Do you know why having a financial plan is necessary for your business?
Thinking about making a certain amount of money each year is not going to get you anywhere near your goals. The only way you can reach your goal of earning a specific amount of money is to have a plan. With a financial plan, you can reverse engineer the steps you must take to reach your goal. Those intentional steps are exactly what you need to keep focused and stay on track.
3 Steps for Your Financial Plan
1. Sustainability
How much do you need to make each year to sustain your lifestyle? This is the first question to ask yourself when you are creating a financial plan. So, add up all your expenses to find the number you need to use in your plan.Since I use Profit First, all my plans are based on percentages of my revenue. Everything my business earns gets separated into different accounts for income tax, owner’s compensation, operating expenses, and profits.
2. Get Rid of Debt
If your business currently has debt, you must create an intentional plan of how you will repay all your debt quickly. You shouldn’t be paying interest on money you have already spent. And you can’t move forward to the next step of your financial plan until your business no longer has debt.
3. Start Building Reserves for Wealth Building
Once your business is debt-free, you can start using that money to build wealth. Unless you are an expert in this field, you must find an advisor to help you. An advisor can tell you the best ways to make more money with the money you have. When you start to build your wealth, you will finally be able to see your long-term dreams come true.
Reaching Your Financial Plan Goals
If you have decided you must earn $100,000 each year to sustain your lifestyle, your business may need to have $200,000 in revenue every year. What happens if your business does not have that much revenue though?
One solution is to go out and network to add to your list of clients! OR…change the level of clients you currently serve.
How many clients you need is dependent on the client level and how much you are charging. You may need 20 clients at $833 per month or 8 clients at $2,083 per month. If you have really leveled up your services, you may be charging clients $4,166 per month and in that scenario, you would only need 4 clients to reach your goal.
Hopefully, you now understand why a financial plan is necessary for your business. If you don’t have one yet, follow the steps in order and see how much better your future can be.