By not doing a business plan with a well thought out cash flow projection, many otherwise good business ideas fail early in the game. Even a simple business such as lawn mowing needs to give thought to their cash flow projections. Sure, they have a truck, a lawn mower, and a rake, but what happens when the season ends or when the lawn mower breaks down? What do they have to fall back on?
A good business plan identifies projected income, planned expenses, and an allotment for maintenance. To do this an entrepreneur needs to identify these three financial needs; business start-up, ongoing business expenses, and personal financial needs. This will identify what the business requires to provide for the business and entrepreneur to succeed and thrive.
The business may be seasonal or at least be affected by seasonal holidays and events. It is important to be able to forecast these and have a plan ‘B’. This can be in the form of savings, line of credit, availability of a loan, or perhaps a rich aunt. Unplanned expenses can be the death knell for businesses that are under funded and have no resource to draw on to get through the rough patches.
Doing due diligence through good research will give the needed information as a base for the projections. These projections provide the stats for the business plan. Although good research was done the figures likely will not be accurate. The business plan is a living document, one to monitor and adjust through the first year. The actual financial records form the basis for planning for the second year.
The difference between projected and actual will show the cash flow for the business and the monthly trends. It will also expose the ‘hidden’ costs associated with the business so better planning can be done.
Cash is King! Plan well and have a plan ‘B’!
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