The Importance of Financial Planning For Business
Perhaps you have an idea and want to start a new business or you have even already started the business. But are your financial projections feasible? Do you have a course action plan in case your Plan A, Plan B, and Plan C mess up? Your business financial strategy should be carefully thought out before you move forward. A well-established business financial plan will help with this.
A business financial plan gives you vital information such as should you even create the business or should you acquire an existing one, how much is the expected value of your business, and how should you move forward to meet your financial goals. It is what you’ll use as a valuable tool to make strategic planning decisions, manage your business finances, make investment decisions, and so much more.
As a Finance Savvy CEO®, founder, and entrepreneur, your time is valuable. Much of your focus and effort is spent on seeking new business opportunities, making marketing decisions, and looking for new avenues of growth. These pursuits just touch the surface of all the hats you wear and leave little room for much else, but you can’t overlook the need to make informed financial decisions.
With so many moving pieces, a financial plan is critical to give you a picture of the full puzzle – a simple outlook for the future. If you get too lost in the weeds, your financial plan is a reminder of what you are working towards and gives you insight into how the pieces of the puzzle will fit together. Think of a financial plan as a roadmap for your business to follow, setting goals and measuring success along the way. It’s a visual representation of your business’s future, so you can decide if things need to change.
Here are a few key reasons you need a financial plan and what it can help you do:
Pivot More Quickly
In business, companies that can pivot can survive. Companies that cannot make adjustments as needed will quickly fall behind the competition. Thankfully, a well-planned business financial plan can help position you to make adjustments quickly and often. Even the most thought-out plans hit roadblocks from time to time, so preparing for change is essential.
Focus On The Right Key Performance Indicators (KPIs)
You likely have countless financial reports and files of financial data sitting on your computer. As a business owner, analyzing your company’s performance is a vital part of your job. However, there are likely some numbers or metrics you value above the rest. By creating a well-developed financial plan, you can highlight the key performance indicators that make the most sense for your business and cut out the rest of the clutter.
Plan For Multiple Scenarios
Ideas, big and small, are what keep businesses running. However, tackling a new idea can be a significant risk. Investing time and money into a project that does not bring about results can drain your resources and so are potentially successful ventures that are not financially planned properly. A financial plan can help you work through what-if scenarios, determining what the result might look like if an initiative succeeds or not.
You now know a few of the many many many reasons why a financial plan is vital for the business, whether to help you pivot quickly, uncover your KPIs, make a decision on a potential project, and evaluate various what-if scenarios, a business financial plan is crucial for your business.
To get a head start on creating your Financial Plan, check out the worksheet here and schedule some quiet time to reflect and complete.
