Financial planning is critical to business success. Without it, you simply won‘t know if your business is profitable.
1. Your business is more likely to fail without a financial plan. A lack of financial planning is one of the main reasons why small businesses fail, you‘re likely to being caught out with cash flow or overestimating their revenue.
2. It can help with approximating everyday/monthly costs hence better planning. If you have a plan already in place you can see how much you can afford to spend on a day/month, for example how much expenses you can give employees and training budgets you can set aside.
3. It can help you focus on the future of your business. It‘s easy to lose track of the long term view of your business when you have so many immediate pressures at hand. A forward looking financial plan can help you see what expenditures need to be made to grow your business in the long term.
4. You probably won’t be able to access financial support without one. Lenders will not consider your business viable for a loan or other financial assistance if you don‘t have a sound financial plan in place, complete with a balance sheet, income statement and cash flow forecast.
5. It can help with your marketing decisions. A financial plan will provide you with the information you need to know if the marketing strategies you‘re putting into place are actually delivering increased revenue and how much they cost.
6. It can measure your progress. Is your actual revenue better than what you forecast? Seeing how your business is achieving profit growth in black and white is a great motivator.
7. It can help you prioritize spending. Ready cash is vital to the success of small businesses. The financial planning process can help you to identify your most important expenditures against those that can wait until your cash flow is better.