Strong finances are a foundational keystone for any business, but getting the numbers in order after a crazy 2020 while preparing for an uncertain 2021 can seem overwhelming. But do you know what’s even more overwhelming? Having no plan at all.
Financial planning basically comes down to three basic steps: Crunch, Budget and Plan.
First of all, even if 2020 wasn’t your best year, you have to know where you stand. If you’ve been avoiding crunching those numbers because it gives you anxiety, this is your wake-up call! Schedule time with yourself to crunch those 2020 numbers, compare your income and expenses, identify your biggest challenges and successes and put all of that data into a document you can refer to later and, ideally, update throughout the year.
Secondly, once you have those numbers boiled down to something you can work with, it’s time to do some classic budgeting. How does your income compare with your expenses? If you have data going back a few years, how did last year compare? From there, you can create a budget that works for your business, your team, your customers and your bottom line. We do have one warning: some businesses fared especially well because they were essential in 2020 or created a much-needed product. If that situation has changed in the last year, don’t budget off your 2020 income alone!
Thirdly, the world is still an uncertain place, but you have to be to plan – at least to some degree. What are your ongoing expenses? Do you have large capital expenses coming this year? How will your income continue to be impacted by the pandemic? Are there incremental changes you can make to improve your business throughout 2021 without taking any major risks or making large investments?
Financial planning is challenging and working with an accountant and a Growth Coach can certainly make a difference, but as a business owner you have to be willing to see the clear picture, budget according and plan for the future. Without those three steps – and an eye toward achieving your business goals – you’ll keep spinning your wheels for the rest of 2021.