How to create a financial plan for a new business
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When you start a new business, your success depends on how you handle your money. With a clear and realistic financial plan, you can prepare for the long run with strong spending decisions and earning predictions.
Your financial plan helps you develop your business’s money goals and expectations. It’s crucial in making your money work for you.
But if you’ve never written a financial plan before, you might wonder where to start. We can help with that.
This guide covers how to create a financial plan for a new business, including:
- Forming a strategy
- Creating projections
- Outlining funding needs
- Planning for the unexpected
- Checking in with your plan
See also: Why you need financial planning in business.
Creating a financial plan for a new business: the essential steps
With a well-developed financial plan, you can approach your business with intention. Let’s go over what you should include and how to do so.
Form a strategy
Your financial strategy is the overarching force that drives your plan. It answers key questions about the why and how of your business.
Financial objectives
Start your financial strategy by listing the main objectives for your new business finances. You might come up with short, medium, and long term objectives to guide you in the right direction.
First, ask yourself which general goals you want to focus on, such as becoming profitable. Then, turn this goal into a specific and achievable objective. For example, you might plan to earn X sales in X months to reach profitability.
As you write the strategy, try coming up with five to ten main objectives that are realistic for your new business.
Pricing and sales strategy
Your pricing strategy can impact how many sales you earn for your business. So, how might you price your products to achieve your financial objectives?
For example, you could use a:
- Penetration pricing strategy – offering lower prices than average at the start to draw in customers
- Competitive pricing strategy – listing your products above, below, or level to average pricing to give them a competitive edge
- Premium pricing strategy – setting your prices higher than normal to suggest value or exclusivity
On top of this, consider your sales strategy or what methods you’ll use to draw in customers and earn revenue. For example, you might use a reward system to encourage return customers.
Starting budget
Your starting budget is another essential part of your financial strategy.
It outlines how much you hope to spend and earn from your business initially. To form a realistic budget, consider your business expenses and how you’ll cover them to remain operational.
To learn more, check out our article on budgeting for starting a business.
Create realistic projections
Projecting the outcomes of your business efforts help you plan more realistically. Plus, they can convince potential investors your business is viable, and you’re worth giving money to.
Income projections
As you start your business, you’ll want to know how much you might earn in the first month, quarter, and year. This knowledge lets you predict how much money you could take home at the end of the day.
To learn more about this, check out our article on how to create a financial forecast for a new business.
Cash flow projections
Your cash flow forecast can help you predict the cash entering and exiting your business over a given time. This estimate is essential to determining how you’ll cover regular expenses.
You might also strategise how to bring in the necessary cash regularly, such as following up on late invoices or promoting cash revenue.
Sales forecast
A sales forecast uses market size and demand to estimate how many customers you could draw in at the start.
Creating one for your business helps predict profitability, sales trends, and create realistic expectations.
To learn more, read our article on how to write a sales forecast.
Outline your funding needs
You’ll likely need cash to get your business going. In this section, cover how much you’ll need to start, including startup costs, operational expenses, and a cushion before profit.
You may try self-funding your business to avoid debts or liabilities. If so, outline a savings or funding plan. For example, you might crowdfund your startup idea.
If you need external funding, there’s a few routes you can take. You might choose to seek:
- A business loan – The UK government offers startup loans for businesses. You could also seek a small business loan from a bank like Barclays.
- An investor – If you create a convincing proposal, people may invest in your company in exchange for a piece of the business.
- Grants – Some government grants are available for startups, which could help you avoid taking on debt.
- Family and friends – You might want to approach people you know well with your business idea as they could invest or offer you a personal loan.
Plan for the unexpected
A financial plan for a new business helps you prepare for the future. Still, there are bound to be unpredictable situations. So, in this section, consider potential risks to your finances.
Preparing for the unexpected will help you avoid irreversible consequences that can harm your business.
For example, you might want to develop an emergency fund and business continuity plan, so you’re ready to react to potential disruptions.
Check in with your plan
Once you complete your financial plan, be sure to monitor its success. This way, you’ll catch yourself if you start to veer off the path. Then, it’ll be easier to correct yourself or create more realistic expectations before it’s too late.
The plan acts as a guide to your finances, so regularly referring to it and updating it will help you keep your finances in order.
Financial planning for new business success
Writing a financial plan for your new business lets you get on top of your finances early on. As a result, it’ll be far easier to build a profitable business that’s prepared to grow.
In fact, planning is essential for every part of your operations. So, next, you might want to check out our article on how to write a business plan.
Track your financial plan with a clever app
As you put your financial plan together, you’ll need tools that help you track your progress, like Countingup.
Countingup is the business current account and accounting software in one app. It automates time-consuming bookkeeping admin for thousands of self-employed people across the UK.
Save yourself hours of accounting admin so you can focus on growing your business.
Start your three-month free trial today.
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