Having a financial plan for your personal and business finances is crucial to long and short term business success.
Your financial plan = a clear direction of travel
A financial plan doesn’t have to be elaborate or overwhelming. But you do need one! It’s a reference to measure your success or failure against. And if you want to scale beyond a lifestyle business, financial planning is the number one thing to focus on.
Top 10 benefits of having a clear financial plan
- It gives you a short and long term plan to success on your terms. This way, you are much more likely to actually achieve your goals. Studies have shown that being in business without a plan is like heading off travelling without a destination! Not smart! Yes, you’ll definitely move from your start point (and you might work out where you want to go along the way) but progress will be far from smooth and efficient. And who knows where you’ll end up.
- With a financial plan, you can compare actual performance to your plan and adjust strategies accordingly. You don’t let your business run you, you run your business. The way to improve is to measure results > adjust tactics > remeasure results > adjust tactics and so on, until you find what works.
- It gives massive accountability if shared with your team or family. If you have a team you can start to leverage them, by giving them responsibility for line items in the plan. For example, your general manager ensures all general overheads are kept under budget.
- A financial plan allows you to map your goals, then apply strategies and tactics to achieve them. For example, you want to grow revenue for a particular product or service by 30% next year. What will you do to generate X new clients, how many prospects will you need? How will you attract them? How will you measure progress on attraction each week?
- It’s easier to get investment or funding with a financial plan. You can build out a financial model based on the driver of new business relevant to you. So if you use Instagram ads, drive the entire new sales targets from ad spend metrics. If you get referrals, how many clients do you need to request referrals to generate a new client on average? Use that to drive the targets for the activity to produce sales - NOT the other way around. Most business owners don’t have any scientific approach to lead generation and don’t track data to predict new client acquisition.
- You’ll be able to review your financial plan at regular intervals, have thinking time, and work on your business (not in it). It’s a reference point for weekly executive meetings.
- You can share it with a coach, mentor, friends, or family to get feedback. For example, we once had a plan to get to 10m in sales with a low-profit margin. A coach asked me: why that number? Did you pluck it out of thin air? What do you actually want? That was so helpful. And because I want a bespoke firm that works with amazing clients at lower numbers, we redid the plan to generate almost as much profit but only 2.5m in sales! Much easier to run and much more aligned with my vision of the perfect version of GrowFactor. We get to interview prospects, not the other way around!
- It's motivational to see you are on track. Just as a weight loss client would find it motivating to see their weight go down on your app or software. Being on track keeps you accountable, helps you stick to good habits, and actually leads to staying on track. Knowing you’re on track with your financial plan feels amazing and gives you confidence and certainty you are doing the right things.
- It’s much easier to be resourceful when you have a plan. If you aren’t hitting your targets each week you can see early and adjust until you find something that works. What gets measured gets managed and there is always a way to achieve a goal. It’s about failing enough times to find the one that works for you.
- Adding control to your business allows you to track cash flow, expenses versus plan, and how much sales you need to grow your business to your vision. By committing the numbers to paper you’ll increase the chances you achieve them.
I hope now you can see how critical planning is to the future success of your business. If you want some personalised advice on what steps to take next then drop me a DM on Instagram (@simonkallu)