan

A financial plan is an all-encompassing document detailing your business’s financial objectives and strategies. It offers an insightful overview of your company’s financial health, encompassing current cash flows and outstanding debts, and outlines a roadmap to optimize growth while curtailing liabilities.

A pivotal aspect of this plan is the alignment of short-term and long-term business aspirations. Immediate objectives, like managing current cash flows and addressing operational requisites, must align with the overarching vision of sustained company growth and fiscal stability. 

Such alignment ensures that short-term achievements pave the way for long-term milestones. For example, astute cash flow management today can fuel investments that catalyze future expansion. This synergy in financial planning fosters purpose-driven decision-making and offers the flexibility to adapt to market shifts without deviating from the core business mission.

Risk tolerance evaluation is also an integral component in creating a strategic plan. It aids in balancing the pursuit of growth avenues with the preservation of financial soundness. Regularly revisiting and understanding risk tolerance ensures that financial strategies resonate with your comfort thresholds, making them adaptable, attuned to evolving scenarios, and harmonized with immediate and distant business objectives.

While financial planning demands rigor, enlisting a financial planner can be invaluable. Crafting a financial plan independently is feasible, but a specialist’s insights can fortify your preparedness for unforeseen challenges, be it a slump in product demand or unpredictable cost surges, safeguarding your business’s financial horizon.

Key Principles of Effective Financial Planning

Effective financial planning is the cornerstone of sound financial management for businesses of all sizes. And to navigate the complexities of financial decision-making, it’s essential to understand the general principles that underpin successful financial planning. Here they are:

Create a Comprehensive Budget

A budget is a great way to stay on track with your business and financial goals. It can help you save more, pay down your debt, and even become better at saving for the future. You don’t need complicated, expensive software to set it up. Simplified accounting and budgeting solutions such as Mint and QuickBooks can help you determine where every last cent goes.

A well-structured budget is a financial roadmap that enables businesses and individuals to allocate resources strategically and make informed decisions. In a business context, budgeting helps plan for various expenses, including operational, marketing, and growth initiatives. On a personal level, budgeting allows individuals to track and control their spending, save for future goals, and avoid financial stress.

What’s more, a budget also helps in controlling costs. It reveals which expenses you can reduce and how much money you need to pump into your insurance to shield your business from risk. Eventually, unforeseen risks fall on the business owner’s shoulders. So, strive to create separate budgets for business and personal needs.

Track Expenses Regularly

The essence of effective financial planning often boils down to diligent expense tracking. Monitoring your spending through a method that aligns with your preferences and habits is vital. While some might prefer a traditional manual log, others might opt for modern software solutions or mobile apps. It’s worth exploring various tracking methods to discover the one that resonates with you.

Regardless of the method chosen, consistent expense monitoring is an indispensable financial practice. It offers a transparent view of monetary outflows, helping you discern spending trends and behaviors. Such insights are invaluable for businesses and individuals, facilitating well-informed financial choices.

For individuals, tracking personal expenses can be simpler than anticipated. Those receipts you often discard after shopping? Consider retaining them for a month. By documenting these purchases, either digitally or on paper, you are gaining a clearer picture of your spending habits. Analyze this data to identify patterns. You might discover, for instance, that you’re frequently splurging on items that don’t contribute meaningfully to your financial well-being.

To plan business strategy, identify spending patterns, and uncover areas where cost-cutting or optimization is possible. It reveals unnecessary expenditures, facilitating better resource allocation and budgeting. Additionally, by tracking expenses over time, you can evaluate the effectiveness of financial strategies, adapt to changing circumstances, and work towards achieving long-term financial goals.

The point is that keeping track of every cent enables you to cut down on waste and optimize your resources. Cutting unnecessary items and saving as much as possible, even if you have unexpected wealth streaming, can help pave the way for a brighter financial future.

A sudden wealth planner in Portland can help you manage and spend your sudden wealth wisely.

Develop a Strategic Financial Plan

After establishing a budget and a system for expense tracking, the next logical step is to formulate a financial plan. Wondering about the core elements of such a plan? Let’s delve into:

• Short-term and Long-term Goals: Businesses delineate short-term objectives, like elevating monthly sales, and long-term aspirations, such as penetrating new markets. These goals steer decision-making and resource distribution, propelling consistent growth.
• Income: This denotes a business’s revenue from sales, investments, or other avenues. Grasping and enhancing income sources is pivotal for enduring financial health, enabling businesses to meet expenses, channel funds into growth, and realize profits.
• Expenses: These are the costs a business incurs in its daily operations, spanning overheads, salaries, and material costs. Prudent expense management is key to retaining profitability and judiciously using resources.
• Investments: This pertains to channeling capital into assets or endeavors promising returns. Sound investment choices bolster business expansion and market edge.
• Current Assets and Liabilities: Current assets, like cash and inventory, are easily converted into liquid funds. Liabilities, on the other hand, include immediate financial obligations such as loans. Balancing these ensures liquidity and short-term fiscal health.

Your financial blueprint should detail monthly savings targets, annual revenue goals, and the timeline to achieve your objectives. Remember, financial plans aren’t universal. Each business and its proprietor have distinct requirements and hurdles. Tailor your financial strategy to cater to your specific business demands, addressing particular fiscal challenges, capitalizing on prospects, and steering towards overarching ambitions. Your personal risk appetite is also a crucial consideration.

For instance, while some might find a diversified investment portfolio appealing, others might gravitate towards safer avenues like fixed-income products.

Prioritize Business Investment

While it’s essential to allocate funds for personal necessities like retirement savings, insurance, life event savings, investments, and debt repayments, it’s equally crucial to channel resources back into your business. This reinvestment is the backbone of long-term growth and sustainability.

You’re fueling your operations’ expansion by earmarking a segment of your profits for business reinvestment. This can manifest in developing new products or services, adapting to market shifts, enhancing infrastructure, penetrating new markets, or gaining a competitive edge.

Read Also: Scaling to Profitability – How To Run A Successful Company

Any seasoned financial advisor, whether in Portland or elsewhere, will vouch for reinvesting a portion of your revenue for a brighter financial horizon. For instance, consider the benefits of procuring new equipment, which can streamline operations and boost efficiency. A general guideline suggests reinvesting 20-30% of your revenue into the business.

This range strikes a balance between propelling growth and ensuring fiscal solidity. If you’re in an aggressive growth phase or venturing into new markets, you might tilt toward the higher end of this spectrum. Conversely, a more conservative approach might be apt during economic volatility or when bolstering cash reserves is paramount.

Establish an Emergency Fund

While the future remains unpredictable, one thing is sure: change is inevitable. Factors like fluctuating market dynamics, climatic changes, and political shifts can all impact businesses. Hence, it’s prudent to set aside funds for unforeseen challenges.

Such reserves act as a financial safety net during unexpected setbacks, be it economic slumps, disruptions in the supply chain, or abrupt equipment malfunctions. Without a substantial emergency fund, businesses might be exposed, potentially resorting to high-interest loans or facing insolvency risks when hit with unforeseen costs or revenue declines.

An expert financial advisor for small business owners will recommend saving 20% of your income. Whatever works for you could be as little as $5 a day or $200 monthly.

This percentage ensures that you have a significant financial buffer to handle essential costs like rent, payroll, utilities, and inventory if there is a crisis. However, the specific percentage may need to be adjusted based on the industry, business size, and the level of financial risk. For example, smaller businesses or those in more volatile sectors might consider saving closer to the higher end of this range to ensure a robust safety net.

You can put that money into a savings account that pays interest or a money market account. While at it, cut expenses where you can. It might not seem like much, but every little coin adds more to your savings.

Saving money can be easy if you make it a habit. The sooner you start saving, the more time your money has to grow.

Manage Debt Wisely

If you recall the Asian financial crisis in 1997, hundreds of businesses almost collapsed due to overwhelming debt. If that doesn’t ring a bell, you might remember the Great Recession 2008, where hundreds of businesses went under. At that time, many borrowers were unable to pay their loans.

A decade later, debt remains an inevitable part of the business. Small companies borrow for several reasons, with the average loan size for small businesses reaching $663,000 across the country. Debt is almost always inevitable in business. It’s an essential source of funding. What you need to worry more about is overwhelming personal debt.

If you’re like many entrepreneurs, you’re probably carrying around student loans, credit card debt, mortgages, medical debt, and money borrowed from family and friends. Debt can be backbreaking to pay off and eat away at your profits.

However, it can also be a valuable financial tool when used strategically, but it requires vigilant oversight and adherence to a well-considered repayment plan. Prudent debt management helps avoid financial distress and contributes to overall financial health. So, when you control interest expenses and maintain a favorable credit profile, your business can secure better lending terms, access additional capital when needed, and be better positioned for sustainable growth.

Fortunately, there are several ways to manage your debt. Debt consolidation is one way to get started.

Debt consolidation is taking multiple debts and rolling them into one loan to ease the strain of paying off numerous creditors. Ensure you’re not slipping back into the debt trap by taking on new loans without a strategy to pay them back. If you’re unsure how much debt you can take on, talk to a financial advisor for small businesses.

Plan for Retirement and Succession

This is a big one — a small enterprise planning for retirement can seem like a far-off dream, especially if you’re in your 20s or early 30s. The good news is that it’s never too early to start saving for retirement, and you can do a few things to put yourself in the best position to have a healthy retirement.

A retirement plan may include a SEP IRA, one-participant 401(k), or traditional and Roth IRA. While SEP IRAs are advantageous for small businesses, allowing employers to make contributions on behalf of eligible employees, 401(k)s provide a broader range of investment options and often include employer-matching contributions. Choosing a retirement plan, setting goals, and working with a financial advisor are essential to retirement security.

Read Also: Retirement Planning for Business Owners – Selling Your Business for Your Retirement

Planning for retirement also involves planning for succession. Whether passing the business to family members, selling to a key employee, or seeking an external buyer, succession planning involves identifying and developing future leaders, creating a clear transition strategy, and addressing legal and financial considerations. Combining retirement and succession planning allows you to seamlessly transition out of your roles while preserving the business’s legacy.

You could also choose to sell your business and retire or continue to run the business and retire at a particular time. As a small business owner, you can decide when and where to retire. You may want to relocate or buy a vacation home in a different location.

Cultivate Good Spending Habits

Spending wisely is the basis of every essential part of every successful financial plan. It’s not just about saving money – it’s also about making smart moves about how you spend it. The best way to do this is by developing sustainable spending habits.

Sustainable spending habits involve prudent allocation of resources, careful budgeting, and prioritizing expenditures that contribute to growth and profitability. This includes distinguishing between essential and non-essential expenses, optimizing purchasing strategies, and consistently reviewing and adjusting the budget to align with evolving business needs.

As you may know, good spending habits don’t happen overnight. They take time and effort, but you must work to improve your financial situation. Involve employees in the process, educate them on the importance of cost-consciousness, and seek their input on cost-saving measures. Businesses should also leverage financial tools and software like Mint and QuickBooks to track expenses, identify trends, and make data-driven decisions.

Stay Tax Compliant

Taxes are never fun, but they are even more important to remember when running your business to stay compliant with the IRS and keep your company on the right track.

Complying with tax laws and regulations also ensures that your business operates within the legal framework, avoiding costly penalties and legal complications. Similarly, using tax deductions and credits available to companies is just as important. These incentives can significantly reduce tax liabilities, freeing up capital for reinvestment, growth, and other strategic initiatives.

Tax financial planning doesn’t have to be a nightmare. Rather than scrambling to organize financial records at tax season’s end, businesses should implement an organized and continuous expense tracking system throughout the year. This simplifies tax preparation and gives real-time insights into financial performance and tax liabilities. Stay on top of your taxes by tracking your expenses thoroughly throughout the year, and ensure you’re taking advantage of all available deductions.

Consider Professional Advice

If you’re struggling with business financial planning, seek professional financial advice from financial planners, accountants, and business coaches for small businesses. 

If you’re a small business owner, doing your personal and corporate books can be doubly taxing.

With Interactive Wealth Advisors’ help, you can simplify the process by integrating your business and personal planning— in an attempt to find synergies that may help to provide tax and retirement planning opportunities.

Financial planners specialize in creating comprehensive financial strategies, including retirement planning, investment advice, and risk management. Accountants are essential for managing records, ensuring tax compliance, and providing insights into financial health. On the other hand, business coaches offer guidance on overall business strategies, leadership development, and growth planning. These professionals bring expertise and a fresh perspective, offering valuable insights and strategies to enhance a business’s financial success.

Ensure they fit you before hiring an investment advisor , accountant, or business coach. Verify their credentials, like CPA or CFP, and check their experience in your industry. Ask them questions about their work and how they work with clients. Seek referrals from trusted sources and assess their reputation. Understand their fee structure, ensure it suits your budget, and investigate their track record by requesting case studies or references. A little research should help you reach your ideal professional.

Financial planning is integral to the success of small business owners in achieving financial stability and growth. By implementing these fundamental principles diligently, business owners can meet immediate goals while securing their long-term well-being.

So take action now, tailor your financial plans, and adopt prudent spending habits. And seek professional services from dedicated financial advisors at Interactive Wealth Advisors for invaluable personalized insights and strategies to propel financial success. With our experts’ proper knowledge and support, your small business can navigate the complexities of financial management and steer you toward prosperity.

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There are many different kinds of small business owners in all stages of their business. Some have just started putting their ideas into action in a startup, while others are in the growth stage or even planning an exit strategy.

No matter which stage your business is in and whether you're a dreamer or more of a pragmatist, there is one thing you can't afford not to do. You need a holistic financial plan that takes into account where your business is now and what the plan is for the future.

For small business owners, establishing a financial plan comes with an added complexity, which is the business. In some ways, the business and personal sides of your financial plan will be mutually exclusive.

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Separate your personal financial goals from your business goals 

Before making any plans, it's critical to understand that you are not your business. Most small business owners have goals for their business, but it's important to also make financial goals for yourself and to keep them separate.

It can be tempting to combine the two, especially for sole proprietors or single-member LLC owners whose business is included on their individual income tax return. However, by not separating your business from your personal financial goals, you could be missing out on some amazing personal achievements.

For example, some personal financial goals might include setting up and contributing to an education fund for your child, boosting your retirement savings, funding and going on a vacation, and buying your first home or downsizing when your children move out of the house.

On the other hand, some financial goals for your business might include increasing sales to a particular amount, finding more customers, or establishing a certain percentage of growth rate.

Consider alternative funding options to diversify your business-related risk 

You may also want to look at other places where you can further separate yourself personally from your business. The easiest place to look is at the many available funding options for your business.

Most small business owners invest in their own businesses using their own money and time, which may be appropriate in certain situations. However, just as you would diversify your investment portfolio, so you may also want to diversify your business-related risks.

Using your own capital, or, in a worst-case scenario, your own credit cards, places you at significant personal financial risk if something happens to the business. In some cases, though, it might make sense to cede some of that risk to another party. After all, today's digital world has brought a wider array of potential funding options that range from venture capital and private equity to crowdfunding, business loans, and even more creative options like a small business incubator or accelerator.

The Small Business Administration is also an excellent resource for business owners, not only for information and guidance but also, in some cases, for low-interest business loans.

Remember to plan for retirement

For small business owners, retirement planning actually sits at the crossroads between personal and business financial planning. It can be tempting to just keep pouring your money back into the business, but that can make it difficult, if not impossible, to save for retirement.

Many small business owners don't save for retirement because they believe they'll be able to sell their business and live off the proceeds of the sale in retirement. However, most overestimate what their business might be worth, especially when looking decades into the future.

Simplified Employee Pension ( SEP ) IRAs and individual 401(k)s both enable small business owners to plan ahead for the days when they finally retire.

Diversify everywhere 

Another important thing small business owners should remember when creating their personal financial plans for themselves and their business is diversification. A small business is a piece of a larger investment portfolio, but many business owners don't recognize this.

Being in business represents a significant risk, even if it seems like you're in a safe industry. As a result, it makes sense for small business owners to target low-risk investments for the rest of their investment portfolio.

Prepare your exit strategies 

Finally, small business owners should prepare their exit strategies — for both their personal legacy and their business. From a personal perspective, business owners can't afford not to have a will and estate plan to ensure the business doesn't fold upon their death. Many also want to leave their business to the next generation, but without a will, ownership succession becomes hazy.

In terms of the business, you should also create a succession plan designating who will take over when you retire or pass. The financial reasons for creating a succession plan are similar to those for creating a will and estate plan, although these plans differ from a practical standpoint. In terms of your personal financial plan, you're designating heirs, while for your business financial plan, you're designating the next CEO or manager. They could be the same person or different people, depending on your situation.

Don't be too busy to plan

These guidelines are only the very basics of what a small business owner needs to consider when creating a financial plan. Some other factors that may play a role in your personal and business financial plans include insurance (property, professional, and otherwise), preparations for growth, planning for disability, and more. No two financial plans are the same, and these other factors may fall under some of the earlier headings.

Unfortunately, many small business owners find themselves tapped out when it comes to financial planning. It takes so much energy and enthusiasm to keep the business going that they sacrifice their personal financial wellbeing. However, your busiest times will be when you need these financial plans the most, and having separate personal and business financial plans will make everything much easier.

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Jacob is the founder and CEO of ValueWalk. What started as a hobby 10 years ago turned into a well-known financial media empire focusing in particular on simplifying the opaque world of the hedge fund world. Before doing ValueWalk full time, Jacob worked as an equity analyst specializing in mid and small-cap stocks. Jacob also worked in business development for hedge funds. He lives with his wife and five children in New Jersey. Full Disclosure: Jacob only invests in broad-based ETFs and mutual funds to avoid any conflict of interest.

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10 Tips for Managing Small Business Finances

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Often, your small business is successful because of your expertise in making your product or providing your service. Unfortunately, you might not be an expert at the other important parts of running a business, such as managing finances. If you don’t have a lot of experience with managing business finances, it can be a challenge, but it’s also crucial to the survival of your business. Here’s how to establish responsible financial habits that put your business on the road to success.

Tips for managing small business finances

Here are a few things you should do as a small business owner to stay on top of your finances.

1. Pay yourself.

If you’re running a small or midsize business (SMB), it can be tempting to put everything into your day-to-day operations. After all, that extra capital can often go a long way in helping your business grow. Alexander Lowry, a professor and director of the Master of Science in Financial Analysis Program at Gordon College, said small business owners shouldn’t overlook their own role in the company and should compensate themselves accordingly. You want to ensure that your business and personal finances are in good shape.

“Many SMB owners, especially at the outset, neglect to pay themselves,” he said. “They [believe] it’s more important to get the business up and running and pay everyone else. But, if the business doesn’t work out, you won’t have ever paid yourself. Remember, you’re part of the business, and you need to compensate yourself as much as you pay others.” 

2. Invest in growth.

It’s important to set aside money and look into growth opportunities , which can allow your business to thrive and move in a healthy financial direction. Edgar Collado, chief operating officer at Tobias Financial Advisors, said business owners should always keep an eye on the future.

“A small business that wants to continue to grow, innovate and attract the best employees [should] demonstrate that they are willing to invest in the future,” he said. “Customers will appreciate the increased level of service. Employees will appreciate that you are investing in the company and in their careers . And ultimately, you will create more value for your business than if you were just spending all your profits on personal matters.” 

Editor’s note: Need a small business loan for your business? Fill out the below questionnaire to have our vendor partners contact you with free information.

3. Don’t be afraid of loans.

Loans can lead business owners to worry about the financial repercussions of failure. However, without the influx of capital you obtain from loans, you may face substantial challenges when trying to purchase equipment or grow your team. You can also use loan proceeds to boost your cash flow and thus face fewer issues in paying employees and suppliers on time. Plus, the best business loans come with terms and rates that many small business owners can easily accommodate.

4. Keep good business credit.

As your company grows, you may want to purchase more commercial real estate , acquire additional insurance policies and take out more loans to facilitate these pursuits. With poor business credit, getting approval for these transactions and acquisitions may be more difficult.

To keep good credit, pay off all your debt funding as soon as possible. For example, don’t let your business credit cards run a balance for more than a few weeks. Likewise, don’t take out loans with interest rates that you can’t afford. Only seek funding that you can quickly and easily repay.

5. Have a good billing strategy.

Every business owner has a client that is consistently late on their invoices and payments. Managing small business finances also means managing cash flow to ensure your business is operating at a healthy level on a day-to-day basis. If you’re struggling to collect from certain customers or clients, it may be time to get creative with how you bill them.

“Too much cash tied up in unpaid invoices can lead to cash flow problems, a leading cause of business failure,” said James Stefurak, managing editor of Invoice Factoring Guide. “If you have a chronic late-paying customer, which we all do, instead of badgering them with repeated invoicing and phone calls, try a different approach. Change the payment terms to ‘2/10 Net 30.’ This means if the customer pays the invoice within 10 days, they receive a 2% discount off the total bill. If not, the terms are full payment due in 30 days.” [Read related article: What to Do When Customers Won’t Pay Their Bill ]

6. Spread out tax payments. 

If you have trouble saving for your quarterly estimated tax payments, make it a monthly payment instead, said Michele Etzel, owner of Bayside Accounting Services. That way, you can treat tax payments like any other monthly operating expense. You can also use the best online tax software platforms to streamline your tax payments.

7. Monitor your books.

This is an obvious practice, but it’s a very important one. Do your best to set aside time each day or month to review and monitor your books, even if you’re working with a bookkeeper . This will allow you to become more familiar with the finances of your business and provide you with a window into potential financial crime.

“Do not neglect bank reconciliations and spending some time each month on reviewing outstanding invoices,” said Terence Channon, principal for NewLead LLC. “Failing to do this, especially if a bookkeeper is involved, opens up the business to wasteful spending or even embezzlement.”

8. Focus on both expenditures and ROI.

Measuring expenditures and return on investment (ROI) can give you a clear picture of which investments make sense and which may not be worth continuing. Deborah Sweeney, CEO of MyCorporation, said small business owners should be mindful of where they spend their money.

“Focus on the ROI that comes with each of your expenditures,” she said. “Not doing this means that you can lose money on irrelevant or bad spending bets. Know where you are spending your hard-earned dollars and how that investment is paying off. If it isn’t paying off, cut back and spend a bit more on the initiatives that do work for you and your business.”

9. Set up good financial habits.

Establishing internal financial protocols, even if it’s as simple as dedicating a set time to reviewing and updating financial information, can go a long way in protecting the financial health of your business. Keeping up with your finances can help you mitigate fraud or risk.

“As a small business, we are often strapped for time, money and have vastly inferior technological capabilities, but it shouldn’t prevent any small business owner from implementing some sort of internal control,” Collado said. “This is especially important if you have employees. Weak internal controls can lead to employee fraud or theft, and can potentially get you into legal problems if you or an employee are not abiding by certain laws.”

10. Plan ahead. 

There will always be business issues that need to be addressed today, but when it comes to your finances, you need to plan for the future. “If you’re not looking five to 10 years ahead, you are behind the competition,” said Tina Gosnold, founder of QuickBooks specialist firm Set Free Bookkeeping.

Types of business funding

It is important to remember that business finances aren’t just about your earnings; they’re also about how you spend your money and where you get it. When it comes to the latter, you should understand the two main funding categories below.

Debt funding

Debt funding is a loan that your company repays with interest. Through debt financing, you can quickly access capital that you might not otherwise be able to get for weeks or even months. Bank loans, government loans, merchant cash advances , business credit lines and business credit cards are all forms of debt financing, which you must repay even if your company fails.

Equity funding

Equity funding, unlike debt funding, does not always require repayment if your business fails. However, you will likely have to grant your funders a seat at the decision-making table. Venture capitalists, angel investors and equity crowdfunding are all forms of equity funding. To learn more, read our guide to the difference between debt and equity financing .

The importance of managing your business finances

The most important step for any business owner is to educate themselves. By understanding the basic skills needed to run a small business — like doing simple accounting tasks, applying for a loan or drafting financial statements — business owners can create a stable financial future and avoid failure. In addition, organization is a major component of sound money management. Don’t be afraid to consult a professional, but make sure you have a handle on the day-to-day management of your business’s finances, as well as a plan for the future.

Max Freedman also contributed to this article. Some source interviews were conducted for a previous version of this article.

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How to Develop a Small Business Financial Plan

By Andy Marker | April 29, 2022

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Financial planning is critical for any successful small business, but the process can be complicated. To help you get started, we’ve created a step-by-step guide and rounded up top tips from experts.

Included on this page, you’ll find what to include in a financial plan , steps to develop one , and a downloadable starter kit .

What Is a Small Business Financial Plan?

A small business financial plan is an outline of the financial status of your business, including income statements, balance sheets, and cash flow information. A financial plan can help guide a small business toward sustainable growth.

Financial plans can aid in business goal setting and metrics tracking, as well as provide proof of profitable ideas. Craig Hewitt, Founder of Castos , shares that “creating a financial plan will show you if your business ideas are sustainable. A financial plan will show you where your business stands and help you make better decisions about resource allocation. It will also help you plan growth, survive cash flow shortages, and pitch to investors.”

Why Is It Important for a Small Business to Have a Financial Plan?

All small businesses should create a financial plan. This allows you to assess your business’s financial needs, recognize areas of opportunity, and project your growth over time. A strong financial plan is also a bonus for potential investors.

Mark Daoust , the President and CEO of Quiet Light Brokerage, Inc., explains why a financial plan is important for small businesses: “It can sometimes be difficult for business owners to evaluate their own progress, especially when starting a new company. A financial plan can be helpful in showing increased revenues, cash flow growth, and overall profit in quantifiable data. It's very encouraging for small business owners who are often working long hours and dealing with so many stressful decisions to know that they are on the right track.”

To learn more about other important considerations for a small business, peruse our list of free startup plan, budget, and cost templates .

What Does a Small Business Financial Plan Include?

All small businesses should include an income statement, a balance sheet, and a cash flow statement in their financial plan. You may also include other documents, such as personnel plans, break-even points, and sales forecasts, depending on the business and industry.

• Balance Sheet: A balance sheet determines the difference between your liabilities and assets to determine your equity. “A balance sheet is a snapshot of a business’s financial position at a particular moment in time,” says Yüzbaşıoğlu. “It adds up everything your business owns and subtracts all debts — the difference reflects the net worth of the business, also referred to as equity .” Yüzbaşıoğlu explains that this statement consists of three parts: assets, liabilities, and equity. “Assets include your money in the bank, accounts receivable, inventories, and more. Liabilities can include your accounts payables, credit card balances, and loan repayments, for example. Equity for most small businesses is just the owner’s equity, but it could also include investors’ shares, retained earnings, or stock proceeds,” he says.
• Cash Flow Statement: A cash flow statement shows where the money is coming from and where it is going. For existing businesses, this will include bank statements that list deposits and expenditures. A new business may not have much cash flow information, but it can include all startup costs and funding sources. “A cash flow statement shows how much cash is generated and used during a given period of time. It documents all the money flowing in and out of your business,” explains Yüzbaşıoğlu.
• Break-Even Analysis: A break-even analysis is a projection of how long it will take you to recoup your investments, such as expenses from startup costs or ongoing projects. In order to perform this analysis, Yüzbaşıoğlu explains, “You need to know the difference between fixed costs and variable costs. Fixed costs are the expenses that stay the same, regardless of how much you sell or don't sell. For example, expenses such as rent, wages, and accounting fees are typically fixed. Variable costs are the expenses that change in accordance with production or sales volume. “In other words, [a break-even analysis] determines the units of products or services you need to sell at least to cover your production costs. Generally, to calculate the break-even point in business, divide fixed costs by the gross profit margin. This produces a dollar figure that a company needs to break even,” Yüzbaşıoğlu shares.
• Personnel Plan: A personnel plan is an outline of various positions or departments that states what they do, why they are necessary, and how much they cost. This document is generally more useful for large businesses, or those that find themselves spending a large percentage of their budget on labor.
• Sales Forecast: A sales forecast can help determine how many sales and how much money you expect to make in a given time period. To learn more about various methods of predicting these figures, check out our guide to sales forecasting .

How to Write a Small Business Financial Plan

Writing a financial plan begins with collecting financial information from your small business. Create income statements, balance sheets, and cash flow statements, and any other documents you need using that information. Then share those documents with relevant stakeholders.

“Creating a financial plan is key to any business and essential for success: It provides protection and an opportunity to grow,” says Yüzbaşıoğlu. “You can use [the financial plan] to make better-informed decisions about things like resource allocation on future projects and to help shape the success of your company.”

1. Create a Plan

Create a strategic business plan that includes your business strategy and goals, and define their financial impact. Your financial plan will inform decisions for every aspect of your business, so it is important to know what is important and what is at stake.

2. Gather Financial Information

Collect all of the available financial information about your business. Organize bank statements, loan information, sales numbers, inventory costs, payroll information, and any other income and expenses your business has incurred. If you have not already started to do so, regularly record all of this information and store it in an easily accessible place.

3. Create an Income Statement

Your income statement should display revenue, expenses, and profit for a given time period. Your revenue minus your expenses equals your profit or loss. Many businesses create a new statement yearly or quarterly, but small businesses with less cash flow may benefit from creating statements for shorter time frames.

4. Create a Balance Sheet

Your balance sheet is a snapshot of your business’s financial status at a particular moment in time. You should update it on the same schedule as your income statement. To determine your equity, calculate all of your assets minus your liabilities.

5. Create a Cash Flow Statement

As mentioned above, the cash flow statement shows all past and projected cash flow for your business. “Your cash flow statement needs to cover three sections: operating activities, investing activities, and financing activities,” suggests Hewitt. “Operating activities are the movement of cash from the sale or purchase of goods or services. Investing activities are the sale or purchase of long-term assets. Financing activities are transactions with creditors and investments.”

6. Create Other Documents as Needed

Depending on the age, size, and industry of your business, you may find it useful to include these other documents in your financial plan as well.

• Sales Forecast: Your sales forecast should reference sales numbers from your past to estimate sales numbers for your future. Sales forecasts may be more useful for established companies with historical numbers to compare to, but small businesses can use forecasts to set goals and break records month over month. “To make future financial projections, start with a sales forecast,” says Yüzbaşıoğlu. “Project your sales over the course of 12 months. After projecting sales, calculate your cost of sales (also called cost of goods or direct costs). This will let you calculate gross margin. Gross margin is sales less the cost of sales, and it's a useful number for comparing with different standard industry ratios.”

7. Save the Plan for Reference and Share as Needed

The most important part of a financial plan is sharing it with stakeholders. You can also use much of the same information in your financial plan to create a budget for your small business.

Additionally, be sure to conduct regular reviews, as things will inevitably change. “My best tip for small businesses when creating a financial plan is to schedule reviews. Once you have your plan in place, it is essential that you review it often and compare how well the strategy fits with the actual monthly expenses. This will help you adjust your plan accordingly and prepare for the year ahead,” suggests Janet Patterson, Loan and Finance Expert at  Highway Title Loans.

Small Business Financial Plan Example

Download Small Business Financial Plan Example Microsoft Excel | Google Sheets

Here is an example of what a completed small business financial plan dashboard might look like. Once you have completed your income statement, balance sheet, and cash flow statements, use a template to create visual graphs to display the information to make it easier to read and share. In this example, this small business plots its income and cash flow statements quarterly, but you may find it valuable to update yours more often.

Small Business Financial Plan Starter Kit

Download Small Business Financial Plan Starter Kit

We’ve created this small business financial plan starter kit to help you get organized and complete your financial plan. In this kit, you will find a fully customizable income statement template, a balance sheet template, a cash flow statement template, and a dashboard template to display results. We have also included templates for break-even analysis, a personnel plan, and sales forecasts to meet your ongoing financial planning needs.

Small Business Income Statement Template 

Download Small Business Income Statement Template Microsoft Excel | Google Sheets

Use this small business income statement template to input your income information and track your growth over time. This template is filled to track by the year, but you can also track by months or quarters. The template is fully customizable to suit your business needs.

Small Business Balance Sheet Template 

Download Small Business Balance Sheet Template Microsoft Excel | Google Sheets

This customizable balance sheet template was created with small businesses in mind. Use it to create a snapshot of your company’s assets, liabilities, and equity quarter over quarter. 

Small Business Cash Flow Statement Template 

Download Small Business Cash Flow Template Microsoft Excel | Google Sheets

Use this customizable cash flow statement template to stay organized when documenting your cash flow. Note the time frame and input all of your financial data in the appropriate cell. With this information, the template will automatically generate your total cash payments, net cash change, and ending cash position.

Break-Even Analysis Template 

Download Break-Even Analysis Template Microsoft Excel | Google Sheets

This powerful template can help you determine the point at which you will break even on product investment. Input the sale price of the product, as well as its various associated costs, and this template will display the number of units needed to break even on your initial costs.

Personnel Plan Template  

Download Personnel Plan Template Microsoft Excel | Google Sheets

Use this simple personnel plan template to help organize and define the monetary cost of the various roles or departments within your company. This template will generate a labor cost total that you can use to compare roles and determine whether you need to make cuts or identify areas for growth.

Sales Forecast Template

Download Sales Forecast Template Microsoft Excel | Google Sheets

Use this customizable template to forecast your sales month over month and determine the percentage changes. You can use this template to set goals and track sales history as well.

Small Business Financial Plan Dashboard Template

Download Small Business Financial Plan Dashboard Template Microsoft Excel | Google Sheets

This dashboard template provides a visual example of a small business financial plan. It presents the information from your income statement, balance sheet, and cash flow statement in a graphical form that is easy to read and share.

Tips for Completing a Financial Plan for a Small Business

You can simplify the development of your small business financial plan in many ways, from outlining your goals to considering where you may need help. We’ve outlined a few tips from our experts below:

• Outline Your Business Goals: Before you create a financial plan, outline your business goals. This will help you determine where money is being well spent to achieve those goals and where it may not be. “Before applying for financing or investment, list the expected business goals for the next three to five years. You can ask a certified public accountant for help in this regard,” says Thé. The U.S. Small Business Administration or a local small business development center can also help you to understand the local market and important factors for business success. For more help, check out our quick how-to guide on writing a business plan .
• Make Sure You Have the Right Permits and Insurance: One of the best ways to keep your financial plan on track is to anticipate large expenditures. Double- and triple-check that you have the permits and insurances you need so that you do not incur any fines or surprise expenses down the line. “If you own your own business, you're no longer able to count on your employer for your insurance needs. It's important to have a plan for how you're going to pay for this additional expense and make sure that you know what specific insurance you need to cover your business,” suggests Daost.
• Separate Personal Goals from Business Goals: Be as unbiased as possible when creating and laying out your business’s financial goals. Your financial and prestige goals as a business owner may be loftier than what your business can currently achieve in the present. Inflating sales forecasts or income numbers will only come back to bite you in the end.
• Consider Hiring Help: You don’t know what you don’t know, but fortunately, many financial experts are ready to help you. “Hiring financial advisors can help you make sound financial decisions for your business and create a financial roadmap to follow. Many businesses fail in the first few years due to poor planning, which leads to costly mistakes. Having a financial advisor can help keep your business alive, make a profit, and thrive,” says Hewitt.
• Include Less Obvious Expenses: No income or expense is too small to consider — it all matters when you are creating your financial plan. “I wish I had known that you’re supposed to incorporate anticipated internal hidden expenses in the plan as well,” Patterson shares. “I formulated my first financial plan myself and didn’t have enough knowledge back then. Hence, I missed out on essential expenses, like office maintenance, that are less common.”

Do Small Business Owners Need a Financial Planner?

Not all small business owners need a designated financial planner, but you should understand the documents and information that make up a financial plan. If you do not hire an advisor, you must be informed about your own finances.

Small business owners tend to wear many hats, but Powell says, “it depends on the organization of the owner and their experience with the financial side of operating businesses.” Hiring a financial advisor can take some tasks off your plate and save you time to focus on the many other details that need your attention. Financial planners are experts in their field and may have more intimate knowledge of market trends and changing tax information that can end up saving you money in the long run. 

Yüzbaşıoğlu adds, “Small business owners can greatly benefit from working with a financial advisor. A successful small business often requires more than just the skills of an entrepreneur; a financial advisor can help the company effectively manage risks and maximize opportunities.”

For more examples of the tasks a financial planner might be able to help with, check through our list of free financial planning templates .

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Financial planning tips for business owners.

While much of your budget planning was likely done in the fourth quarter, it's never too late to set your business up for success in the new year.  Financial planning is valuable at any time - whether you're evaluating your business investments or measuring why your cash flow is slow. 

Read further to discover essential financial planning tips for business owners to ensure long-term success and growth.

Setting clear financial goals.

Clear financial goals also clarify the short-term and long-term actions and strategies needed to achieve them.  Business owners should stick with the SMART acronym when defining goals - specific, measurable, achievable, relevant, and timely. As an example, you might set a goal to increase your monthly revenue by 10% within the next six months. The specificity determines the action and gives you measurable feedback on your success or not.

Creating a Solid Budget and Cash Flow Management

Creating a solid budget helps business owners allocate financial resources efficiently. Successful budgeting ensures that you have enough funds to cover expenses and invest in growth opportunities.

Start by identifying and categorizing expenses. This includes fixed costs (such as rent and utilities), variable costs (such as inventory and marketing), and discretionary expenses (such as entertainment and travel). By understanding expenses, you can make informed decisions about spending and identify areas where costs can be reduced.

Cash flow management is equally important as it involves monitoring the inflow and outflow of cash in a business. You should have a clear understanding of cash flow patterns, such as accounts receivable and accounts payable.  When invoice payments are received and expenses are paid on time, your business has enough liquidity to meet its financial obligations and take advantage of opportunities.

Implementing Effective Tax Planning Strategies

Business owners should consult with tax professionals or accountants to understand all available tax-saving opportunities. You should also stay updated on any changes in tax laws that may affect your business. Effective tax planning strategies can optimize your financial position and allocate more resources toward business growth and expansion.

Seeking Professional Advice and Assistance

In general, seeking professional advice and assistance when it comes to financial planning is highly recommended for business owners. Financial advisors, accountants, and tax professionals have the knowledge and expertise to provide valuable insights and guidance.

As a B2B debt collections company, Enterprise Recovery offers professional services to align with your goals and risk tolerance. Our business is successful when yours is, too. We actually don't make a cent if we're not able to get your invoices paid.  And when you work with us , our team helps guide your accounts receivable team with best practices. 

Start off the new year feeling more confident in your financial planning and set your business up for success.

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5 Financial Planning Tips for Business Owners

One of the most beneficial things you can do when building a small business is pay close attention to your finances . Strong money management skills are essential for generating profits, keeping expenses in check, and maintaining enough liquidity to keep your business solvent.

Here are five financial planning tips for business owners.

1. Balance Personal Financial Planning with the Needs of Your Business.

Your business may be a personal ambition, but your business-related financial needs are different from your personal ones. As a business owner, you can’t ignore the needs of either side of this equation. Instead, you need to balance those needs and make decisions after considering the implications for both your personal life and your business.

For example, you might want to think twice before buying a fancy new car with money that could instead be reinvested in your business. At the same time, though, you don’t want to ignore your retirement savings or your children’s college savings fund for the sake of business growth.

2. Consider All of Your Options When Seeking out Funding.

The funding sources you choose will have a big impact on the cost of that funding, the strings attached to each deal, and your freedom when it comes to making business decisions.

An SBA loan is a great way to fund your business, but you’ll need to be able to provide a strong business plan as well as collateral. Outside investors can be a helpful resource, but they may require more involvement in decision-making than you’re willing to offer. 

Choose your funding carefully; it will have long-term implications for your business .

3. Make Sure You Have Enough Cash Flow to Keep Operations Running Smoothly.

When you raise funds for your business, you need to cover more than just start-up costs. Businesses need to have enough cash in their bank account to cover charges, invoices, and other costs associated with day-to-day operations .

If you own a restaurant, for example, you can’t sink all of your funding into kitchen equipment. You also need money to pay food vendors for the ingredients to make your meals, and you’ll need cash on hand to pay wages for your staff. It is not enough to have a lot of assets under your business name—you also need enough liquidity to cover expenses and maintain all revenue-generating activities.

4. Have a Plan for How You Will Pay Yourself—Eventually.

It is normal for small business owners to forego income in the early days of building a business. This is a great way to keep business expenses lean and start the company off on the right financial footing.

Eventually, though, you’ll want to take home a paycheck, and it is smart to have a plan for when that will happen and how much you plan to earn. Make this financial plan before you open the small business because it may affect how much you save before investing yourself full-time into your business.

5. Create a Business Succession Plan Before You Think You’ll Need It.

A business succession plan helps lay out how business leadership and management will be transitioned either in the case of the owner’s involuntary departure or for other reasons requiring a change in leadership. 

Selling or transferring a business can involve a number of tax and financial implications that need to be accounted for. A business succession plan can provide a blueprint for how these financial considerations should be addressed, allowing for a seamless transition. 

Because of the complexity of some of these financial implications, it is recommended that business owners develop this transition plan with the help of a small business expert or financial advisor.

6. Connect with a Financial Advisor—Even If Your Finances Are Manageable.

You might be an expert in your specific field of business, but small business finance is an area of expertise unto itself. A financial advisor can help you prepare for specific financial scenarios and strengthen your business plan.

When it comes to figuring out how to pay yourself or how much money to keep in your cash reserves, a financial advisor can offer a valuable perspective. Seek out an advisor who has experience working with other small businesses in your local community.

No matter how great your business may be, good money management plays a critical role in your ability to stay afloat. As you start a small business, take time to develop a financial plan that is strong enough to support your business and flexible enough to help you withstand unforeseen challenges you may face on the path to success.

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4 tips financial planners are always giving solopreneurs and small-business owners

• Solo business owners face unique challenges in managing business finances.
• Starting simple and delegating tasks are important skills to help owners stay organized.
• Building a community with other solopreneurs allows owners to share resources and collaborate.
• This article is part of " Unlocking Small Business Success ," a series providing micro businesses with a road map to growth.

There's no single path to achieving success as a solopreneur. Rachael Camp knows this better than anyone.

Camp, a certified financial planner , had to take on the roles of accountant, salesperson, and bookkeeper when starting her business in 2022. "It just felt overwhelming not knowing what to do, when to do it, and feeling like things were constantly falling through the cracks," she said.

Those lessons played a part in the founding of Camp Wealth , a financial-planning service dedicated to helping other solopreneurs and high earners find success.

Starting a small business can be daunting. From figuring out day-to-day expenses to choosing retirement accounts , it can feel impossible to operate the behind-the-scenes parts of a company while still building a profit — especially when you’re a solo business owner or leader of a micro business.

Here are four tips for managing finances when starting as a solopreneur or building a micro business.

Start simple 

Many of Camp's clients come to her overwhelmed with how to get their business off the ground, she said. Their first step, she said, should be to get organized and figure out the basics. 

“Typically, when we get started, it's just getting organized and getting everything separated,” Camp said. 

Separating personal and business accounts is an important first step for micro-business owners because it can reduce legal risk and liability come tax season, Camp added. Splitting up accounts can also be beneficial in accessing tax benefits or building rewards on business credit cards . For example, while a home-office setup has the potential to be deducted as a business expense, something like a car with both business and personal uses can be more complicated. She recommended owners consult with financial professionals for advice on the costs of starting a company.

Kathryn Knighton, the director of customer experience at Collective , a financial-management platform designed to help “businesses of one” with services including bookkeeping and accounting , told Business Insider that starting a business organized also helps owners understand their options. 

Many owners come to Collective looking for assurance on the “right” way to start or for help understanding popular social-media business trends, Knighton said. “You don't know what you don't know,” she added. “So a lot of what we end up doing is educating folks on their options.” 

Knighton and Camp added that social media could be the root of misinformation on things such as LLC formation and tax breaks. They said it’s important to research, speak with financial experts, and start simple before making big decisions. 

“Make sure you're profitable first before you really worry about optimizing everything,” Camp added.

Build in necessary expenses 

Solopreneurs often operate all aspects of their business — building a product, dealing with customers, and keeping track of finances. 

“Something a lot of folks don't realize is you’re the person for everything,” Knighton said.

She and Camp said building in expenses during the early stages of a business for financial matters could help reduce stress around tax season. Camp tells her clients that stashing 30% of their revenue into a separate savings account is a good rule of thumb to prepare for taxes.

But micro-business leaders don’t have to manage their finances alone. Camp told BI that building in expenses for financial and bookkeeping services, for example, was worth the up-front cost. “A lot of people try to DIY it and do it themselves to save money, and I often find that that ends up costing them more in the end,” she said. “You don't want to mess with exposing yourself to a lot of liability.”

It's important to recognize which business tasks are too complex to do in-house, Camp said. Hiring an accountant, for example, can help reduce complications down the line, she added. 

Outsource when useful

Knighton said the most approachable way for owners to delegate was to identify places where they could provide the most value for their business and which tasks could be done by someone else. 

“Taking inventory so that you can still enjoy what you're doing, rather than being bogged down by the business side of your business, can make you feel more engaged and still use those creative avenues to bring joy,” she said. 

Business owners should also be mindful of how they go about outsourcing these services , Camp added. Working with financial planners and accountants part time or freelance is usually more feasible than hiring full-time employees. 

Camp said these resources could help solo business owners build their teams and stay organized without losing money. “You can actually start filling these roles on a part-time basis, and it's way more affordable to do it that way,” she said.

Build a support system 

Knighton said finding a community of other solopreneurs or small-business owners could be one of the most helpful ways to get financial advice. Many people who pivot from a traditional career, she said, are used to having a support system in their job — coworkers, managers, and human resources. 

“You can easily slip into this lonely world of being a solopreneur,” Knighton said. Local chambers of commerce and the Small Business Administration often hold virtual and in-person events on small-business ownership where owners can share skills and connect. Knighton said these events could help solopreneurs gain confidence and grow their skill sets.

“There are people doing this successfully,” she said. “There are avenues for partnerships and collaboration.”

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How to Choose the Right Financial Advisor — A Guide for Entrepreneurs Use this guide to select a financial advisor who not only understands your unique financial needs but also has the expertise, experience and connections to support your business and personal goals effectively.

By Shirl Penney • Apr 26, 2024

Key Takeaways

• Business owners need advisors who offer more than just trading skills; they should also assist in goal planning, risk management and legacy establishment.
• Advisors who grasp the unique demands of entrepreneurship are often entrepreneurs themselves.
• When selecting a financial advisor, entrepreneurs should prioritize finding someone with relevant experience guiding clients through various stages of business growth, managing unpredictable cash flow, crafting investment strategies and navigating complex tax scenarios.

Opinions expressed by Entrepreneur contributors are their own.

Because you're a business owner, your financial advisor should know more than how to trade securities. You need an advisor who can help you plan and work toward your financial goals , manage the risks you encounter along the way and build a legacy for the next generation. You need someone who understands the cycles and pressures of entrepreneurship and has a track record to prove it.

Advisors who understand that their entrepreneur clients require more than standard financial services are often entrepreneurs themselves. Entrepreneurial advisors tend to be based in independent "registered investment advisors," or RIAs, overseen by the Securities and Exchange Commission.

In this article, I'll share a few specific things entrepreneurs should look for when choosing a financial advisor .

Related: You Have to 'Date' Your Financial Advisor to Find the Right One — Here Are 3 Tips to Doing Just That.

Look for passion tempered by training and experience

Because they've had experience as RIA owners, these advisors know the stages of business development from startup and early growth through achieving scale and, in some cases, selling the enterprise. Motivated by a fascination with personal finance in the context of business ownership, these advisors either focus on entrepreneurs exclusively or maintain a healthy roster of business-owning clients as a passion project within a broader practice.

Enthusiasm is no substitute for expertise, however. An advisor who can make sense of your business and personal finances has experience managing unpredictable cash flow , crafting investment strategies that complement your business and navigating complex tax scenarios.

An advisor's experience can't be overstressed. Has a particular advisor successfully guided business owners through various stages of growth and increasing complexity? Does this advisor have smart things to say about your industry? If "yes," then it's likely he has navigated challenges similar to those you encounter and can offer advice that's practical and feasible.

Remember, emotion clouds judgment. Knowing your business is everything to you, an entrepreneurial advisor will work to keep you calm and focused — especially when the stakes are high.

Find an advisor who gets business and has connections

Some advisors who specialize in business-owning clients enjoy working with entrepreneurs from a variety of business types, while others prefer going deep into specific niches. The generalist can draw on varied scenarios when formulating solutions for your business, while the specialist enjoys the advantages of concentration — namely expertise and credibility — in your line of business.

The choice will depend on your field and your circumstances. Are you looking for an advisor versed in early-stage fundraising for technology startups, exit-planning options for dentists, or the needs of a franchise restaurant owner in fast-growth mode? The answer should color your selection.

An advisor suited to an entrepreneur like you will have strong connections in finance and finance-adjacent spheres outside wealth management. After all, advisors who can call on investment bankers , tax professionals, insurance consultants and legal experts can put you on solid ground when it comes to spotting industry trends, devising valuation strategies, managing risk and keeping everything on the up-and-up when it comes to tax and estate planning. An advisor with working relationships in these spheres can provide full-spectrum financial insights on your enterprise and perhaps open doors to broader business opportunities.

Related: Is Your Financial Advisor Right For You? Here's A Simple Test To See If It's Time To Move On.

Use these tips to find an advisor you can trust

A major factor in evaluating financial advisors is their potential as a long-term partner. Entrepreneurs should vet potential advisors by asking for references from other clients in similar business phases or industries. These insights can tell you a lot about the advisor's capabilities, work style and overall responsiveness.

Taking the time to check an advisor's professional certifications, compliance history and status as a fiduciary (viewable online at BrokerCheck ) are also essential steps for choosing a wealth manager. Fiduciaries, such as RIA-based advisors, are constrained to put their clients' interests first. Stockbrokers, meanwhile, adhere to a lower standard stipulating only that their advice be broadly "suitable." If you're still unsure whether your advisor is a fiduciary, ask for a signed pledge that will act for you in a fiduciary capacity.

An advisor's transparency about fee calculation and openness about the advisor's compensation sources are significant trust builders and must-haves for avoiding conflicts of interest. It's also critical that the relationship be collaborative. From the start, you want an advisor who proposes solutions that mesh with your personal and business goals. This shows the advisor has already taken time to understand your values and risk appetite and that they aim to provide meaningful advice.

Put "works well with me" at the top of your list

To assess this alignment, start by sharing your vision for and expectations of the relationship. Probe the advisor's investment philosophy and her approach to financial planning and portfolio construction in the context of business ownership. Ask how she tailors her advice to meet the specific needs of entrepreneurs, with case studies and anecdotes to illustrate her concepts. Meeting the team that supports the advisor can also provide insights into the depth and breadth of expertise the advisor's firm offers.

As mentioned, having experiences in common as business owners can support long-term collaboration between you and your advisor. Advisors who run their own businesses possess insight into the challenges and opportunities you face as an entrepreneur, resulting in appropriate advice.

Related: The Truth About Your Financial Advisor

Comprehensive advice for business owners should go beyond business and investment considerations. For most of us, after all, money is just a tool to help us accomplish our personal, family and philanthropic goals. A skilled advisor integrates these personal aspects of financial management with the business to ensure actions taken bolster other important facets of the entrepreneur's life.

Finding the right financial advisor is a crucial step for entrepreneurs eager to improve their financial health and make the most of their opportunities. A suitable advisor blends industry knowledge, experience, networking capabilities and a deep understanding of entrepreneurship. By choosing an advisor who can act as a partner, entrepreneurs can achieve financial strategies that support equally their business and personal goals.

Entrepreneur Leadership Network® Contributor

President and CEO of Dynasty Financial Partners

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Six financial planning tips for business owners

Set your business up for success today and develop a financial plan for retirement.

Running your own business? You’re in good company. There are one million small businesses coast-to-coast operating with fewer than 100 employees.

Here are six tips for financial success.

1. Target top talent

You want great employees that will help support your business success. These days, steady work and reasonable wages aren’t enough to attract and retain the best talent. Employee benefits can help give you a competitive edge in the marketplace.

2. Find great rates

You want your money to work for you as much as possible. Look for banking solutions that help reduce borrowing costs and that earn the highest possible returns on all your short and long term investments.

3. Find tax efficiencies

Most business transactions–from employee compensation to business succession planning and asset protection–have tax consequences. Understanding and addressing tax implications can make a difference to the success of your business and the growth of your personal wealth.

4. Insure your human capital

Most small businesses have at least one person who is critical to the company’s operations—this could be anyone who helps run the business and is hard to replace. A loss or injury to key personnel could have far-reaching effects on the business’s survival; consider protecting yourself and others with Key Person Insurance.

5. Think future – yours and your business’

Many business owners rely on the sale of their business to fund their retirement and some are concerned with their business continuing after they leave. Combining succession planning with retirement planning can help you enjoy a financially secure retirement–whether you plan to sell or pass the business on.

6. Protect yourself and loved ones

In the case of critical illness, disability, or premature death, the impact on your family’s savings and lifestyle could be significant. Life and Living Benefits insurance products can help mitigate these risks.

Related articles

Start smart with your small business

One important tip for every new entrepreneur.

Choose the right options for your workplace savings plan

Help your employees save for the future.

Don't be afraid to look outside the family business

It’s time to start leveraging an advisor’s strategic expertise.

Call: (952) 542-8900

Financial Planning for Business Owners

Business financial planner & financial advisor.

What Is  Financial Planning?

Financial planning is the process of creating a comprehensive plan to save and budget money for your future.

It involves proactive planning for some of life’s major financial events like funding education, buying a home, starting a business and retirement . Usually, the ultimate goal of financial planning is to ensure you have enough savings to live comfortably when you retire.

It requires taking a long-term approach that includes evaluating your financial situation, setting long-term goals, taking steps to accumulate money through budget-setting and savings, 401ks, IRAs, and more.

360's Financial Planning for Business Owners

Financial planning for business owners requires the expertise of specialists who understand the unique needs and challenges of business owners.

Doing what’s right for the business and balancing that with what’s best for your personal goals is an art.

At 360 Financial, we help business owners and entrepreneurs create greater synergy between their long-term business and personal financial goals.

Our Services Include:

Wealth Management

Business Owner Cash Flow Planning

Retirement Savings and Tax Strategies (such as implementing retirement plans (401(k)s, SEP IRAs, and SIMPLE IRAs)

Risk Management

Succession Planning

Investments

Legacy and Estate Planning

Business Planning vs. Personal Financial Planning

Business planning and personal financial planning are two separate disciplines..

Business planning and  personal financial planning  are two separate disciplines.

The level of complexity involved in managing income, taxes and investments is much greater for businesses than for individuals.

But if you are a business owner, it’s important to understand that your personal finances impact your business finances — and vice versa.

While each should be managed and planned for separately, you should do planning for both simultaneously to have the clearest view of how one impacts the other.

The Four Pillars of Wealth Management for Business Owners

Succession planning vs. exit planning.

Succession planning and exit planning are two different strategies that can be utilized by business owners who are ready to leave their business or retire.

Succession planning usually involves transferring the business to new leaders within an organization. Often this can involve family members or other key employees in the company.

Exit planning involves preparing a business for sale to a new owner or management team. Both have complex legal implications that require careful planning with the help of experienced legal professionals.

Is Succession Planning Important?

Succession planning is extremely important because all business owners will eventually need to consider what happens to their company after they leave or retire.

A well-considered succession plan can create continuity that ensures a smooth transition that keeps the business stable and profitable. Ideally, succession planning is a long-term process where future leaders and owners are identified and developed years in advance of the transition.

We usually recommend a 3 to 10-year time horizon to our clients.

Whether you’re passing the business on to a family member or selling it to a new leadership team, such as a private equity firm, the best succession plan should maximize your return while setting the new owner up for continued success.

5 Important Financial Planning Tips for Small Business Owners

1. Use an Experienced Advisor.  There’s a lot at stake for business owners. An advisor that doesn’t have experience with the unique financial planning challenges of business owners probably isn’t the best advisor for you.  

2. Keep Personal and Business Finances Separate.  Mixing your personal and business finances can create headaches and complex tax challenges. It’s best to do separate financial planning for each, even though they ultimately end up impacting one another.  

3. Maintain Good Credit . Keeping a good credit score gives you access to capital loans that can be used for improvements, growing the business, or even acquiring another company.  

4. Manage Your Risk.  Mitigating risk is essential for business owners. Having the right types of insurance, such as life, liability, property, key person, and health insurance, can protect you and your assets from risk.  

5. Do Annual Reviews.  You should meet with your advisor to review your financial plan annually and make changes as needed when business or personal circumstances change.

Doing Your Estate Planning

Being a business owner adds complexity to doing your estate planning .

Yet it is vitally important to have a solid  estate plan  in place that outlines your wishes for how you would like the business assets distributed if you die or become incapacitated.

In many cases, a business owner’s net worth is higher, which may mean the estate could be subject to estate taxes at the state and federal levels.

Utilizing estate and tax planning strategies in advance can save your beneficiaries the expense and headache of probate and reduce their overall tax liability upon inheritance.

Creating a Retirement Plan as a Small Business Owner

Creating a retirement plan as a small business owner is a complex process that should consider multiple factors.

It should be built around what matters to you the most and designed to support the lifestyle you envision for yourself in retirement. Since the business is likely your largest asset, its value when you sell it will be a key part of your retirement plan.

But just like any non-business owner, there are a number of other ways you should be investing along the way to grow your personal retirement wealth. 

As a business owner, you’ll likely have more money to do it with and more opportunities to benefit from tax-deferred investments that can lower your personal taxable income.

Creating an Investment Plan

The value of your business is a key piece of your retirement planning puzzle.

But you should also be growing your personal investment portfolio in the years leading up to your retirement. Investments like 401(k)s, IRAs, or SEP IRAs allow you to grow your retirement accounts tax deferred.

The more successful your business becomes, you may be able to take cash distributions that you can use to further diversify your investments to include things like real estate, tax-efficient bonds, and emergency savings.

Your 360 Financial advisor can work with you on a holistic, tax-efficient investment plan that meets your personal goals while simultaneously benefitting your business.

Diversifying Beyond Your Business

It’s wise to diversify beyond your business because relying on its value to fund your retirement is not an ideal strategy.

It’s risky because it places too many proverbial eggs in a single basket. Not all businesses are profitable, and some lose money, or even fail altogether. Building a diverse portfolio of personal investments protects you in the event that the value of your business isn’t enough to fund your retirement.

We can help you with a variety of diversification strategies for both your business and your personal finances.

Managing Risk for Yourself and Your Family

With more money comes greater risk.

Our risk management specialists can provide insurance and other risk management tools for your business, as well as yourself and family.

One of the biggest risks to the value of a business if an owner suddenly passes away or becomes incapacitated. The abrupt loss of a key leader could be devasting to the company’s ability to function.

Important risk planning initiatives like key person insurance and drafting key legal documents that govern how a deceased owner’s shares of a company are distributed, such as buy/sell agreements , are musts for any business owner.

On the personal side, having life insurance for yourself can provide for your family if you die and give them funds to cover funeral expenses and any tax they may owe after they inherit your assets.

Additionally, having insurance for larger personal assets like your home, boats and vehicles as well umbrella policies for liability, are all smart ways to manage risk and protect your wealth.

Importance of Financial Planning for Entrepreneurs and Business Owners

Financial planning for business owners and entrepreneurs is highly important because business owners tend to have more at stake.

As a business owner, you may have more money to gain or lose, and a higher exposure to risk and tax liability. A financial advisor and financial planner who specializes in working with business owners can help create and execute a holistic financial plan that includes budgeting, investing, and retirement planning.

A financial advisor can also provide guidance on  business strategies for:

lowering taxes

managing debt

finding capital

tracking cash flow to ensure that the business remains financially healthy

Working with a Wealth Management Team

The more wealth you have, the more you can benefit can from working with an experienced  wealth management team.

The 360 Financial team’s 25-person team includes seven  financial advisors  with more than 200 years of combined experience as wealth managers, financial advisors, and planners with CFP®’s (Certified Financial Planner™), MBA, CLTC, and fiduciary investment credentials.

The 360 Financial team specializes in the following:  

investment and asset management

cash and debt flow planning

college planning

risk management

insurance planning

estate planning

retirement and income planning

business planning

tax strategies

How to Choose a Financial Advisor or Financial Planner

If you own a business, it’s important to  choose a financial advisor  who has extensive experience working with business owners and understands business tax planning and risk management.

At 360 Financial, helping business owners do financial planning for both their personal finances and their business is one of our specialties. Our advisors and financial planners understand the unique needs and challenges business owners face.

We can help you navigate impactful financial events to grow both your business and your personal wealth.

When to Start Working with a Business Financial Advisor

Different advisors have different thresholds for when they take on clients.  At 360, our ideal client has $1M or more in investable assets or the ability to get there. 

We’re not right for everyone, but we make a significant impact for the clients we work with.

Latest Blog Posts

📖 Read the Smart Wealth Blog

What Is the Difference Between Financial Planning and Wealth Management?

What Is an Appropriate Fee for a Financial Advisor?

What Is the Role of Forecasting in Financial Planning?

When To Change Financial Advisors

The team at 360 Financial is not only knowledgeable and experienced but also incredibly responsive and accessible.

Whether it's planning for retirement, saving for our children's education, or building a robust investment portfolio , 360 Financial has been by our side every step of the way, offering guidance that is both strategic and forward-thinking. 

In an industry where trust is paramount, 360 Financial has consistently demonstrated integrity, transparency, and a genuine commitment to their clients' success. 

We wholeheartedly recommend them to anyone seeking not just a financial advisor, but a trusted partner on their journey towards financial prosperity.

Tom and Brenda Laska

Owners at Interior Care & Construction, Minnesota

My husband and I have been a client of 360 Financial for an impressive 20+ years.

Throughout this time, they have consistently exceeded our expectations in every aspect of financial planning and advisory services. 

From the moment we first engaged with their team, we were struck by their professionalism, expertise, and unwavering commitment to our financial well-being. 

They took the time to thoroughly understand our goals, concerns, and aspirations, crafting a personalized financial strategy that aligned perfectly with our needs . 

What truly sets 360 Financial apart is their dedication to providing comprehensive and proactive guidance. 

Client Testimonial

This statement is a testimonial by a client of the financial professional as of 04/03/2024. The client has not been paid or received any other compensation for making these statements. As a result, the client does not receive any material incentives or benefits for providing the testimonial.

Schedule a 15-minute call with a business financial advisor to find out if 360 Financial is the right fit for you and your business.

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Business tips

The Basics Done Right: Creating a Simple Yet Effective Business Plan

13 Minutes Read

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2024 Small Business Startup Made Easy: Free Simple Basic Business Plan Template

Kristal Sepulveda, CPA

May 10, 2024

Using a business plan template , you bring the distant vision of your business into the immediate, actionable present. This process clarifies your business objectives and provides a clear roadmap for achieving them. In this article, discover how a simple, basic business plan template can transform a budding idea into a thriving enterprise, guiding you through each step with precision and focus.

Further reading: 5 Benefits of Using a Business Plan Templates to Launch Your Dream in 2024

Key Components Every Basic Business Plan Must Have

Executive summary.

This section of your business plan summarizes your business idea, business needs, and goals. It should quickly captivate potential investors' interest, encouraging them to read more about your unique value proposition and the future direction of your startup business .

Market Analysis

A critical part of your business plan, the market analysis helps you determine your target market, understand customer needs, and conduct competitive analysis. This section is foundational in developing a robust marketing plan and setting your business up for success.

Financial Projections

Every effective business plan includes detailed financial projections. This section should outline your expected revenue streams, balance sheet, cash flow statements, and other financial forecasts that demonstrate your business's viability to investors. Using a simple template or tools like Microsoft Word, you can create clear and professional financial statements that are easily updated as your financials are subject to change.

Tailoring to Specific Business Needs

It's a good idea to customize your free business plan template to reflect the specific type of business you’re looking to start. Whether you’re opening an ecommerce shop with Shopify, a local service business, or a tech startup, your plan should reflect the unique aspects of your market and operational needs.

Tips for Effective Financial Management in Your Business Plan

Realistic budgeting and financial advice.

Budgeting is a fundamental step in the planning process, helping build the foundation of your financial plan. Spend time forecasting your costs and revenue to ensure you have sufficient cash to cover upcoming expenses. Financial advice from experienced advisors can also help you understand how to manage your business’s money more effectively.

Comprehensive Financial Forecasts

Include a step-by-step guide to your startup business’s financial health through projections, break-even analysis, and other financial forecasts. These elements are vital for planning your business’ growth and securing funding .

Utilizing Financial Management Tools

Tools like QuickBooks or Xero can simplify managing your business' financials by providing comprehensive features for monitoring cash flow, creating balance sheets, and preparing other financial statements. These tools are particularly useful in updating your business plan as your company grows and your financial situation evolves.

Further reading: Startup Funding: Strategies for Securing Startup Capital

Leveraging market research to strengthen your business plan, utilize free resources.

Numerous free resources are available that can provide valuable market insights. Websites like the U.S. Census Bureau and industry associations offer free data that can be pivotal for understanding market trends and consumer behavior. Platforms like Google Trends and social media sites can also offer free, real-time data on consumer interests and market dynamics, enhancing your written business plan without needing a costly investment.

Conduct Surveys and Polls

Using tools like Google Forms or SurveyMonkey, create simple surveys to collect data directly from your target audience. This direct feedback can be invaluable in understanding what features of your products or services are most appealing, which can be emphasized in your marketing and sales strategies.

Interviews and Focus Groups

Another low-cost way to gather market data is through interviews and focus groups. Contact potential customers, industry experts, or competitors for one-on-one discussions. These conversations can provide deep insights into the industry and help refine your business’ elevator pitch.

Analyze Competitors

Competitive analysis doesn’t have to be expensive. Review your competitors’ websites, marketing materials, and customer reviews. This can help you identify their strengths and weaknesses and position your business to take advantage of gaps in the market, thereby enhancing your competitive advantage.

Using Market Data to Inform Business Strategy and Competitive Positioning

Swot analysis.

Conduct a SWOT analysis using the data you’ve gathered. This will help you understand where your business stands in the broader market context and what strategic steps you need to take to achieve success. You would write this section last in your business plan examples.

Tailor Marketing and Sales Strategies

Use insights from your market research to tailor your marketing strategies. Understanding customer preferences and market demand can help you create targeted marketing campaigns that speak directly to your potential customers’ needs.

Develop or Refine Your Business’ Value Proposition

Based on what you learn about your target market and competitive landscape, you may find opportunities to tweak your business model or value proposition to meet your market's needs better. This could involve emphasizing certain features of your products, adjusting pricing, or altering your service delivery methods.

Create an Elevator Pitch

Once you clearly understand your competitive advantage and value proposition, distill this into a concise elevator pitch. This should summarize the unique benefits of your business in a way that resonates with potential customers and investors.

Streamlining Your Business Plan for Clarity and Impact

Keep it concise.

The best business plans, especially a lean business model or a one-page business plan, are concise and to the point. These formats encourage you to focus on the essentials and avoid overloading with unnecessary detail that could dilute the key messages about your products and services.

Focus on Key Elements

Every business plan section should contribute directly to the reader's understanding of your business. Essential elements to highlight include your company description, the unique aspects of your products and services, and your strategic marketing plans. This focus is particularly vital if the free business plan template includes sections that might not be directly relevant to your specific business model.

Use Clear and Simple Language

Your business plan should use straightforward, jargon-free language, ensuring it is accessible to readers outside your industry. This clarity is vital, as your plan often serves as an introduction to potential investors who need a business overview quickly and clearly.

Effective Formatting

Use effective formatting tools like bullet points, bold text, and subheadings to organize information and make your document easier to scan. A well-formatted business plan enhances readability and helps maintain the reader's attention on your critical points.

Visual Elements

Enhance your financials and analytical data with graphs, charts , and images. Visual aids can help summarize complex information quickly and are especially effective in sections like financial forecasts and competitive analysis.

Consistency in Design

A consistent design across your business plan reinforces your brand and contributes to a professional appearance. Ensure that the document's layout, color scheme, and typography are uniform to provide a seamless reading experience.

Review and Revise

Revising your business plan is necessary. After you write it, review it for any content that can be condensed or simplified. Also, consider having someone else review it to catch errors or areas where the business strategy might not be clear. Feedback is invaluable when you are creating a business plan to secure funding .

Achieving Clarity Through Language, Format, and Design

Clarity in your business plan is critical. It ensures that readers, particularly potential investors, can quickly grasp the essence of your business and its strategy. A clear, logical presentation builds investor confidence and shows that you have a deliberate and considered approach to launching and growing your business.

Achieving clarity involves more than just the words you choose. It extends to how information is visually presented. Use a one-page format if brevity is essential or provide detailed annexes if deeper dives are necessary. Every content in your business plan should serve a clear purpose and support the business objectives contained herein.

Common Business Plan Mistakes to Avoid

Neglecting emotional connection in your simple business plan.

Business plans often prioritize numbers and strategies, but overlooking the emotional connection with your target audience is a significant oversight. Briefly outline how your product or service, detailed in your simple business plan template, will enhance lives, evoke positive emotions, or address deeper needs. This connection is essential for resonating with investors and customers alike, especially for new business owners.

Failing to Future-Proof Technology

Technology evolves rapidly, making it essential for new business owners to write an effective plan considering future advancement. While your simple business plan covers current solutions, including a section on staying ahead of the curve is essential. Mention adapting your tech stack using your free template for potential advancements or industry trends.

Omitting Your "Why"

Investors seek businesses with a strong purpose beyond profit. As a business owner, showcasing your company's mission in your business plan is essential. Explain core values and demonstrate a commitment to making a positive impact. This effective plan is beneficial for starting a new business and resonating with investors.

Underestimating Storytelling

Facts are indispensable, but a compelling narrative in your sample business plan can be powerful. Share how your business idea originated, the challenges you've overcome, and your vision for the future. Humanize the plan to foster a deeper connection with readers and make your business more successful.

Ignoring Cyber Threats

Cybersecurity is vital for new business owners. Briefly outline your data security plan in your business plan template, showing awareness of potential threats. This understanding builds investor confidence in your ability to safeguard information and manage risks effectively.

Key Takeaways

• Structure: Templates offer a clear layout, simplifying the process of writing a business plan.
• Simplification: They break down complex ideas into manageable sections, ensuring you'll need not to start from scratch.
• Guidance: Templates provide direction on what to include in each section, aiding in creating a comprehensive plan.
• Customization: Versatile templates can be tailored to different businesses, ensuring they meet your specific needs.
• Foundation: They establish a solid groundwork for a successful business strategy, demonstrating how a template can help you get started effectively.

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More From Forbes

Five financial strategies to modernize your small business.

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Sal Rehmetullah is the founder of Stax Payments , a Unicorn in the Fintech space, and serial entrepreneur.

In today's dynamic business landscape, modernizing your small business goes beyond just keeping up with the latest technology trends. It's also important to implement financial strategies that optimize operations, drive growth and ensure long-term sustainability. Based on my experience founding and growing a business in today's financial technology market, here are five financial-focused approaches that can help you modernize your small business and set yourself up for success.

1. Optimize cash flow management.

Effective cash flow management is important for the financial health of any business. It can affect how you gain credit, grow your business and reinvest in growth strategies. One step to consider is implementing cash flow forecasting tools to help you project future inflows and outflows. This can allow you to anticipate and mitigate potential cash crunches. By leveraging a forward-looking forecast of market trends and customer behavior, you can make informed decisions to optimize cash flow efficiency and maintain liquidity.

It's also important to prioritize the right things in cash flow management depending on your size. For example, if you are a smaller or newer business, ensure that you understand your supply chain and the amount of inventory on hand. If you are larger and can afford to keep inventory on your balance sheet, it may make sense to buy in bulk and save a few dollars to optimize your bottom line.

2. Explore financial technology solutions.

Business owners can also consider fintech solutions to help streamline financial processes and enhance efficiency. Explore solutions that can provide tools for confidently making data-driven financial decisions. I have found that leveraging fintech solutions tailored to your business needs can help save time, reduce manual errors and gain actionable insights into your financial performance.

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The main things to consider are your size and the growth of your business. There are many tools, both small and large, that require minimal-to-no setup or require a large and lengthy implementation. Consider your revenue size, the number of people and size of the team that will take this project on, as well as the overall budgetary requirements you have for a new solution.

3. Consider diversifying revenue streams.

Relying solely on one revenue stream can leave your business vulnerable to market fluctuations. Identify emerging market trends and opportunities to diversify your revenue streams. Then, consider exploring complementary products or services, expanding into new markets or developing strategic partnerships to help minimize risk and maximize revenue potential.

Additionally, keep in mind any concentration risk you may have. Large customers can be great, but if all of your revenue is tied up in one area, you may have a significant issue if this customer churns or has some challenges in their own business. I believe diversification is key for a healthy business.

4. Implement cost-reduction strategies.

Identify areas where you can trim unnecessary expenses and optimize operational costs. I have found that the easiest way to do this is to look at your profit and loss (P&L) and ask yourself, if you had to cut 10% of all expenses but still hit your numbers, where would you start? You may quickly realize that there are a lot of things in the organization that are nice-to-haves but not necessary.

This is also where cost analysis tools may help, and there are many from which to choose. By leveraging data-driven insights, you can identify cost-saving opportunities, renegotiate contracts with suppliers and streamline your operations without sacrificing quality or productivity.

5. Improve your financial education.

Knowledge is power when it comes to financial management. Explore educational resources and advisory services. By doing so, you can empower yourself and your team with the skills and knowledge needed to make informed financial decisions. Whether through training programs or personalized guidance from financial experts, equip yourself with the tools to navigate complex financial challenges and capitalize on growth opportunities.

Modernizing a small business requires a strategic approach to financial management and decision-making. In my experience, solutions that can help you digitize your business are important keys to driving growth in today's technology-savvy world. By optimizing cash flow management, leveraging financial technology solutions, diversifying revenue streams, implementing cost-reduction strategies and investing in your financial education, you can strengthen your business's financial position, drive growth and position yourself for long-term success in today's competitive marketplace.

The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

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