Business Planning 101: Part 4 – The Cashflow Plan

For Start-ups and Entrepreneurs... Even the Big Guys

4 mins read

For Part 4 we are going to discuss the cashflow plan for your Business Plan.

The Cashflow Plan

Now you need to begin estimating profitability based on cashflow. That is money in, money out. You will begin to guestimate how much you plan to sell and how long before you will see real sales. This is a reality check and being real is essential in figuring out these numbers. Your goal is to arrive at cashflow statements where all the end of month balances are appropriately positive.

From here, you can produce your income statements and balance sheets to begin assessing your business’s viability. If you are showing a suitable profit margin and are able to show a plan where you can begin paying back financiers in a timely manner, then your plan is a success. If the numbers don’t work, then you will need to go back to your initial business plan and revisit your ideas from the start.

You will be looking for options to make your plan balance out. Perhaps you are starting with too large a staff that you may need to cut back? One mistake many entrepreneurs will make is selecting a location that is expensive in the middle of downtown when foot traffic makes no difference to the success of the business. Why would you pay $20 a square foot instead of $8 or less in an industrial or suburban location? On a 1,200 sq foot location that is a difference of over $14,000 per month and it seriously affects all margins and profits.

Another common blind spot is thinking you have to buy all your equipment and a building. These assets can create the biggest debt and that will completely deplete your cashflow. Look for options to lease or rent over purchasing so that your overhead can be dramatically lowered. Analyzing every detail where you can save is incredibly important for laying a good foundation to start from. You want to start with as little debt as possible and remember can always expand or buy that dream building when the business is a success.

So don’t feel defeated if the cashflow shows negative in the first run through. It just offers you a new opportunity to think creatively about your business. Remember that the purpose of a good business plan is to research and discover what parts of your business will create success and which parts will hinder it. All with no actual money on the line. You want to do all this planning now before it costs you in the end.

This all may look intimidating but we here at BIG are at the service of our members, so if you have any questions or need any guidance along the way just reach out.

Download our Business Plan Process – Infographic (pdf) and join us in Part 5 as we begin discussing the presentation portion of your business plan.

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Visit our Resource Library for all available downloads.

If you require assistance with any of the guides, forms or templates, please contact a BIG representative.

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