An effective financial plan is the most important feature of a successful business. The financial plan has to be practical and cost-effective for the business to enjoy a long-term economic success. Many businesses do not flourish because most people under estimate the importance of a financial plan in a business. If you are an entrepreneur you must keep track of the money you make, you spend and whether your business runs in loss or in profit. Unless you chart out a financial plan and have an explanation for each penny in the business transaction, your business will not become successful.
Let us have a look at some important tips to make an effective financial plan for your business.
- While creating a financial plan an entrepreneur should divide his financial life into six categories namely assets, liabilities, property and casualty risk (house, car, personal injury etc.), personal risk (life, health, disability etc.), education and retirement. It is equally important to put an approximate amount in each of the categories. You should have thought about the tentative expenditure beforehand. Consulting other business men with business experience is a very good idea in this regard.
- You should add all your assets first followed by those under liabilities. You will get your net worth by subtracting liabilities from assets. If your net worth is negative it means that you are in debt. If the net worth is positive your business is in profit. In the former case you should find out ways to pay off your debt.
- You should find out ways to build on your budget. Your main aim is to have a net worth in the positive side. Depending on your net worth you should evaluate your lifestyle and other ways of expenditure. The insurable risk must be transferred to insurance companies and more wealth can be created out of it.
- An effective financial plan must be flexible. You should revisit it at least once in a year. If you do not have the time and competence to do it yourself, you should seek professional help in things like taxes, business and estate planning. Your personal values should be integrated into your financial plan. Your financial plan should remain as a standard for you based on which you should take other decisions.
- You should gain as much knowledge and experience as possible to run a business effectively. Attending conferences, workshops and seminars on business will equip you with better efficiency and you will be able to deal with your business in a better way. You should be very careful in receiving instructions and guidelines. Do not straightaway rely on the advice from family members, close relatives and friends. It is very much possible that they have a vested interest in your financial plan.
- A financial plan must be flexible and at the same time it should include the short and long term goals of the business enterprise. In cases of profit employees should be given incentives which will help the business to move forward. Employees will feel good that their efforts are recognized and rewarded. They will continue to put in their best efforts in the subsequent period. Each business is unique and different businesses need different financial plans. You should make sure that your business has the right financial plan. Do not hesitate to seek help from other professional and reliable sources. An entrepreneur’s prime focus is on running the business effectively and to gain profit.
It is natural that businesses will go through ups and downs. You should learn from your mistakes if any. You should take care as in not to commit the same mistake twice, but find out the best financial plan for your business and achieve great success in business.
Dora Houston is currently working as a writing expert at financial analysis writing service, an online platform for dissertation help and other writing assistance. She also provides help to students on career possibilities and other academic success related topics. Besides, she enjoys writing about current trends and innovations in education, technology, motivation and traveling. She can be found online at http://american-writers.org/services.php
I’ve owned 5 businesses. I regularly work with business owners to improve their systems and processes. I’ve also had a career as someone who helped people buy and sell businesses and I can tell you that I’ve learned a lot from all the successful (and not so) entrepreneurs that I’ve met over the years. When asked to come and do a guest blog post for Marc about what to remember when starting a business, here’s what comes to mind:
Cash Flow: The purpose of a business is to make money. It should do this every month, right from the start. Do not encumber your young enterprise with obligations it can’t meet like costly overhead at the beginning. Use outsourcing and rent/borrow as much as you can to keep monthly commitments to a minimum. ‘Burn rates’ are for Internet businesses that have been capitalized with millions of dollars from venture capitalists.
Vendor trade credit: Most people think about making the sale and not how they’re going to be paid. The awful truth is that when you’re new, you may find customers that your competitors don’t want because they are terrible at paying on time. What are the normal payment terms in your industry? Should you be extending trade credit to your customers? What is reasonable and how will you enforce the credit terms? A bad debt can kill a new business. Accepting credit cards to eliminate receivables can be a smart move for new companies.
Over-estimating sales penetration: Did you hear the joke about the entrepreneur who said he was being conservative about estimating that he could capture 1% of a billion-dollar industry? I see this all the time. That’s not how you estimate sales. Your sales projections should be based on these questions: how many calls are going to be made each day? How many sales appointments will this result in? How many of these appointments will lead to a sale? How long will it take to deliver the service/product? How long will it take to get paid? As you can see, sales are a function of how many clients you can touch and sell to, not how big a market is.
NOTE: This is the second post in a series of guest posts answering the question; “What Advice Would You Give New Entrepreneurs?”.
You most likely started your business for one of these reasons:
– you saw a void that you and your expertise can fill,
– you wanted to monetize your passion,
– you wanted to create (financial) freedom,
– you wanted to gain control over your life.
Whichever it may be, you have every opportunity to make it happen, to reach your goals, live your dreams… but doing so successfully will require a lot of focus, discipline, confidence, and a team.
Yes, you will need a team! Let me explain:
The “Implementation team”
When you start a new business, the last thing on your mind as well as the last thing you (can) budget for is to hire someone. At least in the beginning stages, that’s the mindset of a vast majority of new entrepreneurs. I know, I’ve been there and I see it every day as a virtual business manager and business consultant. Bootstrapping your business is certainly a necessity, but doing it all, wearing all those hats, juggling all those responsibilities, can actually cost you your business.
Keep in mind that as an entrepreneur, you only make money when you make sales and perform billable activities. So when you need to handle all the administrative work, answer the calls, respond to emails, devise your marketing plan and execute it on a daily basis, create the content and post it/mail it, engage with your audience, follow-up on mailing campaigns, attend networking events, take care of your bookkeeping and billing, filing and even chasing after those late payers, you have a very limited availability to source your potential customers, to have sales conversations with them, close sales and focus on providing the services you’ve been retained for.
So, what can you do as a new entrepreneur?
First, how many days per week do you currently have to get in front of, talk to, and close deals with your IDEAL customers? Yes, days, 6-10 hours straight, if you wish, with no interruptions!
How would your revenues be affected if you had just one of those days per week? Naturally, your success will vary based on how successful you are in closing, and there are several variables in determining what the closing ratio is based on each industry.
But just to illustrate this, let’s say you currently talk to 10 prospects per month and close three of them which translates to $15,000 in sales per month. You could double, triple, even quadruple your revenues if you had 10 sales conversations per week. And you can when you free up your time by delegating.
At least in the beginning, you should consider hiring a virtual assistant to minimize your expenses, compared to hiring an employee. You can find highly qualified and experienced assistants and their rates very significantly. Do research before you hire.
Take a look across all of your activities to determine what kind of assistant would be the most helpful to you in the short- as well as – in the long-run. What are the things you LOVE doing, are great at, and getting paid for, and what are the ones you simply hate?
The “Strategy & Accountability team”
Besides the “Implementation team”, you and your business also need a so-called “Strategy & Accountability team”: coaches, consultants, mentors, mastermind, just to name a few. Having them on your team will not only provide you with an extra set of eyes and minds, helping you set higher goals, conquer greater challenges, seeing things from a different perspective and being held accountable. Their expertise could also put you and your business on a fast track to success by helping you predict, plan or and avoid timely and costly setbacks.
To illustrate this, I would like to share with you my personal story: When I started my business, it didn’t take off at the rate I had planned. And that became one of the biggest issues I’ve faced as a business owner. Feeling I failed myself was nothing compared to the feeling I had failed my husband and our family!
So why the heck couldn’t I break through the revenue goal I had set? Why was I able to help others but not myself?
I tapped into my experience as an employee and MBA knowledge and insights, I studied the traits of successful entrepreneurs, listened to webinars and tele-classes and read any report I could lay my hands on. Instead of seeing the desired results, I simply became overwhelmed by all the information and all the options, disappointed in not seeing results and paralyzed by the fear of failure.
Running a business was no longer fun, rewarding and enjoyable. Instead, it became a burden because I only focused on lost opportunities and obsessed over every penny I wasn’t bringing in.
Finally, I took a chance on partnering up with a coach. I found a mentor and a mastermind group. They were the right mix for me and with their help, it hit me: I was lacking accountability!
Once I regained my composure, put procedures and systems in place, and began tracking all business activities, set exact goals for every aspect of my business and tracked the progress and the process… ..that’s when things started to crystalize.
As a result, business quadrupled in just one month, and two more experts joined my VBM Pro team. And when it comes to money, I realized that in order to succeed, you need to be willing to invest not only time and emotions, but also money. Only this way can you expect to see doubled, tripled, even quadrupled returns. I’m still far from where I want to be, and know I can be. Yet seeing the progress is rewarding in itself.
So, increase the odds of your business’ long-term success and stop doing it all on your own.Read More
NOTE: This is the first post in a series of guest posts answering the question; “What Advice Would You Give New Entrepreneurs?”. Over the coming weeks, a number of people who I admire and respect will be answering this question on the blog, and I think you’ll get a lot of value from their advice! Today’s post is from one such person, Melissa Krivachek, who has had a big impact on my coaching business … I couldn’t think of a better person to start with. Enjoy!
As a new entrepreneur it can be scary, and intimidating to walk away from the pay to live life your way. It can also be overwhelming because you have to wear so many hats. Success doesn’t come easy and it isn’t cheap. Actually it’s just the opposite. You’ve taken on the responsibility of playing many roles, multi-tasking, and goal-setting but as you get up and running you’ll realize very quickly that just isn’t enough. You’ve been taught to set goals, make plans, and figure out how you are going to do it but none of that really works.
So, I’d tell you to forget about goals, forget about the plan and figure it out as you go but never focus on the “how”. Now, you’re probably thinking “well I’ve spent hours planning, preparing, and I know my goals!”, but you still haven’t figured out the secret code to living the life of your dreams and having everything you want. Life is as simple or as hard as we make it. The difference between those who have it all and those who are just starting is they understood one principle.
That principle is “Your heart knows what it wants. Your head just thinks it does”. What do I mean? Well if you ask yourself the question: “What do you want for yourself, family, and business?”, you already know. But the problem is you’re bombarded with opportunities, shiny objects, social media, technology, endless books on success, and after consuming all of these you find yourself in the same position. Broke, unhappy, and miserable. You long for more, you deserve more, and you can have more. How? Well, I want you to consider this that every goal or a great majority of the goals you’ve set for yourself don’t ever get accomplished. You know the ones I’m talking about.
– “I want to lose 50 lbs” (But you love food.)
– “I want to be an entrepreneur” (But you love steady pay.)
– “I want to have abundance” (But you don’t think you are worthy.)
And the list goes on and on …
The point is that setting goals doesn’t necessarily mean that you will achieve them. But if you know in your heart that you are passionate about sharing your message with the world and it solves problems then writing goals isn’t the answer. Making an impact is. As for the plan, consider this … the only plan you should have is to track your goals and take corrective course action should you not see the results you are looking for. Finally you want to know how it’s going to all work out but understand this … the “how” doesn’t matter. It only matters that you have the belief and confidence in yourself and your abilities to execute.
Many entrepreneurs fail and it isn’t because they don’t have goals, haven’t created a plan, or don’t know the “how” – it’s that they aren’t taking enough of the right actions and they don’t know what actions to continue taking because they haven’t seen the results they desire to inspire them to continue to take more action and get greater results. It’s pretty likely they have seen very little or no results.
I’ve been where you are. I’ve written goals for days. There were even times I would take a week off and write all of the things I wanted, but that didn’t always ensure I got them. I’ve spent hours creating plans but they almost never worked out because once I got going I needed a new plan or I got off track and had no desire to look at the plan. Finally, for all of the time I spent wondering HOW I could have been sharing my passion and message with the world and helping people that were looking for the solution I had as a coach.
Hey, if you’ve done these things and continue to do these things it’s ok. I’m not saying they aren’t in some way beneficial or you shouldn’t know what you want. You should. But it’s more important to focus on the people and how you can help them. What problem does your product or service solve? Who could benefit from what you have to offer? Then find those people and enhance their life. Because business isn’t about you. It’s about your customer, their business and their bottom line.
I want to leave you with one last thought: when you feel like giving up, remind yourself why you went into business to begin with. It wasn’t because you knew everything, or wanted to make lots of money, it was because you wanted to make an impact on the world … and now you can! So go do that!Read More
When Chris Hadfield’s book, “An Astronaut’s Guide to Life on Earth” was first released last year, I planned on reading it. Like many other Canadians (and people around the world), I marvelled at the videos that he shared on social media while he was up in space: like how to make a peanut butter sandwich or clip your nails up there. He managed to use this social media to show how interesting it is to do mundane Earth things while in orbit.
But other books nudged their way onto my reading list at the time, and I justified that by saying that I should be reading more business-related books, since what could entrepreneurs possibly learn from an astronaut?
I was wrong. Once I got around to reading the book, I realized that everyone can learn lessons from an astronaut. Here’s what I took from the book:
1) Setbacks Will Happen In Life
Hadfield has had a number of experiences where he looked certain to get something and was then thrown a curveball. In 1987, he was selected to go to France to fast track his path to becoming a test pilot. His family rented the perfect house, packed their things and were ready to go when a dispute between the Canadian and French governments lead to his spot being given to a French pilot at the last minute.
2) Setbacks Can Be a Good Thing
Shortly after his setback with the French school (and only because he had that setback), Hadfield received a “lucky break” that was instrumental in his journey to becoming an astronaut. He wrote;
As I have discovered again and again, things are never as bad (or as good) as they seem at the time. In retrospect, the heartbreaking disaster may be revealed as a lucky twist of fate, and so it was with losing the French spot in the spring. A few months later, I was selected to go to the U.S. Air Force Test Pilot School (TPS) at Edwards Air Force Base, and our year there changed everything …
3) Continue Learning New Things Everyday
Hadfield is addicted to learning, and talks about his love of learning new things throughout the book. Whether he was on the ground or on a mission in space, he describes himself as being in “receive mode” where he said to others: “tell me everything, keep teaching me, I’m going to soak up every last drop”. So many people are afraid to try new things, but that’s a great way to expand your learning and improve yourself!
4) Preparation Is Important
Most people don’t like to prepare – they find it boring and want to just do what they want to do. Preparation may not be the most exciting thing, but it’s vital to success. Hadfield writes;
The upshot of all this (preparation) is that we become competent, which is the most important quality to have if you’re an astronaut – or, frankly, anyone, anywhere, who is striving to succeed at anything at all. Competence means keeping your head in a crisis, sticking with a task even when it seems hopeless, and improvising good solutions to tough problems when every second counts. It encompasses ingenuity, determination, and being prepared for anything
5) Push Past Your Fears
I was shocked to find out that Chris Hadfield is afraid of heights! Here is a guy who blasts into outer space at incredible speeds and heights, yet he says that he gets nervous whenever he’s on a balcony or near a cliff. If he can get past those fears to explore space, what’s holding you back?
6) Don’t Whine
I like Hadfield’s description of whining;
Comparing notes on how unfair or difficult or ridiculous something is does promote bonding – and sometimes that’s why the griping continues, because it’s reinforcing an us-against-the world-feeling. Very quickly, though, the warmth of unity morphs to the sourness of resentment, which makes hardships seems even more intolerable and doesn’t help get the job done. Whining is the antithesis of expeditionary behaviour, which is all about rallying the troops around a common goal
7) Have Fun!
Although Hadfield is in an industry – space exploration – where his life was on the line whenever he went into space, he didn’t let that scare him. He enjoys his career so much that he’s having fun and not stressing out (which is helped by the tremendous amount of preparation that he does). He even enjoyed the massive amounts of training that took place before every space flight, comparing it to doing a New York Times crossword puzzle – something that’s hard and stretches your mind, but you feel good when finished it.
Hadfield once did survival training in the wilderness in Quebec in February (not exactly beach season!). The training included hauling a 300 pound sled through snow with a small team while surviving in the harsh Canadian winter. To lighten the mood, the team carved a face in a pineapple that was among their supplies, and called it “Wilson” (in honour of the volleyball that Tom Hanks befriended in the movie “Castaway”). The pineapple helped boost the teams morale by having some fun with it.
8) Small, Daily Actions Lead to Big Changes
And finally, one of Chris Hadfield’s main points is that what a person does every day determines the kind of person that they become. This short video does a nice job summing up that philosophy!
One of the problems that entrepreneurs often face is the habit of spending too much time worrying about what their competitors are up to. I recently spoke to a young(ish) entrepreneur who was telling me how things were going with his business. In the span of a 30 minute conversation, he referenced his frustration at the achievements of others in his field at least four different times, and how he was better than they were but wasn’t getting the props that he deserved.
I recommended that he focus less on the other guys, and put more positive energy into what he was building. But I understood where he was coming from. In the past, the accomplishments of others weren’t nearly as visible as they are in today’s era of social media, where a quick run through your news feed could turn you green with envy (if you allow it to). It’s not easy to watch as others are seemingly getting further ahead than you are with your business.
There’s a reason that race horses wear blinders when racing. The blinders help the horse focus on what’s ahead, instead of what’s beside or behind them. Without the blinders, the horses’ attention would be all over the place (and the odds of winning would be very low). Entrepreneurs have to take the same approach and put blinders on as they’re running their race. Too much attention given to other people could kill your focus and be disastrous!
When you see a person’s achievements being celebrated, you aren’t seeing the challenges that the person had to go through to get to where he/she is today. They’ve probably had their fair share of tears and sleepless nights along their journey, so they’ve earned their moments of recognition. There are very few “Overnight Successes”!
If you find yourself overly-concerned with what others are doing, try this exercise. For one week, make a commitment to celebrate the achievements of others (yes, including your competitors!). This may seem crazy and difficult, but it really isn’t hard to do. Send a congratulatory email or pick up the phone and drop the person a line to give them props. Not only will it make you feel better, you’ll be putting positive energy out there and form some new connections with others that you wouldn’t have made otherwise.
It actually feels good to celebrate the successes of others. I love seeing other entrepreneurs succeed – it gives me energy. For example, I’m a member of a group of about 20 highly-motivated entrepreneurs. Recently, one of the members made a huge deal worth a ton of revenue for his business. I was happy for him, and I told him so when I spoke with him by phone a few days after he secured the huge client. Hearing his story gave me, and the other members in our group, a big lift!
Seeing other entrepreneurs achieving things shows that it is possible, and makes it easier for others to succeed. A great example is the story of Rogers Bannister, who became the first man to run a mile in under four minutes in 1954. Before 1954, nobody could do it and it was considered impossible. Although mankind had been trying to achieve the feat unsuccessfully for 1000 years before Bannister did it, about a year later another runner did it. And in the following years it became somewhat common for runners to run a mile in under four minutes. What happened? Once others saw that it was possible, the seeds of belief were planted and allowed them to break through their mental barriers.
The same thing happens in business. Seeing your peers reach new heights shows that it’s entirely possible for you to do the same. They probably aren’t any more gifted than you are – they put their pants on one leg at a time as well – and if they can do it, you can too.
Start shifting the way you see your competitors and see what it’ll do for your business!
From north of the border, happy 4th of July to my American friends! In honour of America’s birthday, I wanted to share some insights on what I’ve learned from an American hero who has truly inspired me: Abraham Lincoln.
I’ve always had appreciation for Lincoln since I first learned about him, but that appreciation has grown after finishing the book “Rise to Greatness: Abraham Lincoln and American’s Most Perilous Year” by David Von Drehle, which shows the challenges that Lincoln overcame during the Civil War to keep the country together (and end slavery at the same time).
Anyone, especially entrepreneurs, can learn a lot from Abraham Lincoln’s life, including:
1) Your Past Isn’t a Predictor of Future Success
Lincoln’s numerous challenges before he became President in 1860 have been well-documented: business closure, the loss of a love, a nervous breakdown, numerous defeats in political campaigns … but he soldiered on to win the highest post in the land. His life trajectory looks a lot like a roller coaster (with more downs than ups) before he became the most powerful man in the nation.
So many people stay trapped in the past, replaying the old defeats in their minds instead of putting positive energy towards new opportunities. If you hopped in a time machine to go to the 1830’s, 1840’s or 1850’s and told someone that Abraham Lincoln would become President, you’d be met with an “Abraham Who???” or laughter. If Lincoln was able to get over his defeats to become the leader of the United States, what can you do?
2) You Can Turn Your Enemies Into Supporters
I’ve always been impressed by Lincoln’s ability to turn the other cheek when attacked by his critics (and he had a lot more than you or I do). He even brought some of his harshest opponents into his cabinet once he became President, because he recognized that they could help each other. For a detailed look at how Lincoln accomplished this, read Doris Kearns Goodwin’s critically acclaimed book, “Team of Rivals”.
3) You Can Probably Handle More Than You Think You Can
When I recently read “Rise to Greatness”, I was surprised by how much stress Lincoln had in this life. Whereas we complain about having a few extra appointments crammed into a day, or a surprise fender bender that we have to take care of, Lincoln was hit with pressures from all directions and managed to stay on track. I’m amazed that the man didn’t have a heart attack while in the White House!
When it feels like your life is spinning out of control and you can’t take it anymore, remember what Abraham Lincoln had to shoulder. Reach down deep and get that second wind to keep going.
4) Small Changes Can Lead to Big Results
When we talk about the end of slavery now, it’s easy to fall into the trap of thinking that it was something accomplished swiftly and even somewhat effortlessly, as if Lincoln woke up one day and decided to draw up the paperwork to free the slaves. But the process was a much more difficult one. Lincoln was attacked by many Abolitionists as going too slowly on the slavery issue (and by Anti-Abolitionists as going too quickly with it!). Lincoln was always sympathetic to the plight of the slaves, but he realized that an outright end to slavery done too soon could destroy the country. He would have to do it slowly, inch the country towards the goal and then strike when the opportunity presented itself.
When you’re continuing along on your entrepreneurial journey, there can be a tendency to want to do everything right away. But to be successful, you have to pick your spots. Consistently making small steps towards a goal can insure that you hit it when the timing is right!
5) You Can Become a Self-Educated Expert on Anything You Want
There’s a belief that you have to sit through college and university classes to truly become an expert on something. But Lincoln was able to become an expert on a number of things by spending his spare time immensed in study. Take military strategy for example. At the beginning of the Civil War, Lincoln left much of the planning to his generals since he figured they were the ones with experience on the battlefield. But as the war dragged on (and his frustration with some of his Generals increased), Lincoln started taking a more active role in the planning of the battles. He was always pouring over maps and reading historical accounts of battles won by the greats like Napoleon.
You can teach yourself anything – especially with the help of today’s technology. In the past, access to good books was limited and you had to go to a library to learn anything. With today’s technology, you can learn from your home with a few clicks of the keyboard. Never before has there been such easy access to knowledge to teach yourself anything!
6) Stay in Control of Your Emotions
Lincoln was able to stay cool and collected while fighting the Civil War, at times when most people would have screamed in anger. For example, he had some Generals who were too timid and wouldn’t strike when they were ordered to deal the death blow to the Confederate Army, which prolonged the Civil War and ensured many more Americans would be killed. One of those Generals, George Mclellan, was always doing things to frustrated Lincoln (disobeying commands, criticizing the President, and requesting more troops be sent to him). Lesser men would have flipped at Mclellan, but Lincoln showed tremendous poise when dealing with him.
When you’re running a business, you’ll encounter numerous frustrations throughout each day. Instead of letting them throw you off track, remember Lincoln and keep your cool. You’ll be better off for it.
8) Tell Stories!
Abraham Lincoln was always telling stories to illustrate the points that he wanted to make. So rather than repeating tired, stale arguments, he had a story at this disposal. Storytelling has an incredible impact on people’s brains - they’ll remember a story better than statistics or anything else. Try injecting some storytelling into your communications with others and see the difference that it makes.
9) The Bad Times Won’t Last
Lincoln is remembered as saying; “This too shall pass”. Despite being dogged by depression his whole life, this unlikely man kept the nation optimistic during its most bloody war ever. There was times when Lincoln felt as if the Civil War would never end, but he kept in mind that bad times can’t remain.
If you’re going through a difficult time in your life, remember that things will eventually turn around for you. There are 365 days in a year, and almost 2000 days in a 5 year span. Those are a lot of days to turn things around … you’ll start getting some breaks!Read More