So much of business success boils down to good planning. Preparing for the financial year is no different. The new year tends to sneak up on us when we’re so busy, but you don’t want to leave this aspect of business planning to chance. This guide will help you prepare mentally so that you can have your best financial year yet.
Why planning for the financial year matters & the basic planning process
Your finances are the lifeblood of your business. Even if you’re not a numbers-oriented person, it’s crucial to make forecasts for the upcoming year, plan for and pay your taxes, and make business adjustments depending on your financial situation.
Planning allows you to get a high-level view of what is actually happening in your business. It gives you motivation, direction, and confidence as you pursue your goals.
Understandably, some business owners feel overwhelmed when they consider their financial responsibilities. However, with a bit of forethought, budgeting doesn’t have to be hard.
In a nutshell, the process involves determining your desired income figure and working backwards to see how to achieve it. You’ll establish that figure, subtract your expenses, and add in your overhead to see where your gross profit needs to be to achieve the income you’re seeking.
Along the way, you’ll run a reasonableness test to see how your numbers align with past years. This will help you see the feasibility of your income goal.
Finally, you’ll divide your budget into smaller segments, such as quarters, days, or weeks. Then you’ll run some numbers to determine how many sales you need to make during the shortened time frame to achieve your goals.
Getting into the right mindset for planning
There are two mindset models that people can use while financial planning: the Rock, Pebbles, and Sand model and the Results model.
A visual model is useful for understanding the Rock, Pebbles, and Sand mindset. Imagine having a glass jar that you can fill with rocks, pebbles, and sand.
ROCKS: The rocks represent your yearly goals: they’re large financial milestones that you hope to achieve over a long period of time.
PEBBLES: The pebbles are 90-day goals. They’re smaller, but may still be tough to reach.
SAND: Then there’s sand, which represents the many actions you can take to achieve your 90-day financial goals.
If you pile sand on the bottom, put the pebbles in next, and lay the rocks on top, you won’t be able to fit as many pebbles or rocks. The sand – all those small actions you’re taking to reach short-term goals – won’t leave much room for the small and large goals. Instead, it’s better to mix in small and large goals along with your actions. In the end, you’ll have a balanced set of achievements to pursue during the financial year.
Results boil down to one simple formula
The results model relies on a simple formula:
D x A x A = R. Decisions x actions x accountability = Results
It’s worth noting that we achieve results with this model by multiplying those three key factors. Basically, our growth becomes exponential as we focus on these main areas. This certainly applies to financial planning as every little decision or action will impact your results.
Both mindsets are effective for achieving your financial goals – what matters most is that you stay consistent with the model that you embrace.
Join Vibrant Business for our upcoming webinars
Guidance is necessary for effective business planning. This month, we have two webinars that will help business owners reach their business and financial goals.
Thursday 10th June – 1pm – Webinar – The 7 Factor Formula for Business Success
This webinar focuses on the elements that every business owner needs to be successful. We’ll define each element and describe why it matters, develop an actionable roadmap together for using the formula, look at real-world examples, and talk about options for support along your entrepreneurial path. You’ll come away with clarity about your next steps for success.
Thursday 24th June – 1pm – Webinar – Know your Numbers, Grow your Business
Numbers paint a vivid picture of your business. In this webinar, we’ll go back to the basics of defining your purpose, stating your values, and understanding what you hope to achieve. From there, we’ll talk in-depth about the budgeting process. We’ll examine budgeting at a high-level as well as a granular, short-term level. Further, we’ll look at key performance indicators and learn how these measurements relate to your financial success. Instead of leaving your financial year planning to chance, turn to Vibrant Business – we can help you achieve your business goals.