Creating a business money plan is important to take control of your finances. It’s easier than you think, AND it doesn’t have to be boring or stuffy.
Let’s talk about Money, Money, Money.
It doesn’t have the best reputation, would you agree? On the one hand, it’s seen as the motivator that gets people to do just about anything. On the other hand, it’s also considered anything but noble, even dirty.
But the truth of it all is that it should be neither.
We need money to live. And while it’s usually not the sole or even the most important thing that motivates us in business, most of us wouldn’t be doing what we were doing if we didn’t have to earn a living.
About the money side of your business…
- How often do you review your finances?
- Do you make a plan to grow your money?
- Do you think about growing your personal wealth so you can create generational wealth?
I’d like for you to be honest with yourself!
The Inconvenient Truth About Our Financial Goals
I know a lot of business owners who don’t like the money side of doing business. So, it usually ends up at the bottom of the to-do list.
Earning more money is still high on the wish-list. But dealing with money… not so much.
But here’s something to think about: YOU HARVEST WHERE YOU SOW.
If you avoid thinking about financial goals, ways to make money, and getting better with how we spend it … it’s unlikely we’ll one day reach our financial goals.
I know… Ouch!
In my opinion, we should make it an annual thing to look at our money and our money plan (call it finances and the finance plan, if you like). Then check in quarterly, and even monthly; review if we’re on track, and adjust if needed.
Let me tell you!
10 Reflective Questions About Your Financial Business Behaviours
Before we can start creating a money plan for business, we need to take stock.
My trick is the 10 Reflective Questions About Your Financial Business Behaviours. It looks at patterns and triggers. Stuff we may not want to know about if we’re honest. But remember that knowledge is power. If you become aware of your habits (both good and bad), you can foster them or control them.
So, about these 10 questions….
Your Past Business Money Habits
Ask yourself what an annual money review for your business has looked like in the past? Non-existent? A yearly plan? How often do you check in to see if you’re on target?
Set Aside Time
Schedule half a day or a few hours in your diary. If your office is an environment that is full of distraction, plan to go somewhere where you won’t be disturbed. A relaxed and focused environment is what you need.
Look Back to Look Forward
Bring out the financial report for the past 12 months. It’s a treasure trove of information that, once we are done with our process, will be an important tool in creating a business money plan.
What Money Came In?
Is this the figure you had planned? (We’re looking at the facts, there’s no judgment!) Did you overshoot the mark, or did you underachieve your expectations? If the figure is not what you hoped for, ask yourself why not? Whatever the conclusion, delve deep into the why!
What Money Went Out?
Now, do the same for the money you spent. Just state the facts. Remove the emotion. Did you meet the target? If not, why not? Did you spend money on a whim? Or was it necessary? Then bring out your bank account and drill into the detail of your expenses.
The Good Financial Business Behaviours
Reflect on what smart money decisions you made. Write these down and celebrate yourself for them.
The Not So Perfect Financial Business Behaviours
Also reflect on the ones that were not so smart. Look at the list of facts. Why were these decisions made? Was it to make you feel better? To make somebody else feel better? Was it to grow your business?
Reflect And Journal
Identify the messy moments where we made un-smart decisions because we felt unsure about what to do. We’re looking for patterns that often go back to our childhood. (For example: I was brought up not to be wasteful with money, so I often find it hard to decide on big-ticket items.) Also, ask what could make you feel more confident with the decisions you make about money?
The Magic Word for The Past
Choose a word that describes how you feel about your approach to money over the last year. Write it down.
The Magic Word for The Future
Move into the future and choose one word how you WANT to feel about money in the future. Write it down. Keep this word front and centre every time you work with money. It’s a reminder of the feeling you want to have with money moving forward.
4 Steps To Create Your Business Money Plan
Next, with all the insight we have gathered, we can start creating a business money plan. (Many people will call it a business budget, but I think that sounds excruciatingly stuffy.)
To do that, you need 3 things:
- An annual revenue plan
- A forecast of your annual expenses
- Your Freedom Metric (The Freedom Metric sets the target for your business based on the lifestyle you desire. We’ve covered it in episode 4 of our BYW podcast series. You can find it here.
No need for panic! I’m talking you right through it!
Step 1: Start with your revenue plan
I use a calendar that has a page for each month to forecast how much income I will generate for each month. This forecast sounds like it could be something I’m making up on the fly, but it’s anything but random.
These are the tools I use to make the forecast down to a science.
- Use last year’s financials as a guide. Look for possible patterns. Maybe your business is seasonal? Mark this on the calendar month by month.
- Next, look at your promotional calendar. If things are done correctly, your promotional calendar should directly link to your revenue.
Do you have service packages you promote at a certain time of the year? When?
Are there any new service packages you want to launch at a certain time of the year? Put them on your calendar. (Don’t worry, if you haven’t worked out the pricing detail of a new product yet, just roll with a ballpark figure. You can fine-tune later.)
Putting these insights together gives you a not-so-random revenue plan.
Step 2: Project Your Expenses
Next, it’s time to project business expenses based on the revenue plan you have just created.
Your expenses will include general business expenses (telephone, rent, stationary, professional development, etc.) PLUS any direct costs for the delivery of the services you plan to provide during the upcoming year (IT costs, staff cost, ingredients, etc.)
- Again, use the previous 12 months as a guide, enter month by month. If you overshot last year’s budget, take out what’s not needed. Stick to what you really need only.
- Remove any expenses for services or products you have decided to drop.
- Look at the new packages you decide to introduce. Are there new expenses? Add those.
Putting these insights together on the calendar gives you a monthly overview of your expenses.
Step 3: Calculate Your Profit
This is a simple equation you’re probably familiar with:
Revenue-expenses= projected profit
Calculate this per month, not just per year.
Step 4: Compare With The Freedom Metric
Then, finally, ask yourself how your profit aligns with your Freedom Metric.
Is it equal?
If it doesn’t, go back to your projected income and check if you have been conservative. For a service-based business, a growth of 10-15% year on year is a realistic figure. (My personal tip: ‘Packaging’ is a great way to avoid your time being the bottleneck.)
Also, revisit your projected expensive and cut where you can. You’d be surprised how little a business needs. Be careful with the small spendings here and there.
This might take 2 or 3 goes. Don’t give up after the first shot.
Let’s Finish What You Started!
There you have it! Your final money plan for your business is a fact!
But this is only half the work.
The goal now is to stay on target… Every. Single. Month.
And to do that, you review every quarter, or even better, every month. Adjust what is needed, including your expense budget, your promotional calendar, etc.
Consistency is the key!
And then, by the end of the next year, we can celebrate being the boss of our money, the boss of our business, and the boss of our life!
If this still feels intimidating, reach out to me on firstname.lastname@example.org , or jump on over to Instagram, and send me a voice message or a text message. My handle is SandraJulian.co.