Cashflow Importance & Being Realistic
Without a steady stream of cash a business can rapidly become insolvent. Sure all business can experience a period
The importance of a marketing plan
How to do Business Planning
A business plan is more than a blue print for the future. It is also a document that many lenders will want to see if you are
CASHFLOW AND THE IMPORTANCE OF BEING REALISTIC
Cash is king for any business, but it can be particularly critical for small enterprises.
Many people starting out in business get hung up on profit. Yes, it matters, but it is a focus that can take your attention off cashflow, and this brings its own pitfalls.
Without a steady stream of cash, businesses can rapidly become insolvent. Sure, all businesses can experience periods when cash is tight but it doesn't have to spell disaster. If you know what to expect, the business can take steps to manage the situation and avoid a full blown crisis.
This highlights the need to forecast your cashflow. However preparing a realistic cashflow forecast isn't just about averting disaster. A well-drafted cashflow forecast lets you:
Identify periods when you could face a cash squeeze and identify steps to bridge the gap
Ensure your business consistently has cash available to pay employees, creditors, and meet tax obligations; and
Plan the funding of plant and equipment.
The good news is there is a wide range of software tools available to prepare a cashflow forecast. These can generate key details like profit margins and break even points – all of which can be extremely useful to small business owners. Nonetheless, the information these packages provide will only be as good as the details you enter. This is where the need to be realistic about cashflow becomes paramount.
Let's take a look at four steps that can help you be a realist rather than overly optimistic about your venture's cashflow.
1. Imagine the glass is half empty
One of the worst mistakes small business owners can make – especially those who are just starting out, is to assume the money will roll in from day one. From a financial perspective it makes far better sense to take the opposite tack and imagine you won't make any money at all for several months – maybe longer.
This can be a tough challenge as entrepreneurs tend to be optimistic by nature. But it does mean you won't base plans on spending money that hasn't yet come in.
Finance Partners for instance recommends that new franchisees budget for at least 6 months of working capital - in addition to start-up costs, to tide them over the first year and a half of operation. It can take this long for a new business to build momentum.
2. Make allowances for curve balls
Don't just budget for tough times – think about how your business would survive a serious hit. For small businesses, having a pool of rainy day funds, is not a luxury. It is smart practice. It is not always easy to grow emergency cash but without it you could be one curve-ball away from closing your doors.
3. Understand the economy, your industry and your market
No business operates in isolation. Your venture is subject to the vagaries of the economy, the broad industry in which you operate, and related sectors. You need to stay up to date with what's happening because your cashflow projections should reflect the world around you. This can only happen when you stay well-informed.
4. Talk to those who know
A second opinion never goes astray, and when it comes to realistic cashflow forecasts professional expertise can deliver better informed opinions than a mate at a barbecue or well-intentioned family members.
Finance Partners franchisees have the benefit of support systems like mentoring, dedicated field support and ongoing professional development. It's a head-start few other businesses enjoy.
Teaming up with a reputable accountant matters too. A good accountant will take a dispassionate view about your likely cashflow, and cast a set of well-trained eyes over your projections to see if you're viewing the business through rose-tinted glasses.
To give your business the benefit of a proven brand and expert support, discover the benefits of investing in a Finance Partners franchise. Call us today on [phone number]
THE IMPORTANCE OF HAVING A MARKETING PLAN
If you're not convinced about the need to plan marketing activities, take a look at our five key reasons why your business needs to develop a formal marketing plan right now.
We're not about to roll out Benjamin Franklin's famous quote – “if you fail to plan, you are planning to fail”, but the fact is, when you run a small business taking an ad hoc approach to any aspect of the enterprise can see you pay unnecessary costs and achieve a poor rate of success.
Large businesses always have a marketing plan – but it's not something that's restricted to the big end of town. Here we look at five compelling reasons why it is so important to develop a marketing plan for your small business.
1. Your goals are aligned with your actions
You want to grow your business right? Having a marketing plan sets out the strategies that will help you enhance customer awareness and build market share. No business owner can afford to leave things to chance – and actively planning how you will market your services is a critical first step to growth.
2. Your marketing ideas shift from being a thought to a formal strategy
Small business owners can have a tendency to keep a wealth of information and plans for their venture inside their head. It's great that you know your business like the back of your hand. But putting your marketing plan down on paper is a key step to making those plans a reality.
3. You know when to seek expert help
Marketing involves more than putting an ad in the local paper and having a current website. As a small business operator you need skills across many areas however sometimes it pays to call in the experts, and marketing can be one of those areas where tapping into professional support can pay off. One of the advantages enjoyed by Finance Partners franchisees is the ability to access to whole teams of experts – including in-house marketing specialists.
4. Your marketing plan establishes formal timelines and steps for action
In a busy working day it is easy to get caught up simply running your business rather than actively growing it. Marketing is an ongoing must-do activity for any enterprise, and your marketing plan serves as a reminder of the tasks you need to organise, and the dates of various marketing activities that you should be working towards. This sort of timeline can help time-poor business owners stay on top of essential activities.
5. You will develop an understanding of what works for your business
A marketing plan is a forward-looking document but over time the plans you have drafted for previous years will help define what works for your business – and what doesn't. This is a great way to understand where to pitch your marketing budget to get real results rather than wasting valuable cash on marketing activities that falls short of success.
Finance Partners has extensive experience in marketing and our brand is highly recognised and well-respected. To understand more about the benefits of investing in a Finance Partners franchise call us today on [phone number]
HOW TO DO BUSINESS PLANNING
Business planning is one of the most important activities you can undertake. Good plans play a critical role at every stage – from establishing a business through to laying foundations for growth and expansion.
A business plan is more than a blueprint for the future. It is also a document many lenders will want to see if you are applying for finance, so it's worth developing a plan at an early stage.
Considering overarching factors first
Drafting a business plan forces you to address the key factors necessary to operate a successful venture. First up, identify the industry you are in – does it have strong prospects for the long term? As technology evolves entire industries are becoming obsolete. Be sure your industry will still be viable in five, 10 or 20 years.
Next, identify your product and your market. How big is that market? Is it growing and what share of the market are you aiming for? This is critical to identifying revenue flows and producing profit forecasts.
Importantly, your business plan should include clear strategies on how you will capture your share of the market. The more you can drill down and identify specific strategies, the more accurate your plan will be.
An effective business plan will also pinpoint your competitors. Describe their strengths and weaknesses and explain how you will overcome (or take advantage of) these. In short, what will set your business apart from the competition, and what weaknesses could your business have that competitors may be able to exploit?
Consider your business structure
Establish the structure of your business will have – sole trader, a company, a partnership, or a discretionary trust.
Seeking legal or professional accounting advice here is helpful as it can be expensive to shift the business over to a different structure at a later stage.
Do the maths
Now it's time to start crunching some numbers.
Work out your establishment costs and ongoing operating expenses. Do you need an injection of cash to finance these costs – is your own equity sufficient or is it likely you will need additional debt funding? If so, can your business afford additional interest charges?
Consider your anticipated revenue for the first year. It can pay to err on the conservative side as it may take a while for your business to become fully self-funding. Determine the point at which the business will break even based on revenue versus costs.
If you have got this far and the business still stacks up, chances are it will be viable. But the process of compiling a business plan can reveal fatal flaws – like what will happen if you get sick, or simply that the return the venture offers is not worth the risk involved.
The main point is that the rigorous analysis required to put together a business plan means you will go into the venture with your eyes wide open rather than taking an overly optimistic approach.
Help is available
Preparing a business plan takes a fair bit of effort. Your accountant may be able to help but it is worth doing a large part of the work yourself so that you understand exactly what running the business will involve.
One of the benefits enjoyed by Finance Partners franchisees is the wealth of support available to establish, nurture and grow their business. It means you have the resources of big business while still running your own show. Even better, the team at Mortgage Choice know what it takes to succeed in the industry, and this can give you a head start with your business plan from day one.
To learn more about investing in a Finance Partner franchise call us today on