Good financial planning is vital for the development and growth of a business. It is used to manage the company's financial resources and to implement strategies to achieve the company's objectives.
Without planning you are lost. If it doesn't exist or is not well done, you won't get very far. And unless you are a financial whiz, it is advisable to enlist the help of experts to draw up a strategy to guide your business.
When doing your planning, whether you do it yourself or have outside help, be careful not to make the following mistakes.
The burn rate is the money you invest each month for your business to keep running. If you don't know that figure, it will be very difficult for you to reach your goals before the money runs out.
According to different studies, one-third of entrepreneurs admit to having misjudged their monthly expenses. Of these, 20% realised too late that they didn't have enough funding to carry out their business.
Therefore, miscalculating your expenses and being too optimistic happens frequently. Keeping a record of all start-up expenses will minimise the risk of error. And then, keep track month-on-month and make projections.
Calculating the price of the services or products offered by a company is critical. Simply adding costs and calculating the desired profit margin is not enough.
To set the price of a product, in addition to the operation above, it is necessary to consider the brand's market position and the added value offered compared to the competition.
You also need to consider other questions, such as: who is the customer?, what need does the product or service fulfil?, what do you have to offer?, who is your competition? With all this information, you will be able to set a competitive price that is in line with the market.
One of a company's biggest expenses is its people, its human capital. To keep this cost down, you need to find the perfect formula and balance between the workload and the staff required to get it done.
Some of the most common mistakes are hiring staff too quickly, which can deplete the entire budget.
As well as salaries, a large team involves other expenses: larger offices, equipment, materials...
You need a dedicated person for your company's accounting and finance. They will keep the account books up to date and monitor important appointments with the tax authorities, for example. This will be a great long-term investment for you and your business.
Review these common financial mistakes one by one and make sure they are not happening within your business. And if numbers overwhelm you, ask for reinforcements!
