Once you have a clear picture of your expenses, it’s time to calculate your estimated revenue. Talk to similar, local businesses and others with experience in your market to approximate your potential income. Understand that your numbers will be significantly lower in the early days as word spreads about your business. Mistakes will happen and they will cost money. This is a natural part of the entrepreneurial learning process and you’ll need to budget accordingly.
While weighing your estimated expenses versus revenue is a good place to start, understanding certain aspects of your business can help you get an even more precise picture of your financial needs.
There are different types of business funding that are geared towards the needs of businesses that experience hot and cold seasons. Starting a business is inherently risky, but some types are riskier than others. Certain business financing options can help you plan for risk. It’s prudent to have an emergency financial plan in place so you don’t have to scramble for money under pressure. Market conditions can affect your ability to get good financing terms. They will also impact your company’s revenues.
All investments in your company should have an underlying purpose that helps you meet an objective. Lenders will demand to know your specific intentions for any money they give you. The length of time it will take you to pay back your lenders will have a bearing on the type of small business funding you should target, as will the investment’s usable life. You don’t want to be making payments on something you got rid of years ago. Ask yourself the following questions when creating your financial plan.