Why is developing a financial plan so important to an entrepreneur about to launch a business? What should you consider including in your financial planning?
Having a financial plan is important to any entrepreneur because without one you are not making money. Even if you do not know when your off season is, you can project it based on what your product is, who it benefits, and if others have done this before you, you can base your projections off of their businesses. For myself, when I had not had a full year of working by myself, trying to predict how each month will go was hard, however I had lots of experiences working in gyms and just being in one to know that the winter tends to be a bit dead for the first half and picks up during the second with all of the holiday weight people put on as well as the new years resolutions people want to try to keep. The real season for money is during the summer. That gave me an idea as to when my off season could be. The other thing to take into consideration is that since I don’t have a gym most of my clients are either at home or outdoors. No one really wants to workout in the snow, so winter is even tougher for me, and my real seasons to make money on the outdoor workouts is spring and fall, while the at homes are during the summer when people are trying to get fit for the beach and still have enough time to workout. I worked in a franchise once and the manager used to talk to all of us waitresses all the time about how he wasn’t sure exactly how well we would do on a night by night basis, and all we could do is look at see how other branches are doing and how they did in hopes that we would bring in about the same amount. Once you’ve been open for at least a year you can use previous years earnings to know when your personal business will do well and when it wont. There will be flukes when you may make more or less than projected, but it will give you a good idea to base your plan off of. It is important to know when your going to make a lot of money and when you aren’t so that you know how much to save and when it is important to make and save enough. This will help not only for your own savings and payroll, but for when you have to pay back any loans to others as well. If you dont want to go under, you need to know how much you need to make, save and spend. If you want people to sponsor, finance, and trust you enough to loan you money, then you need to have a plan written out for your money and how much you think you’ll be able to make by when.