The role of money in your planning
One of the most important elements of your business plan involves money, specifically your ability to project how much income you’ll have as well as how you’ll use it to continue helping you grow your business. A business plan that doesn’t factor in money and how it will be spent is essentially like a ship sailing in fog without a light to guide it. Eventually you’ll founder against the rocks, and your ship will sink.
Sometimes I’ll work with business owners who don’t want to deal with money. They are happy money is coming in, but they get paralyzed at the thought of doing anything with the money. The problem with that paralysis is that it also effectively freezes the business as a whole.
A business owner should be able to assess what money is coming in as well as what money is going out, and also be able to assess a projected income over the course of the year. In other words, you should be able to determine how much you think your income will grow as well as how much you’d like it to grow. There is a difference between the two projections, and of course if you want to bring in the income you’d like to achieve, then you need to change your actions and possibly your target client as well.
A snapshot of your money situation provides you a way to assess where your money is going in your business as well as determine what changes you can make to your finances without negatively impacting your business. To be honest, I think business owners should be able to know their financial situation on any given day and be able to act on financial plans that improve their business with the same frequency.
The key to doing that involves keeping accurate financial records and knowing what your profit and loss is as well as knowing what you want to do with the money you are bringing. You should want to do something with that money so that you can effectively use it to help you grow your business. Otherwise if you are just holding on to it, you are spinning your wheels.
I do like you are bringing in money to the table as most business owners I speak with do not take money into consideration when doing any kind of planning. It is extremely important to know not only the money you are planning to bring in but also the money YOU HAVE to bring in otherwise business will not survive.
Share with you a post that I recently wrote about the subject http://en.joelpintoromero.com/2012/11/learn-to-play-with-money-that-really.html
@Joel Pinto I've noticed something that I consider quite curious about many business owners. They seem to want to avoid thinking about money or dealing with it in a proactive manner. I find it puzzling because money is the life blood of their business, but I think part of the issue is that money is so wrapped up in our survival instincts that it probably creates a lot of stress to think about it. Nonetheless I don't feel like I'm on track with my business if I'm not reviewing the books every couple of days or planning how the money will be used to grow the business.
@teriel @Joel Pinto Definitely! I wouldn't say every couple of days but definitely at least once a week to be able to make proper (and timely) decisions if things were found not to be going on the proper directions. Must business owners I talk with do it once by the end of the month, and that's not right. Once the month is closed, it is closed and no correction can be applied to it, nor any changes can be made. It's important that you are mentioning "in a proactive way"... I think that is key :-D