Why You Need a Financial Plan For Your Business

Failing to plan is planning to fail.

A financial plan for your business is a necessity, not an option. You wouldn’t go on a long road trip without knowing the way. Why embark on one of the biggest journeys of your life without any directions?

Benefits of a Financial Plan

Having a financial plan isn’t a formality. It’s a necessary part of achieving success in business. A financial plan will answer these essential questions about your business’s financial health:

  • Is your startup capital sufficient to even start the business?
  • How much of your revenue needs to be directed toward repaying loans?
  • What should your prices be so that you can meet all expenses and still turn a profit?
  • When does your startup capital run out?
  • If your business isn’t turning a profit, how much do you need to put into it to keep it alive? For how long?
  • How much of your revenue needs to be directed toward keeping the business afloat?
  • What expenses are necessary to pay off right now? What can you put off paying until later?
  • Where are your financial resources best expended?
  • What benefits are you getting in the short and long term from tax write offs?

Common Objections To Having a Financial Plan

Many entrepreneurs put off creating a financial plan for their business. If you are one of these entrepreneurs, consider the following objections and their answers:

  • I’m not missing anything by not having a financial plan. If you aren’t paying attention to where your business is, it’s very hard to plan where it’s going. Financial planning isn’t just about seeing where your business is at. It’s getting a roadmap for the future.
  • I don’t have the time or money to invest in drafting a financial plan. Honestly, you don’t have the time or money to not get a financial plan. The only thing you lose is some time and money. Not having a financial plan, on the other hand, puts you at risk of losing your entire business.
  • I know my business well enough that I don’t need a financial plan. You might know your business very well. However, having all the necessary information in one place benefits you, as well as any employees and investors you might have. In the case of other team members, they don’t have to rely on you for information. They can go right to the financials to get the information they need.

Getting a Financial Plan

If you’ve never made a financial plan before, consider hiring a consultant to help you. You might also have people already in your organization who can draft a financial plan for you. Regardless, getting help from someone experienced at drafting financial plans is essential to make the most out of your company’s financial plan.

Financial Plans and Your Business

You want your business to succeed, so you’ll need a financial plan. This is literally what separates a business that thrives from a business that struggles or goes under. You owe it to yourself, your business and your employees to get a financial plan.