| Been thinking about being your own boss lately? | | | | what you need to run the business. You need to |
| Feel like giving that 'great high school plan' a try? | | | | account for supplies, utilities, rent, wages, telecom |
| Starting a small business comes with its perks but | | | | bills and so on. Balanced against your net worth, |
| demands an equal amount of your patience. The | | | | the costs will give you an idea of how much you |
| finances especially, could get the better of you, if | | | | can finance yourself and how much will have to |
| you are unprepared. But take heart, we have just | | | | be borrowed. On an average, small businesses |
| the thing for you: a crash course in small business | | | | must have ready cash to meet with at least |
| financial planning! We'll take you through all that | | | | three weeks of operating costs. |
| you need to do before you start your own small | | | | Investigate financing options: The success of small |
| business. | | | | business financial planning will lie in the sort of |
| Ask yourself: Don't overestimate and ask all the | | | | financing you finally opt for. You could borrow |
| hard questions. How much can you pool in and | | | | capital from banks, raise it through the stock |
| how much will you need to borrow? Is your | | | | market or opt for tradeable instruments like |
| business cyclical or seasonal? Does it seem risky? | | | | debentures. We recommend a mix, to help you |
| Trust us, the banks will want to know. Your loan | | | | leverage expenses and share risk. |
| eligibility will depend on the answers. | | | | Calculate break even: Once in the business, it is |
| Check personal finances: Prepare a worksheet of | | | | essential to know how much you need to sell |
| assets and liabilities. On the asset side, record | | | | before you cover all your costs. The formula to |
| details like cash at hand, savings, investments in | | | | be employed is: |
| stocks, bonds and real estate, life insurance | | | | Total Fixed Costs/ (Price per Unit - Variable Cost |
| policies, vehicles owned and other liquid assets you | | | | per Unit) = Sales at Break Even Point |
| can think of. On the other, record your credit | | | | Calculating this beforehand can help you plan |
| card debts, auto loans, real estate loans, insurance | | | | targets for sales. |
| payments, taxes and other liabilities. The | | | | Keep an eye on the cash: Prepare a cash flow |
| difference between the two will give you your | | | | statement to keep track of your financial |
| net worth. This will come in handy while requesting | | | | strength. Maintain details of cash balance at the |
| a loan. | | | | beginning of the month, all cash received and paid |
| Prepare a family budget: Effective small business | | | | out during the month, and what your balance at |
| financial planning requires you to have a clear idea | | | | the end of the month is. Such statements |
| about your family's annual expenditure. Prepare a | | | | effectively capture lags in sales that you would |
| budget that covers all the major expenses | | | | have missed otherwise as well as help you find |
| incurred and the income earned in the past year. | | | | avenues to save. |
| Divide the expenses into fixed and flexible. Fixed | | | | Do an industry comparison: Look up some |
| expenses should cover such details as auto | | | | industry reports and compare your profits with |
| & insurance payment, mortgage or rent and | | | | others in the business, to know whether or not |
| taxes. Flexible expenses should cover all others | | | | you need to buck up. |
| such as clothing, entertainment, gas, repairs, gifts | | | | Can't wait to start? Try or "201 great ideas for |
| etc. Use this to make a survival plan for your | | | | your small business" by Jane Applegate, available |
| family, in the event that your business does not | | | | at for some neat ideas on starting your own |
| make or loses money. To be on the safer side, | | | | small business. "Financing your own small business" |
| save at least one fourth of your annual income | | | | by Art Dethomas available at could give you a |
| and cut down on expenses that can be done | | | | useful insight into strategic financial planning for |
| away with. | | | | your business. |
| Figure the costs of your venture: What is small | | | | Small business financial planning can be a success |
| business financial planning without a plan for your | | | | only when you do a reality check on your |
| business? You need to calculate startup and | | | | finances and your business. Apart from making a |
| operating costs. Ordinarily, start up cost | | | | good financial plan, research your industry, look |
| comprises expenses on advertising, equipment, | | | | out for competition, and explore cheap financing |
| insurance, legal fees, licenses, remodeling, deposits | | | | options. Plan well and stay ahead! |
| and other one time expenses. Operating cost is | | | | |