This article is a modified excerpt from the new ebook “Get More Sleep by Seeing the Financial Future of Your Business, An Introductory Guide to Financial Projections for Small Business”
We want to see every small business grow and become more profitable. To do that, we will show you how to see the financial future of your business.
Why should this be important to you? It is important because if you are a financially profitable business (or organization), your life is easier. You will have fewer headaches, less stress and you will sleep better.
Make My (Business) Life Easier!
For some of you the promise of fewer headaches, less stress and more sleep isn’t enough. So, I will show you specifically how seeing the financial future of your business will help you make better decisions.
Which decisions am I referring to? How about:
What prices should I charge?
How much can I pay myself (and my team)?
When can I hire another person or buy more equipment?
How much can I put into marketing and advertising?
For many, the bottom line and most important thing is will I have enough cash to pay my bills and keep the business going for another year?
Financial Projections Help with the “What” and “When” of Budgeting?
Financial projections help you clearly see the financial condition of your business and help you make good decisions on what to spend your budget and when to spend it.
With experience, you will find that your projections will soon begin to very precisely reflect the day-to-day financial life of your business. There will always be unexpected bills and costs, but we’ll show you some tricks to address those, too.
What are financial projections?
Financial projections are simply a way to keep track of what is coming in the door of your business (revenue) and what you are spending (expenses).
As we all would like to improve our business, here are a couple of benefits you might appreciate. Good financial forecasting:
Leads to more profits
Helps get the most from the money you have
Helps you plan, anticipate and model impact of potential business decisions
Helps you predict and measure profitability (and cash flow) in a reusable model.
You will be happy to hear that financial forecasting, an important business skill, is a skill that improves with regular practice. Like many things, financial projections become easier the more times you do it.
Now that we’ve got your attention…
It is important to remember that your financial projections are not generally shared with people outside of your business. Financial projections are a working tool used for your own benefit.
There are some important things about projections to keep in mind, but there is not really a right and wrong way to do projections. We’ll show you how to get started and how you will benefit from even the quickest and most basic of calculations.
“You have your way. I have my way. As for the right way, the correct way, and the only way, it does not exist.”
– Friedrich Nietzsche (German classical scholar, philosopher, writer)
It’s a Model! (Not a finished product)
Let’s remember that projections are a tool to help you. They are not something you publish for the public or file with the state or federal government. They are for your use and your eyes only.
Here are a couple more things about our projection models:
Models are fluid & dynamic
They are never complete (think about timing)
They highlight problems & opportunities
Use models to pose & address questions
Business & marketing strategy can emerge from these questions (and these models).
Hopefully we have removed some of the pressure you may feel when you think about trying to envision and forecast the future life of your business. Projections should be viewed as a helpful tool so you can make confident, informed decisions and see how these decisions may affect your business.
About the Author: Erik Bunaes is President & Principal of Endorphin Advisors an Albany, New York-based marketing and management consulting firm.