Every start-up or small business should have a business plan for growth. This business plan should include a number of financial goals and strategies, or measures of success within a wider road-plan. Furthermore, although strategies will differ from company to company – depending on factors such as the business area – there are some core essentials that can help a small business to develop financially.
Money management
Right from the start-up phase, money management is a key building block for financial success. It is essential for a business owner to have a realistic and detailed plan for handling money. Even for the smallest company, this includes costs of overheads such as office premises and supplies, and for larger companies this expands to include wages for staff and subcontractors, and costs of raw materials and transport. To cope with this, the company business plan should be closely linked to an itemised spreadsheet estimating money in and money out. This should be drilled down to a fine level of granularity, without relying on over-optimistic broad estimates of future sales. Most importantly, income should exceed expenditure.
Solutions to common financial issues
Several financial issues can affect business growth but in many cases sound and realistic financial planning can offset them. For example, although any business can benefit from surprise upturns in profits, it is usually best to enter only substantiated expected income in the financial plan. It can also help to maintain a fundamental consistency within the financial plan, including the following:
- Identify or build a stable customer base and use this as the basis for income planning.
- Look for consistency in expenditure, such as fixed monthly costs or perhaps outsourcing rather than variable internal personnel costs.
In addition, it is prudent to have a plan to deal with any shortfall in income. Identify a potential source of additional funding, such as a loan deal from a financial institution or partner, which could be used as a stopgap to prevent a financial shortfall from forcing a total work stoppage.
Financial departments and outside help
Traditionally, many medium-sized or larger businesses have employed their own financial personnel. However, contractor accountants can be a tempting alternative for a small business that does not have the resources for permanent financial staff. This is also true of any start-up business in the early stages of development, when setting up efficient financial processes is a business priority. In this situation, the contractor accountant would not only carry out routine financial tasks, but can also assist in shaping the company’s financial framework. This can be particularly important in issues such as taxation. Furthermore, the business owner may find that the contractor accountant fits well with their business operations, and may decide to continue the cooperation. This is a lower financial risk than employing internal accounting staff from the outset.
Summary
Sound money management is essential to the success of businesses of all sizes. Right from the start-up phase, a company should take financial planning in hand and deal with it realistically. Often, the services of a contractor can help to both make expenditure on resources more predictable and identify the necessary professional financial expertise and guidance.