We are curious about the success of new businesses. Is success really that simple? Not like that at all. To be successful in a new entrepreneur or business one has to burn a lot of wood. Today I will give you a simple idea that can take your business to the top of success.
Being successful in business is like a battle. A successful businessman has many stories. It is almost impossible to succeed in business without following many rules and regulations. Successful people have very organized business and personal lives. Among all, financial planning is the secret of startups.
Why New Businesses Can’t Survive?
Before we start a business, we are very fickle. If we have some cash in hand, we have thousands of startup business ideas running through our heads. We also start new businesses on impulse.
Even if we started it like this, our startup business fell flat after a few days. We get frustrated because the business is not doing well. Most of the time there is no capital to go ahead. There is no provision for reinvesting or raising money.
In some cases, new entrepreneurs or new startups do not survive due to financial crises or financial mismanagement. Researchers and market analysts have already done a lot of research on this. A study by the US-based market research firm CBI Insides has revealed many reasons for business failure. Some of the notable reasons are mentioned below:
- Not understanding the demand for the product or service
- Running out of investable money
- Inability to form the right team
- Unable to compete
- Pricing for the product or service is relatively high
- Choosing less important products or services
- Not having the right business model
- Poor marketing strategy
- Ignoring customer feedback
- Untimely product
- Not having a specific purpose
- Disputes with partners
- Lack of proper leadership
- Lack of attention and skill
- Location of the business
Financial Planning for Small Business Success
Financial planning is the biggest secret to small business success. Very few successful businessmen reveal this secret. There is no substitute for financial planning to operate, grow, and sustain a business for a long time. Proper financial planning assures the business of future investable funds.
Financial planning is like a business budget. It projects cash flow to the business which helps reduce risk during small business emergencies. Proper financial planning only helps the business to create a specific roadmap. This is how small businesses can survive and thrive.
Why is financial planning necessary for small businesses?
Almost everything in a small business is small. The scope of work is small, the market is small, also the assets and capital are small. The smaller the workforce, the smaller the target. It is the job of a skilled new trader to slowly move the business forward with limited capital. Only those who can do this work become successful and grow as small business owners.
So the secret to small business success is financial planning. As this is the general budget of the business, it is said to save the business from failure. How the business will run, how much will be spent, how much money will be spent until the profit comes, what will be the next financial plan if there is profit, and how will it be if there is no profit, all of these are included in the financial plan.
Also given below is a list of reasons why you need to do financial planning for small business success:
- Budgeting: You must do financial planning for efficient use of resources and small capital.
- Cash Flow Management: There is no substitute for proper financial planning to meet all kinds of financial crises including running a business and unexpected expenses.
- Risk Management: Risks are always faced in doing business. If there is no proper financial plan to avoid all kinds of risks, business activities will come to a sudden halt.
- Goal Setting: Financial planning is not just about budgeting for small business success. Apart from budgeting, there must also be proper planning to set the right goals to grow the business. Financial planning is also the lifeblood of a long-lasting business.
- Profitability Analysis: Are you making a profit or a loss from the business? To understand this, you must have a financial plan in advance.
- Cost Control: Whether the business is profitable or loss-making, costs must always be kept under control.
- Investment plan: When your business becomes profitable, where and how to invest that dividend is also part of the financial plan.
- Debt Management: Helps manage and reduce debt to avoid financial stress.
- Tax Planning: Enhances tax efficiency and helps comply with tax regulations.
- Financial forecasting: There should be advance planning to predict the future financial situation.
- Capital Structure Optimization: Helps determine the right mix of equity and debt for the business.
- Emergency Funds: Businesses require large amounts of cash for emergencies for which reserve funds are required. Proper management and planning help in this regard.
- Financial Decision Making: It is difficult to make financial decisions at any time if there is no prior plan for the financial affairs of the business.
- Business Expansion: Facilitates planning for growth and expansion opportunities.
- Vendor and Supplier Relationship: Ensuring timely payments and building good relationships with suppliers requires planning.
- Employee compensation: If the employee is injured due to an accident, the organization will compensate him/her. This should also be included in the financial plan at the beginning.
- Customer Pricing Strategies: Without a proper and competitive pricing plan it is almost impossible to survive in the market. If there is a mistake in the financial planning, the correct price cannot be determined. So have a proper financial plan.
- Financial Reporting: Ensure accurate and timely financial reporting to internal and external stakeholders.
- Compliance Management: Helps comply with financial regulations and standards.
- Succession Planning: Helps plan for the long-term success of the business, including leadership transitions.
From the above discussion, it is clear that financial planning is the secret of small business success. Proper financial planning acts as a game changer for small businesses. So financial planning for small business success is a must.
