How Big Is Your Heart?

Ola Emmanuel
| credits: File copy

When you consider starting a business, your expectation is that you make profit and that your life is positively transformed with solid financial power. But sometimes, it doesn’t work out as expected.

Quite a lot of people that were initially enthusiastic about their businesses ended up being disappointed because they failed to achieve their business goal. This may primarily be as a result of their inability to clearly see the business’ prospect by doing a financial plan for it before they step out.

Give two people the same business idea to develop, it is certain two different businesses will come up; with each developed business commanding different attention.

While what one may come up with may not require more than N300,000 in capital, what the other may package may require billions of naira that may warrant some finance institutions to come together to finance the business. In business packaging, how big your vision is will determine who listens to you and the manner of respect the business will command.

Today, we are going to start exploring the financial planning aspect of business plan preparation – a very strategic area that shows whether a business will survive and thrive or die prematurely, even before it is started.

Inside the business plan training room, I am always keen to see the outcome of this section because it always shows me how small or big the business vision of each entrepreneur is.

Here, the expectations of entrepreneurs are laid bare with many bursting out laughing when they see that the businesses they thought were good to go were not yet anywhere perfect.

Financial planning brings into view the sales and costs plan for a business and how cash will flow in and out of the business at a particular point in time. It also reveals the profitability potentials of a business, informing ahead of time the possible profits or losses over a period of time.

Business financial planning shows whether the business is good to go or the concept should be immediately repackaged. It is one area that enables you to test your potential and discover possible and probable returns on resources to be deployed in the business. You are able to know ahead of time whether you are starting your business to work for other people, to throw away the resources or to make good money.

When you take time to do financial planning for your business idea before you start out, it enables you discover whether the product you want to sell is okay for the amount of money you want to put into the business.

 But where you fail to do this before starting your business, you may end up wondering whether you are under spiritual spell that is not allowing you to know where your money goes despite the fact that you may be making sales.

The truth is that you didn’t take time to put your business activities in proper perspective before you started it.

Financial planning helps you to know whether you need to work harder to increase your sales or you need to change your initial thought and introduce more than one product line. It will also show you whether the expenses your business will carry is too huge for the sales potential of the business.

Where you fail to discover this, the business may end up not surviving or you end up cutting corners by reducing the quality of the product or opting for substandard products.

Likewise, financial plan preparation will help you to understand clearly your trade peculiarity and how money flows in your business line.

There are some businesses that are purely transacted on immediate cash payment but some businesses are done on credit with payments made after some weeks.

Failure to understand this before you step out may lead to the business running out of cash which may spell doom for the business.

You are starting your business primarily to make profit.

It is, therefore, very important that you plan for the amount of profit you want to make, how liquid the business should be at any point in time in terms of cash. You should also be able to identify the financial loopholes that may not allow you realise your profit objective. This is what cash flow plan as well as sales and costs plan help you to achieve if you do it before you start your business.

God willing, we shall examine what to do when preparing this two-in-one aspect of business planning next week.

Source: Punch