Three Step Plan to Create Small Business Financial Plans

small business planningCreating a business plan with financial goals can be hard.

After all how are you supposed to know the revenue you need to get the income you want.

Especially if you are a newer business!

Here are some things you can do to make the process a bit easier and help you feel like you are not just guessing!

How Much Do You Need to Live

When you run a small business you need to be able to make enough to pay your personal bills.  Thus at a bare minimum your net income from your business that you can take home, has to be equal to your living expenses.

Do a review of your personal expenses to determine how much it costs you to live every month.  This should be your absolute minimum when calculating your companies net profit.

To be even better off you should add in more money for emergencies and saving for retirement.

If you are in a position that your business is not the primary source of living expenses, then I recommend you pick a specific goal that you business would pay for.  For example if you are married and your spouse covers living expenses, perhaps your income goes to vacation and paying off the house early.  You would pick your number based on how much vacation will cost and a calculation on how much you need to pay off the house early.

Create a Sales Estimate & Marketing Plan

Once you have your minimum income needed then begin to create your sales plan.  The sales plan is what you intend to sell of each product or service that you offer each month.

If you are an existing business you should pull up last years sales and use that as a base for this years estimates.  Then add in any new products or services that you intend to begin offering.  Finally make some increases for what you believe you can grow this year to.

After you have a draft of this begin working on your marketing plan, with expense numbers of what it will cost to drive the growth and market your business.

Create Your Profit & Loss Statement

Now take the revenue numbers and the marketing expenses and put them in your profit and loss plan.  Add in non marketing expenses such as CPA fees, telephone expenses, business card expenses – everything you will need to run your business.

From this you should get a target net profit.

If this number is not the income you need to live, then it is time to go back and tweak the numbers to make it work!

Other Things to Keep in Mind

  •  Make sure your revenue numbers are achievable, if they are not reachable it is not a good plan.  The plan can be a stretch, but it must be an achievable stretch.
  • If you still cannot make your net profits large enough to cover expenses then consider what other products and services you may be able to add that can help you achieve your goals.
  • If you are new in business and you just cannot make enough to cover your bills you may need to consider a temporary part time job.  Working harder for a couple years is better than going in debt so deep that you have to work decades to get out!
  • Remember this is always a work in process, even after it is set you still have to go back and make adjustments as you run your business.  This is especially true the newer your business is, you are still trying things and figuring out what works.
  • Don’t use the last point as a reason to just skip doing a plan.  If you are new and don’t feel comfortable doing a year, do two months.  Creating a plan at least forces you to begin following your business numbers and create a plan for how you are going to grow your business.  (For more on why it is important to track your business finances.)

This is a process that can take a bit to get to something you think you can achieve.  Don’t rush it or feel like you should have it done within 30 minutes!  Remember business finances when you are a micro business can be very emotional! Give yourself time, space and a bit of forgiveness and you will have an Income Goal you can live with.

1 comment
Carin Kilby Clark says January 15, 2015

Great advice! I’m divorced but have a full-time job {that I adore, and more than covers everything for me and my three kids} and so my business income is for extras {savings, kids college funds, vacations}. I try to be intentional with my income goals but I haven’t specifically tied them to the extras that I want them to pay for. I’ll do that now.

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