A financial plan is the business roadmap to the growth and success that you want for your business. It includes establishing SMART financial goals, creating an expense budget, forecasting cash flow and conducting a break-even analysis which is essential to the longevity of your business. At Maspeth Federal Savings, our business bankers work closely with business owners from many industries and have seen how a financial plan is the non-negotiable backbone of any serious enterprise. 

Tips from our Banking Experts

  1. Define Your Financial Goals

Set SMART (Specific, Measurable, Achievable, Relevant and Time-bound) goals that align with your overall business strategy. Examples include:

  • Increase revenue by 15% in 12 months.
  • Reducing overhead costs by 10% in the next quarter.
  • Grow market share by 5% using $20k marketing budget.

Having specific goals that define what success looks like allows you to allocate resources effectively. It is important for stakeholders and investors to know that you have a firm grasp on your operational capacity and market conditions. You aren’t just chasing a dream; you’re executing a calculated plan.

  1. Create an Operating Budget

Develop a budget that lists all anticipated income and expenses, separating them into fixed costs (e.g. rent, payroll) and variable costs (e.g. supplies, marketing). This will prevent overspending and ensure that you have enough funds for daily operations. If possible, include a contingency fund for unexpected costs or slow periods. Having an operating budget forces you to translate your ideas into cold, hard numbers. It tells you exactly how much you can spend without sinking the ship.

The operating budget also provides guardrails for your team. When you have a budget, you can delegate with confidence. You can give your manager a spending limit and a goal and allow them to run with it. Being able to empower your team in that way shifts the culture from having to get every dollar approved to taking ownership of set goals.

  1. Forecast Cash Flow

Predict your business’s cash flow for the next 1-3 years. Consider recurring operating costs like payroll, rent and utilities as well as non-operating costs such as tax payments, loan repayments and major equipment purchases. Remember to also account for peak and slow seasons. 

Once you have your forecasted cash flow, compare your forecasted cash to your actual cast weekly to obtain a variance analysis. A variance analysis enables you to identify cash overspending or revenue shortfalls early and take corrective action before they become critical.

  1. Perform a Break-Even Analysis

A break-even analysis calculates the amount of sales needed to cover all costs. This number is the amount of revenue needed to generate to avoid losing money and allows you to see how much you need to make to begin making a profit.

A business without a financial plan is a series of best guesses that may face severe cash flow shortages, unmanaged operating costs and an inability to forecast profitability. A clear financial plan forces you to quantify your goals; it’s the difference between a hobby that makes money and a business that builds wealth.