Financial Planning for SMEs: 4 Questions to Help Your Venture Succeed
The first mistake that many small medium enterprises often make is not having financial planning.
What are the consequences of this?
Entering a vicious circle in which the entrepreneur works alone with the aim of “filling in the gaps”.
In order to avoid this and to ensure the liquidity of your business, stop for a few minutes and try to answer these four questions listed below in this article. With this you can take the first step in this important planning.
1) What goals you want to achieve?
Take a blank sheet of paper and start writing down not only all the goals you want to achieve in your business, but also how you want to achieve it.
It doesn’t matter if your goals are short, medium or long term, just make sure they are specific and measurable. For example: buying an office, having your own vehicle to transport goods, or opening a website.
To be sure that this is a goal and not an objective, ask yourself the following question: what is happening now in your business to seek change? What exactly should be happening?
2) How many resources do you need?
With your goals now clear, it’s time to determine how much money you will need to achieve each one. It is not necessary to define how you are going to achieve them, but it is enough to have a notion of the amount of resources required to accomplish each one of them.
Remember that the amounts should preferably be in the currency in which you receive your income.
3) How can you achieve this?
To achieve the goals set out in the first point, you need, in turn, to define strategic actions, which are also known as “financial alternatives”.
Among these alternatives are savings and bank loans, among other ways to generate extra income while realizing your dream of self-employment.
Having clarity around this type of assistance, from the beginning, is important. As it will allow you to react strategically in case an unforeseen event occurs along the way.
4) How long will it take?
It is time to define the financial objectives of your business. They are the concrete steps you will need to take to achieve each of your goals. Each of these actions should be specific, measurable and have a fixed amount of time for execution. It is worth mentioning that there are some variables that can positively or negatively affect the path to achieving a goal. For example, inflation.
However, if it is possible to contemplate in time (or with some anticipation) this type of contingency in your financial plan, it will be easier to face them without suffering a great impact on the business.
Now that you have more clarity in your financial management framework, choose three short, medium and long-term financial objectives (three of each) and focus all your efforts on them. After a while, you will notice the differences inside and outside your business, so be ready to implement it!
This article has been written by Chandra Mehta.
Chandra is a seasoned banker with 35+ years of experience in banking and financial services industry. He’s a retired banker and has served as Chief Manager and Assistant Vice President in State Bank of India/or its subsidiaries. He has authored many articles on this site (allonmoney.com).