Troy Fernandez says 50% of businesses fail within 1 year and 90% fail after 5 years. The main reason is due to insufficient capital or not enough revenue. Before anyone starts a business they need to know their capital requirements and how much money they’re going to need to cover the monthly expenses. I’ve seen too many businesses burn through capital like dry grass in a wildfire because they don’t stay on plan. The best idea won’t survive if the CEO or CFO can’t manage the finances. Here are 7 components you need in your financial plan:
1. Detailed list of start-up costs (incorporation, legal, website design, product development, office equipment, etc.)
2. 12 month marketing budget
3. 12 months of general business expenses (lease, phone, office supplies, etc.)
4. 12 months of wages and benefits (salaries, insurance, workers compensation, payroll taxes, etc.)
5. 12 month cash flow statement
6. 12 month growth projections (sales and employees)
7. Cost of Sales
Set a realistic one year target and work your numbers backward. Focus on year 1 and don’t worry about year 2 or 3 because if you don’t get past the first year, the following years don’t matter.
