Properly made financial plans

Financial Architecture: the Key to Ease of Cashflow and Business Survival

Building a business is no different from building a house, do people build houses without plans? No way! Unfortunately, people build businesses without plans. Here we are focusing on the financial aspects of a business plan.

 

How does this come about?

Many businesses start with offering products or services, at a time when they don’t have much infrastructure or outgoings. Next, they introduce or increase marketing to sell more and gain more exposure. And then support systems are required to sustain the sales increase. Business owners realize that they can’t do this all on their own. In some cases, they need experts or consultants for particular tasks. And finally, tax, who really thinks of this until tax time comes around?

 

Then comes the time to grow.

 

But Uh Oh! It’s not working, the business owner is run off their feet and overwhelmed. They need help managing all those tasks and meeting all those bills! You have effectively built a house from the top down, rather than the bottom up. Or in some cases, business has walls but no floor and the roof is a little too small.

 

If you find yourself in this position, it is time to reverse engineer the way you built up your business financials and pricing. The method above started with selling a product and costs have grown on top of the initial pricing. Pricing really should occur after all expenses have been worked out.

 

Solid financial infrastructure for your business.

 

What tasks or systems do you need and how much that might cost?

First work out your business support systems, this is your foundations for leveraging growth. It includes technological infrastructure, human resources (including how much you want to earn), insurances, outsourcing required tasks, and machinery or production costs.

Then work next on marketing, this is like walls on a house. In your financial architectural plans, what do you need to assign for this to function well? How will your growth affect the cost of this to your business?

The next step is to look at products and/or services. Can you estimate how much you might sell? What will that cost to make or provide to customers?

And the final step, like the roof of a house, how much tax will you pay on the profit you make? Add this percentage on.

 

Many businesses have not accounted for all costs mentioned earlier.

 

All these factors are vital. But if done the wrong way around, you may find not only is growth difficult, but you are potentially under-pricing your product or service. These key elements are essential for business survival.

Ask yourself, am I charging enough? Am I being my own financial architect?

 

 

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