Create your business and financial plans, Part 2

| March 7, 2020 | Economy, EDUCATION | No Comments
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Continued from Last Week…

Understand the financials

Next, analyze what it’ll take to start, grow, and manage your company. A great source for business finance insights is the Hands on Banking® website. Fundamentally, you should know:

  • Startup costs: How much you’ll need to pay to get your idea going. Free resources like the S. Small Business Administration (SBA) can help you calculate these costs. You should also consider speaking with current professionals in your industry, such as vendors, suppliers, and industry groups.
  • Break-even point: When your business brings in just enough money to cover expenses. If you need help figuring that out, The Balance offers a good rundown. Setting up a consultation with an accountant to help you estimate costs could also be helpful in the long run.
  • Projections for profitability: Predictions about future income. It’s important to be realistic with these: Forbes gives a helpful guide on how to best forecast the revenue your business will likely bring in. This is also where the market research you’ve done can play a big role by helping you determine market size and the demand for your business.

Once you have these estimates, it will be much easier to pin down whether this is a worthy business opportunity.

Evaluate your financing options

There are many ways to fund your business, but you have to choose the one that works for you. “You can put in sweat equity, use credit, raise venture capital, or even solicit funds with crowdfunding,” says Dr. Dennis Kimbro, a business professor and best-selling author. “But which way is best for your business?”

The SBA suggests considering both your personal and business resources to help you arrive at the right financing strategy.

For instance, do you have:

  • Savings that you can draw from to get started?
    • Depending on your situation, you may think about investing your own savings. Although this may not pay for everything, doing so shows lenders how much you believe in your own idea.
  • Collateral to secure a business loan request?
    • If yes, you could be ready for a loan or line of credit from a financial institution. For this option, you’ll want to have a good relationship with your banker so they can assist you in setting it up.

When starting out, all of these questions may not apply to your business just yet. However, if you approach a bank or investors, these are the questions they’ll likely ask. They’re also factors to keep in mind should your business outgrow your initial plan.

As you get closer to launching, your financial and business plans may change, and that’s OK. Regardless of how they evolve, having a plan in place to guide you on this venture could make all the difference for your success.

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